Friday, February 29, 2008

No Retirement?

Well apparently many middle class people are not planning on being able to retire. In this article at MSN, people are talking about not saving for retirement. The first couple in their 70s were lucky to inherit $400k from their parents. This helped them get into a retirement community.

However, experts are predicting people can no longer count on substantial inheritances to bail them out. They also cannot count on SS or a pension to replace their income.

People in general have no idea how much they have to save. They expect a miracle. This is the reason why I don't believe we can switch SS over to an individual account. People are depending on it too much. Are we really going to allow our parents/grandparents to eat dog food?

If you need $40k/year to retire you need about $1M saved to generate that income. This $40k is assuming you have a $12k SS and no pension. This will come to about $52k/year (close to the median salary of $48).

But will that really be enough? Can you live on $52k gross? That's the other question being raised, how will retirees manage the rising medical costs? Before it used to be picked up by employer provided insurance. With cuts to pensions and medical plans how will these retirees manage with medical bills? Will these bills replace the costs of raising their kids? I think so.

It's sad that so many people have nothing saved nor any idea how much to save. But it's better to start later than never. It's better to try to fix your situation than sitting there saving nothing.

Thursday, February 28, 2008

Smaller Living

MSN just had an article on smaller living. They stated that developers are selling 298 sq ft condos for $150k-$500k. Mostly in urban areas where land is a premium. Amazing huh?

They questioned who would live there? I know tons of people who live in such small spaces either as singles or couples. Personally I've lived in a 300 ft bachelor (studio without kitchen) in Los Angeles. It was cheap at $900 and close to the university. I picked it solely based on it's location.

I think many more younger professionals, broke twenty-somethings, or retirees will chose to live in tiny spaces. It makes for streamlined living. Yes you pay more for things, because you don't stockpile or storage stuff. But then you really simply your life. Often there isn't room for dustcatchers or excess purchases.

During the time I lived in the bachelor, my DH also lived with me and our dog. We found the space unbearably tiny, but livable. We realized that it was more than adequate because of the location. The main problem was lack of parking spot, which in LA, is a necessity.

But we really loved the fact it made us simplify our lives. It made us choose what was important and not shop as much. We cooked simply without an oven and a Foreman grill. I think this way of life will become more common even for retirees.

Do you think you could live like this? Would you?

Wednesday, February 27, 2008

Sucker to invest in 401k?

Recently an article in Money Magazine poses the question about whether it is foolish to invest in a 401k? The article states that some advisors are saying that it will cost you more to invest in a 401k than a regular taxable account. The reason is that when you start drawing on a 401k, it is at regular income tax rates. However in a taxable account, you might only pay 15% to long term capital gains.

The article goes on to explain why not investing in a 401k is a bad idea. That you will end up with less money because the initial investment is less due to taxes. Hence, the amount saved grows slower.

But there is the argument what if tax rates go up and you find yourself in a higher bracket? Right now are the lowest tax brackets in a long time, and it can only go up from here. So what happens if you pay 40% instead of 28% now?

I think these are valid concerns and points. However, by deferring the taxes on your investments in a 401k, you have an opportunity for the money to grow faster. Also you aren't paying taxes twice, just once. In a regular account you will pay taxes as you put it in (25%, and when you have gains 15%), so there is a double taxation. In a 401k, even if the rate is higher in 30 years, you'll only pay it once.

Another more pressing factor is the ease of saving directly from a paycheck. It is a lot easier to save when it's on automatic investment. How many people would actually save money if they had to set up an investment account, direct deposit, etc? If people find saving into a 401k difficult, I can only imagine how much fewer people would save into a taxable account. I would hazard less than 75% would even do it.

So maybe, there is a valid concern to investing in a 401k could cost you more in the long run. However if it means not saving for retirement versus saving, I'd rather gamble on paying higher taxes rather than not saving at all for retirement.

Tuesday, February 26, 2008

Thrifty Tip!

I went to Pepperidge Farm Thrift Store this past weekend. The store is for food which is past the expiration date, or damaged packages. Hence I bought a bunch of stuff which I normally would not buy.

For example the BEST deal in the store was the bread, even the cashier said so. We bought a loaf of pumpernickel for $1.59, while our roomie bought a cinnamon raisin and brown sugar loaves for $1.29/each! That's less than 50% off compared to the normal supermarket in the area ($3.29 and $2.50 respectively). Yes, what a score.

We also purchased sadly 8 packages of cookies. This I preferred not to do but our roomie loves chocolate. But it was 8 packages for $5. Regular price? $3.19/bag! Yes it was slightly past the date, but you can't tell. Fortunately our roomie already finished 2 bags (yes in less than 1 day) and we ate 1 sleeve together of mini mint milanos. I'm done.

And we topped it off with a box of crackers for 99 cents. Fantastic deals to be had. If there is a Pepperidge Farm Thrift store in your area check it out!

Monday, February 25, 2008

Understanding the Fair Tax

I am not a proponent about the fair tax. I am a proponent of the flat tax, but that would likely mean I will pay a lot more in taxes. If there were a fair tax, DH and I would be raking in the dough.

A fair tax system basically occurs where you pay on what you consume. It enables everyone to keep their paychecks, but charges a 23%tax on goods you purchase. Sounds great right? You are sitting thinking if I'm a frugal miser, I'll save a ton. Maybe.

Problem? It will be an unfair tax on the poor. But the poor will get "prebates" to allow them to purchase food and medicine. It will also scale up for family size. Sounding better and better right?

Well wrong. What's wrong? Consider this, a family of four (2 adults, 2 kids) will get a monthly prebate of $537 or $6440/year. But it doesn't account for income. So if you make the median $48k, you get the same as if DH and I make $200k with our 2 children. There is no difference in prebate for people of different incomes but same family size.

Now for those of you who think, well you'll consume more because you make more. Really? Reading this blog, I'm pretty frugal and so are others who blog income non-withstanding. So out of my $200k income, I might consume annually $25k (extrapolating what I spend now) and equivalent to the $48k family. So I will be taxed on 12.5% of my income. But the $48k family will be taxed on 50% of their income if they spend $25k/year. However if they only want to spend 12.5% then have to spend less than $6000/year or $500/month. How realistic is that?

So whose family will come out ahead? Do people who make $200k really spend proportionally more consuming? Or do they spend more $, but a smaller % of their income?

As I've previously calculated someone with 2 kids, making $48k will pay 1.6% in federal income tax (assuming standard deduction and 2 - $1000 child tax credits). Hmm...why would they want to move to a consumption (fair) tax, when they pay literally nothing in federal taxes?

Fair tax supporters, explain to me why someone who pays nothing now should support the fair tax? I don't because it's unfair to the poor and would widen the gap between the rich and poor faster.

But if it were to pass (thank you huckabee), I'd be on the side of the "rich" and getting richer faster because we're savers. DH and I love to save money, we drive our cars for 10 years, and spend less than $500/year on clothes. We also carefully shop for food, and enjoy eating out. But percentage wise it's a smaller portion of our income than others because of our income.

So a fair tax would be awesome for us. Our tax liability would go down substantially. And other people making 6 figure incomes would agree. Suddenly they are able to keep their entire paycheck? And they can still consume at the same level and pay a smaller percentage instead of the current graduated system?

Hence, for real reform we probably need a flat tax. Which will mimic the Alternative Minimum Tax currently in effect, getting rid of deductions and setting a flat tax rate equal for everyone.

But no one likes to hear that it will cost more the fair tax. They like to think they don't consume many goods. But the truth is if we all consume about the same amount. The people with large disposable incomes will be able to save more money and use a smaller percentage of their income for basic life goods.

Carnival of Personal Finance #141

The 141th Carnival of Personal Finance is up at Broke Grad Student. Submitted is my post on "Inadequate savings in your 20s".

Couple of great posts to check out are "Pay off mortgage before retirement" or "Changing rates and Streamline Refinancing." I guess I'm into real estate this week.

Sunday, February 24, 2008

Children's Gift Money?

Now I have no kids, but DH and I currently have many friends and family members having children. Now some are close friends and some are acquaintances. However because we have a bit of disposable income, DH lets me give more gifts than perhaps I need. But I like gift giving and it feels good.

I usually give someone something off their registry, however, for closer friends and family, I will often include money for college. I think this is becoming more typical. This is not a lot usually $25 on top of the gift, but it's just the thought that counts right?

But I was DISTURBED, on a message board when someone asked could they take their children's college money and pay off debt? It pissed me off, because their children's 529s were around $3k and mostly funded by gifts from family members and friends. This was not money saved by the parents.

I felt like I had been hit in the stomach that someone would actually ask about taking their child's money and using it for themselves. I understand that debt is bad. I also understand that no food, losing the house is a terrible situation.

However, I asked if this woman was already working a full-time job from her husband or he was working 2 jobs to support the family if she wanted to stay at home? And they have no cable, eating, excesse luxury items in the budget? Because if the situation was not extremely dire, where they were not eating and losing their house and working as hard as possible, I was flabbergasted that someone would ask about taking gift money from their children.

And worse yet, someone suggested taking it to lower the financial need of the children when they apply to college.

I'm sorry but NO! I am one of those givers and I would personally be horrified if I knew my friend/family had taken the money and spent it when I wrote on the check college fund. And they knowingly acknowledged that I had given money for their child's future college. But they decided to spend it and "pay" it back later by supporting the child in college.

How do I know you will support your child in college? What if you can't? What if something comes up? How do I know you'll pay them back?

And worse yet, isn't it like stealing? Stealing from your child, whom some generous person (grandparent, aunt/uncle, godparent) wanted to gift your CHILD not you with $$$?

Maybe because I don't have kids, I'm way off base. And I shouldn't be disturbed that parents would take the college money to pay bills. Please readers help me out here. If you tell me this is common practice, and completely acceptable, I'm reconsidering my gift giving strategy. I'll probably just buy nicer gifts the child will use or need. I won't give money for "college".

And even if you say it's unacceptable to take a child's gift money, I still might change my gift giving strategy after hearing what parents do.

Saturday, February 23, 2008

Money Saving Tip?

Don't shop. Don't shop online or in a mall. Don't go into a store. I think it's great that some people can surf the internet and window shop while bored. Here Dog Ate My Finances writes about her recent internet window shopping.

Good for her. But I don't shop. I am not interested at all. I hate it actually, but realize many people love shopping. But my advice to real life friends? Don't bother window shopping or internet shopping if you really want to stop spending. Why? Because it's too much temptation.

It's like baking cookies, cakes, etc while on a diet. Sure you can give it away and see others enjoy it. But how long will you keep testing your willpower? How long will you keep tempting yourself? How long before you take one cookie, or one bite?

It's like sabotaging yourself to fail. You are giving yourself every opportunity to fail instead of succeed. If you want to stop spending money, don't allow yourself the opportunity to spend money.

It's like going to bars every night with an alcoholic. Perhaps there are more productive things they could be doing instead of constantly battling temption. They could be biking, hiking, working out, second job, etc instead of staring at booze. I am not saying deny yourself completely, but if you want to succed at spending less, then don't go to a mall, don't surf online at stores.

This will help to curb your desires. And maybe you'll get to the point where you hate it. Where it no longer gives you pleasure to buy stuff. Where you don't feel this urge to shop.

So my money saving tip? Don't surround yourself with temption, instead surround yourself with tools to succeed.

Friday, February 22, 2008

Top tip to survive a bad economy?

The top tip given by most people is to start trimming your budget. Well not me. My top tip to surviving in a bad economy is to keep your job. What? DH and I discussed this the other night, the main thing right now is staying employed. It doesn't matter how lean you live, or how well you budget.

If you have no income because you have no job, then all the budgeting and lean living will not work. You will not be able to pay heat, food, gas, rent/mortgage, etc. So keep your job. And in a downtrodden economy that can be tough. It can also be tough to find another job, hence stay employed.

How to keep your job? Well now is the time to be taking on "crap" responsibilities. Now is the time to volunteer for tasks no one else wants. Now is the time to be pulling more overtime and taking more responsibility at work. Now is the time to be seen as a team player and not dead weight.

It is not the time to be focusing on debt paydown, saving money, etc. So if you are working 2 jobs, make sure it's not at the detriment of slacking at your primary job! This is not the time for companies to feel you aren't giving 110%. You want to be sure that your boss knows how important you find your career. You want to keep your job.

With the economy in a bad way, many jobs are being downsized. So you should also network with former coworkers and bosses, in case you need a job or a reference. This way you'll be able to get word out quickly if you do lose your job. Or if you find yourself given 3 months notice you can start looking sooner.

Also be proactive with keeping up with your skills. Show your employer that you are a person who is trying to learn and be competitive in this environment. Show them why they want to keep you and not the guy sitting next to you. I know this sucks to hear, but you have to keep a job in order to pay the bills and live. Unless you are living off the grid, you will have to pay for electricity, water, food, heat, medical care, etc. This is not the time to get complaicent.

If you are self-employed, now is the time to be finding new clients, networking harder, etc. It is time to perhaps think of more ways to earn income in case your client load lessens, not after you lose your income.

During a bad time in the economy, others suggest cutting back expenses. I say great if you hvae time and energy, but focus on keeping the income coming in. Sure cutting back is good, but if you are laid off or fired, then you can focus on trimming expenses. Now is the time to not be distracted at work. Right now you have to stay later, work harder to keep your job from being outsourced or downsized. You want the guy next to you let go, not you.

Do you have any tips to survive?

Thursday, February 21, 2008

Grocery Game

I forgot to tell readers I decided to sign up for the grocery game. It is a trial enrollment to see if I can save some money for 1 month. It costs $1 for unlimited number of stores in your area. I am using CVS, Walgreens, Stop and Shop, and Shaws.

After the one month trial it's $10 for 8 weeks at 1 store, and $5 for 8 weeks for each additional store. So I would probably do Stop and Shop and Shaws for $15/8 weeks about $2/week or $1/store.

Not bad right? Well it depends on how it works. I signed up last week and honestly haven't really found great deals. CVS and Walgreen I can do myself and prefer CVS because I pay so little Out of Pocket (OOP).

But for the other two grocery stores, I am finding the deals are not as plentiful as I would hope. It's possibly because of the stores involved. Or because I just don't buy the stuff on sale.

So for example a stock-up deal is Jolly-Time Popcorn @ 66 cents! It's 71% off, however, I don't buy popcorn really, we eat it maybe 2-3x/year and I have packets from CVS for free. Or GM Cheerios is $1.27/each for 60% off, but we don't eat cereal for breakfast.

Also most of the deals are between 40-50% off. And that's her suggested stockpile price for me! A 50% savings. Sounds good in theory, but honestly I can do better with Costco for many of these things in bulk. I also do better by not eating it. And I keep a price book for my staples, like chicken, steak, seafood, milk, eggs, bread, so I know a good deal on food I need to cook. I try to not buy fruit rollups, pudding, cake mixes, etc. Those are not bought in our house (it may change after kids ok?) but for now, no way.

So I'll see how the rest of the month plays out, but for now I can't see spending any more than the $1. It could do better for other people but not for me, and not for my area.

Wednesday, February 20, 2008 they define you?

Forbes just had an article called "What your car says about you to the opposite sex." I had to laugh when I read the article. I found it very funny and interesting. It gives a new perspective on how car makers are researching the demographics of their buyers to better tailor their cars.

I wonder are people really impressed by a fancy car? If I were single and dating, would I look and care? I am pretty sure, that if I were single I'd still be driving my car. My DH would be in a fancy car for sure, after all, he commented what he saves in for my retirement would pay for a car. But I'd keep my car and hope a man would pick me and my corolla. I wouldn't mind a man driving a Porshe if he really did make $400k/year and saved a good portion of it. That would impress the heck out of me, someone who has worked hard, saved, and can enjoy the fruits of their labor. Especially if they started out young.

But of course, you won't know this until much later in the relationship. You'll have no idea if the car is leased or financed. All you'll know is whether the guy is driving a nice car or not. Much like figuring out if they have debt.

So I guess I'd have to go pick another corolla driver. Boring, safe, reliable, and cheap. Because people who are more into cars pick Hondas, those who are cheapskates picker the Toyotas!

Owning my couch

Today I own my couch. I paid off the last $244 owed on it. I decided to pull the trigger. It was time to be free. I don't know that it really feels different. But at least it's owned. Now if only owning your brain was so easy.

Next up? Gotta pay my taxes. We usually owe a little, but in January I always make a rather large payment to the state to get us within the $1k no penalty area. I continued to do this again, so I think we might owe like last year $100 or so.

Tuesday, February 19, 2008

140th Carnival of Personal Finance

The Carnival of Personal Finance #140 is up at The Financial Bloggers. This week it's based on Prison Break the tv show. Looks like a great week, check out the posts.

I submitted "Spreading the Gospel". Other great posts are "What price are you paying to have it all...the supermom myth" by the Digerati Life. Fantastic post looking at having it all for women. Also read "buy whatever you want after you save up" by We're in Debt. They ask readers to wait until they save up 3x the cost of someone wants. I wonder if it's worth doing?

Well enjoy the carnival.

Engagement Ring costs?

We had a couple of friends staying with us this weekend. 30 year old single, professional women from the Bay Area. They have good jobs, fun, and did I say single?

Well the topic came up about how much to spend on engagement rings. And how DeBeers has bruted about the 3 month salary rule. That you need to spend 3 months of income to propose. This prompted my DH to laugh and say he got off easy because 3 months of graduate income was peanuts (and yes it was). I believe my ring was maybe $1500, but I picked it out and I couldn't believe he would spend that much! Yep my Mr. Scrimp! To blow $1500 was a ridiculous amout of money about 2 months of income at that time!

But now, these women were saying that they would accept any ring given to them at 30+. But the single 30 year old guys we went out with (we were all friends from college/graduate school), called them on it and said "NO WAY!" They say this policitally correct statement that they don't need a 1 carat diamond solitaire set in platinum now, to look good, but when it came down to it, would they really accept a cheaper ring?

I had to call them on it too. I don't believe any of my single girlfriends would accept a ring as inexpensive as my ring. I certainly would not. And BEFORE you launch into me I'll explain why.

Right now if I were single I would demand any man I marry to be financially responsible. He can have CC debt, but only if he's in the process of paying it off. He can have a car loan, but if he realizes the problem. If he's unwilling to pay off debt and take responsibility and change his ways, no way am I going to be involved with him. It's a deal breaker. I would expect that any man in his 30s be more responsible with his finances.

And I would understand that he can't buy me an expensive ring because he's paying off debt. But if he can't buy me a ring because he's blowing it on everything else, there are bigger problems. And that's the truth. I can understand him saying, "no ring because I have debt, am saving for a house DP." I'd be in heaven, but to tell me I need a 2 week vacation to bahamas? Or a leased BMW?

So I have trouble believing that women in their 30s would accept a very inexpensive engagement ring without good reason. And I have to side with the 30-something men that it's just BS. I will say that in your 20s, you're more flexible and probably more willing to overlook financial irresponsibility. That you are more likely to marry for passion/fun and not examine a person's financial decisions.

But me, Mrs. Save? Well if I couldn't find another Mr. Scrimp, I'd have to find at least a Mr. Save.

Renaming ourselves

Hmmm..apparently I should rename DH and I. He's decide to "christen" us Mr Scrimp and Mrs. Save. Apparently I would have trouble finding a new spouse because my financial habits are extreme.

So I am no longer "living almost large", only in my dreams. I am apparently now Mrs. Save to his Mr. Scrimp. And I am way too thrifty to impress a man, rather I change men into scrimpers. Sigh...

So hello to all, we're Mr Scrimp and Mrs. Save!

Monday, February 18, 2008

Moving up in mortgages?

How do you handle moving up in mortgages? For example where you buy a home, then after a few years (5-7), you sell and move into a larger home with a bigger mortgage. Do you reset your mortgage to a new 15 or 30 year fixed product, or do you just continue with the years left on your current mortgage? Also do you increase the amount borrowed or keep it the same?

I think this question very applicable to people in their 20s. When you are starting out, often you have a lower income, no kids, and little needs. So the house you purchase could be a condo, townhouse, or smaller single family home. Hence after you increase your income and start a family your needs might change.

But should you do this? Or is this expecting too much?

I think that it's a hard to handle saving for retirement, children, and a mortgage in your 20s. Often times, the income isn't matching all your needs. But as you build up your experience and increase your income, you find the ability to comfortably a larger home, children, retirement, etc.

I don't think it's necessarily a bad idea to keep trading in a 30 year mortgage for another 30 year mortgage in your 20s. After all can many people who buy at 22 really afford a single family home? And if you live in an area where you can, was it large enough to fit the family you desire?

Plus if you bought a condo instead, and saved money by buying instead of renting for say 8 years from 22 to 30, perhaps you have significant equity. So is it a bad idea to trade your 22 year mortgage for a new 30 year mortgage to afford the SFH you've been waiting for and saving for by building equity?

This is the new trap of today. Before people like my parents and DH's parents bought one house. They never traded up or moved. But now with jobs in flux, people marrying later or getting divorced, the chances of staying in the same house is small.

So the dynamics of buying one and only one home less the norm, and more the aberration. But does it justify the restarting of a mortgage?

I think it can in some scenarios. Mostly those of people who bought RE in their early 20s. If you wait until your 30s or 40s, I think it makes less sense just because you have less time to finish paying off your mortgage. But in your 20s if you bought something affordable that might not be able to fit your family, then perhaps joining other 30 or 40 somethings in purchasing your final home and restarting your mortgage can make sense.

For us personally, we definitely will have to restart our mortgages. If we had continued on a 30 year fixed, we'd only have 27 years when we bought this current townhouse, and when we buy our next home, 25 years or less. This will be difficult to accomplish, because of prices in our area even if we save up cash for a larger DP and have grown some equity.

But as I write this, I'm also not sure where our incomes will go in the next 10 years so perhaps it's possible. Also we might have the opportunity to move to a lower COLA and that would make our dreams of homeownership a lot more possible. The only thing you can do is make the best decision at the time with regards to your potential income increase, savings, and number of children, etc.

Sunday, February 17, 2008

Inadequate savings in your 20s?

I pondered my feelings of inadequate savings while in my 20s. It's hard not to feel this way, because you have people telling you to pay off your mortgage, car loan, student loan, credit cards, etc.

But how do you save money outside of retirement? It's next to impossible for DH and I to save more than the maximum in our retirement accounts. Right now we're treading water, paying for our current bills, retirement, and just regular home ownership expenses.

We're milking our cars and praying they last another 2-3 years. We haven't got the savings in a taxable account to replace them with good newer cars. We could afford cheaper beaters (basically replacement value), but to actually buy nicer cars might be impossible without a loan.

Are we misguided? Should we stop saving for retirement and scale down to just 15%? Then save more in taxable accounts? Or should we look for ways to increase our income?

I think the problem is that in your 20s you have so many pots of money to fund and not enough income to fund them all. You can only pick and chose what is most important. And as your income grows, as ours has, you can start to have more pots.

I believe as we leave our 20s behind, we'll be in a good financial position of fully funding buying newer cars, college, and just growing a taxable account. And by maxing out our retirement options and ESPP, we have established the habit of saving and living well below our means. We are used to saving $35k/year so all extra money can be diverted to buying a large home, newer car, college, daycare.

So my advice to people in their 20s? Stop feeling overwhelemed. Start saving for retirement so you'll get into the groove of not seeing or using the money. That way as your income begins to increase, you'll be able to fund all the pots you desire while knowing you've already established a nice retirement nest egg. And stop feeling inadequate over not being able accomplish everything. Rome wasn't built in one day, and neither will your net worth be established overnight.

So I just have to keep on trudging and reconcile I can't be perfect immediately. I can just strive towards perfection and hope to get somewhere close to it.

Saturday, February 16, 2008

Bernanke warns of worsening economy

Bernanke warned of a worsening economy on Valentine's day (2/14). He gave a pessimistic outlook for the next year. He signalled to watchers that the Federal Bank would be cutting interest rates in March and April in an effort to combat the US economy falling into a recession.

He and treasury secretary Henry Paulson believe the government needs to intervene to prevent the economy from falling in a rapid recession. That Americans are drowning in the mortgage mess, lack of jobs, and rapid inflation of goods.

Paulson believe the US will not fall into a recession because of the quick stimulus package approved by Congress this week. Where people are being sent refund checks to help stimulate the economy. However he did call for interest rate freezes on ARMs and extending foreclosure periods for homeowners in trouble.

What do I think? While I don't think we're in an official recession (defined as a decrease in gross domestic product) I believe Americans are in trouble. We are being hit by $100/barrel oil, $4/gallon milk, skyrocketing health insurance premiums, and stagnant wages.

Right now the average person like myself is wondering why do things feel tighter than say 2 years ago, but we're making more money? Because we really are not making proportionally the correct amount of money to keep up with skyrocketing food, heating, and transportation costs.

2 years ago my $100/week grocery budget was generous and mostly organic. $100/week barely covers shopping with coupons, less organics, and less fresh fruits/veggies. $100/month used to cover 5 tanks of gas, now it's $150/month for the same 5 tanks of gas. My driving habits haven't changed, we haven't moved, changed cars, etc, it's just that gas went from under $2 to $3.xx. My heating bills used to be $200/month for 150 therms, now it's close to $400/month for 150 therms. The house is the same, the weather the same, but the cost per therm has doubled.

But has my income doubled to keep up with these increases? No. So I am feeling the squeeze. And I'm sure I'm like most other consumers, except that I am fortunate to work in a field with excellent medical insurance premiums. Which while they have increased by 33%, instead of paying $60/month we pay $80/month is low by any standards.

So no, I don't think we're in a recession Mr. Bernanke. But I do think we're in a worse place than we were 2 years ago. And I do think that the average person is feeling the squeeze in places other than just mortgages. And that our salaries are not keeping up with prices of goods we find necessary to purchase.

But what else can we do but keep on plugging away? Pray to hang on to our job. Keep on working hard to avoid the eventual layoff? Plan for the worse, hope for the best.

Friday, February 15, 2008

Revealing your Finances?

When and how long into a relationship do you reveal your financial status? On MSN, this was a huge thread about a woman revealing to her boyfriend of 10 months her $50k of debt. She was turning it around, and he was very supportive. But the question was, when should you reveal your financial life?

I guess from talking with single friends, friends in relationships, married friends, friends about to get married, and divorced friends, the consensus was when you get serious. Meaning this is not a conversation you have on the first date or even second date.

You can investigate their values about money, their values about their future, but there seemed to be an agreement that you do not have to reveal your debt or savings until say 3-6 months into a relationship.

Now this number will vary depending on how quickly you proceed through dating. Are you immediately seeing one person and you never have the exclusive conversation? Or if you are dating a lot of different people, and you need to have the exclusive converatsion that changes the timeframe by a lot. For my all friends, until their have cemented their relationship as exclusive, they definitely don't think total disclosure is necessary. For some this can take awhile, and I agree.

I mean if you are dating someone ever week, but still looking, you aren't in an exclusive relationship. However if you have a standing date and expectation of not looking, then it could be construed as a permenant relationship. At that point, I would say is when the clock starts to tick on becoming open about your finances.

Mostly because you are trusting the person at a deeper level. You've taken the time to get to know the real person, and not the dating persona. Also you've had time to drop hints and observe their financial habits.

I'm surprised that some people would prefer to know on the first date or would reveal such information on the first date. I think of it as sort of revealing how many people you've slept with on the first date or mentioning all the "bad traits" of exs you've had. There's a time and place for a conversation and it can be a turn off if you immediately put it on the table. I mean do you really want to date someone who just talks about the bad things in their past and constantly complains?

But maybe I'm old fashioned. So what is it? Should finances be revealed immediately? Or does it wait till a relationship develops further? Is it only revealed once the couple talks marriage (I had a couple of votes for this)? Or when it's obvious the relationship is serious? Or on the first date?

The poll is going up...and everyone can weigh in.

Thursday, February 14, 2008

Hallmark Holiday!

I got nothing for my DH and I doubt he got me anything. But happy Valentine's Day to everyone.

I wonder when do you stop buying gifts for valentine's day? Should DH and I be concerned that we don't even have kids and we've already stop the "fires" of passion and gift giving? Or is it an overly commercialized holiday? Some call it a Hallmark holiday.

We never go out to eat either in Valentine's day. The service is bad, food is cold, and reservations need to be had so early it's impossible to get. So we end up usually going out as a pseudo -date either the weekend before or after. It's possible we'll go out this weekend for a "date" but I'm not sure.

Occasionally we'll buy fancy food (scallops or lobster) and make a romantic dinner. Just writing this makes me think maybe I should. But I'm feeling lazy and cheap. So my DH can eat roast chicken instead.

Do you still buy valentine's day gifts for your SO? If you do, and have a cheap idea, please, maybe I'll use it. I could buy into the holiday and celebrate. I might feel less guilty. Although my DH has class and won't be home till almost 10 pm tonight anyway so I guess we'll just go to bed.

Wednesday, February 13, 2008

$400 Beer!

Okay this is an aside, but I forgot to mention that this weekend I drank the most expensive beer on the planet. I had some of Sam Adams Utopia! I am not a beer enthusiast, but when given an opportunity to drink a $400 bottle of beer for free, heck ya I'm going to take someone up on the offer.

So anyway our neighbor had a free bottle from work, and since they don't drink, they willingly shared it with us. Wow. It packed a punch. Not that DH and I could ever afford something so luxurious, and truly in the upper echelons of indulgent, but WOW!

Guess I know what I'm buying DH one day when we have more money. Also, you have to have an inside track because they make 4000 bottles only, and if you aren't friends with the neighborhood liquor store owner, you're not getting one. They sell out in less than 5 minutes. Maybe next year for DH's graduation...

College Obligations

I asked the question a couple of weeks ago if parents are obligated to pay for college? And if they provide college can they expect a return for their investment? Also I posted a poll over whether parents should pay for college or not.

We feel that college is important and we'll be paying 100% of our children's college needs. This is our opinion, please do not say that it's wrong. Everyone is entitled to their own opinion and choice. We feel this way because a college education was provided for us. We did not flunk out or party too much even though our parents contributed to our education. Instead we focused and did well because our parents expected it of us. And their contribution to our education was grade based. We performed adequately enough to go to good graduate programs in our respective fields. I would assume the same would be true for our children. Another idea is we might make them take out some student loans which we will pay off contigent on them not partying and flunking out. This way they understand the seriousness and severity of their actions.

But from a very early age we will instill in our children financial responsibility. Both DH and I have had CC from our teenage years before we even entered high school as a mechanism of financial responsibility. And we've both never paid a fee or interest on a CC. Thus I feel the way we were raised made us more responsible adults financially and emotionally. We were coached early and often about money and responsibility by our parents.

Thus, we hope our children will want to go to college. If they choose to not go, then that is also acceptable. We will not force them into a career that makes them unhappy. After all they have to live with their decisions.

Also we feel that while we provide college, it's important that we save for our retirement so we don't feel that our children need to "pay us back" for our support. I believe that no child asks to be born, therefore as a parent you have an obligation for their clothes, food, shelter, and education until 18. It does not need to be fancy or new, but you are obligated to supply these basics willingly and without expectation of a "Return" in the future.

I do understand that some parents cannot afford college, either through unfortunate circumstances, late realization, or just inability. However, I do feel that parents have a responsibility to help their children go to college by supporting them emotionally, guiding them in finding scholarships/grants/loans, and explaining the fiscal responsibilities that come with going to college. What responsibilities? Well explaining that student loans need to be paid back with interest, and not spent foolishly. Showing them what a CC is, how it's properly used, how finance charges accrue, late fees, and why CC companies are at colleges being given out to students. It's not free money. When I meet students who actually thought CC were free money, I blame the parents. They sent their children into the world completely naive and uninformed.

My kids will be neither. By the time they go to college they'll have paid bills, budgeted, and learned basic investing skills. However, after 1 CC, I think students begin to understand CC. And at that point it's their fault for debt.

Anyway that's how I view college obligations. There is more to college than just funding it. It's also in the preparation to handle college maturely. And so if you can't fund college, you should prepare your child to handle it maturely.

Tuesday, February 12, 2008

Spreading the Gospel?

I've noticed that Dave Ramsey followers fall into two categories. Those who use his words and try to live a new life without debt, and those who follow his words blindly and extremely.

I admire the first group, while despising the second. Why? Because usually those in the second are judgemental of anyone not following DR, pious about their new found "weirdness", and scathing about normal society. That is, until they fall in with the "sinners".

One such person is JimFPU from the LLNOE website. Now I usually don't highlight a person, but this guy is over the top. He is a Finanical Peace University (FPU) coordinator, DR disciple, and hard-core fanatic about following the gospel. He has even been on Dave Ramsey's FPU videos about being debt free.

Yet how he has fallen. He has moved 4 times in 4.5 years buying and selling homes. His most recent home purchase caused him to acquire new debt. He denies this, but however went from Baby Step 4 - saving for retirement, to BS 1 $1k Emergency Fund. What happened?

Well he bought a house without a 20% DP, huge no-no not just in DR book, but MOST financial gurus. Second, yes he got a 15 year fixed mortgage, but turns out it's 41% of his income. Wowsa, can't believe he was approved, but why not? Again way above DR's approved 25% PITI guidelines and by "normal" standards above the 35% maximim PITI limit. The guy is drowning right now in being house poor.

Jim, however defends his position by saying that it was a lot of unexpected life expenses that caused him to drain his 4 month EF. Well HELLO! I hate to point out, but by overextending and purchasing a house he can't afford, it's pretty reasonable to assume he can't manage covering unexpected expenses.

But he doesn't see his Home Equity Loan as "new debt". I find that AMAZING. A man who is teaching DR principals, spreading the "gospel", is in reality a hypocrite. I thought MP Dunleavy was crazy, but she's got nothing on this guy. At least she doesn't try to pretend she's debt free.

Jim on the other hand, is actually guiding people to live debt free while plunging himself into debt. I forsee a hard life for the next year. Even if he works a second job (not ideal), he could easily fall deeper into debt with such a large house payment. Actually it's likely to happen because now he has a large home payment (41%), no EF, and he's pretty much starting to hit the peak of his earning power being in his 40s. He's hitting his peak earning years, so the potential is as high as in his 20s.

This story is a reason why I think DR and other people say buy a home with 20% DP, 3-6 month EF, and 25% PITI. Maybe 35% PITI is not a bad if you have no other debt and you are sure your income is going up.

But it is ironic how people can justify any purchase.

Monday, February 11, 2008

How Americans Spend money?

I found this image which shows how different income brackets in the US spend their money. It appears the top 20% of families save the most and pay the most taxes, very obvious. But what is interesting is that the lowest income goes into debt, the middle class save 5.3%, while the riches 20% saves 31.4%. That the discrepancy is so large is what is interesting.

However the tax differential between the classes is not so stunning. The lowest income is pays 9.2%, middle income pays 11.7%, and the highest income pays 15.6%. So while the savings rate in the highest class is 4x the rate of the middle class, they only pay about 50% more in taxes. So because the highest income has so much disposable income they are able to save and take advantage of tax breaks to lower their bills.

Now looking at consumption side of the equation, the lower classes consume obviously a large proportion of their income. For example food, the lowest income uses 32% of their income for food. While the middle class uses 12.5%, and the wealthiest use 6.8% of their income to eat. Now the rich spend more dollar for dollar again, but it's a much smaller percentage of their incomes.

This consumption is repeated for housing and transportation, where the poorest use 54.4% and 30.4% of their income, the middle class use 21.4% and 17.1%, and richest use 14.4% and 10.9% respectively. This shows how a consumption tax proposed by some people might be inherently skewed to tax the poor unfairly.

Also looking at the graph it appears, that the consumption of the average consumer is nearly the same between the middle and richest consumers. Hence the debt of the average consumer. They are trying to live like the rich while not having the income to do so. It's a vicious cycle. The need to keep up with the rich, when only 20% of the families can really afford to do so.

Free Breast Mammogram!

Please use this link to get a free breast mammogram or donate to the cause. Every woman should be health conscious, even in your 20s.

I was just thinking about this as a friend we saw, who is 31 and fighting breast cancer as we speak. She is almost done with chemo and moving onto radiation and reconstruction!

Sunday, February 10, 2008

Declaring Bankruptcy?

Since I ranted already today, I thought I'd continue with declaring bankruptcy. On the savingsadvice message board, there is a woman choosing to declare bankruptcy. I'm okay with that because she has a lot of bills she cannot seem to pay.

However, she writes about declaring bankruptcy here, but in her post she says "At this point my expenses are really low – cell, student loan, cable bill, food, braces and riding lessons for dd, that’s it. I bring in more than enough to pay all those, pay myself (envelope system) put some in retirement and still have some walking money. So right now I’m doing so much better than I was a year ago. I really have to thank the hard hitting members of this board for that. It was difficult to face my debt, and hard to admit, but I’ve taken quite a bit of advice here, working the second job last year really helped also. "

Um, how can you declare BK when you still have cell phone, cable, braces, and riding lessons? That's a lot of fat in a budget. I am really upset that people like this can just declare BK and buy whatever they want obviously, live a pretty nice lifestyle (I don't have riding lessons), and still walk away?

Excuse me? Where's the personal responsibility for paying back bills you charged? Or paying off a care you choose rather than repossessing it? Where's the responsibility to pay back bills you ran up (medical, dental, etc) than just getting rid of them in BK?

Sorry but if still have cable, cell phone, riding lessons, etc, you aren't doing everything possible to pay off debt. And it's not the CC companies, doctor's office, etc fault. It's pretty obvious it's the person's lack of integrity.

Splitting Meals

Last night, again we were invited to dinner out and we went because I had a coupon, but people at the table wanted to "share" and appetizer and dessert. Now I prefer not to because of the a whole "diet" thing, but I don't get why people keep trying to push "sharing" an appetizer with the table.

There were only 5 people and I opted out, DH obviously wanted to participate. But when we go out, he refuses to share an appetizer/dessert, saying it's way to indulgent (way he was raised), so it's likely because he hates to look bad.

But why do people do this? Is it common to keep trying to order appetizers for the table and "share"? If you want an appetizer or dessert, why doesn't the person who orders it pay for it? I feel it should be that way rather than expecting people to chip and pay for something they didn't choose?

Now I'm being really picky I know, but part of is it cost, and part of it is food habits. I acknowledge I have serious food pickiness, but am I so out there to think that people shouldn't share appetizers/desserts?

Is this a common trend? Do people like to order an appetizer for the table? If you are coupled up, why not just share and appetizer and entree between the two? Why does everyone have to participate? And if there is a large group, why order 2-3 appetizers? Aren't meals enough?

It drives me insane because a lot of the times, I also wouldn't pick the appetizer. I don't eat tomatos, certain dairy, no spicy foods, certain fruits etc (food pickiness/allergies). So I hate bringing up except to say I won't be participating (and I don't). But I don't feel like picking an appetizer or dessert because I don't feel like eating it either.

When did going out become so complicated? What happened to seperate bills and choosing your own meal?

Saturday, February 09, 2008

Bichons are expensive!

I love my two Bichon Frises, but they can be expensive. But not nearly as expensive as my Brother's Bichon. Actually his BF is the reason why I got mine, they are adorable, non-shedding, sturdy, funny, and excellent with kids.

Anyway in a short aside, my brother and SIL went out shopping quickly a week ago, they left their Bichon Casper at home alone. Bichons all hates being left alone and are terribly curious to boot. So they ran out and came home to a turned over entry table with everything spilt everywhere. That wasn't the worse part, my brothers wallet had been chewed and Casper had actually eaten the money in there. Yep, later my brother figured he probably lost about $40 (came out later). Hilarious.

In a second story in the same lines, my Aunt's BF decided it was cool to run around the house when she was gone. Well one day she came home to find a bottle of baby oil on the floor, and very sick Bichon. The bottle had fallen off the top of a dresser, breaking Inu's tail along with oiling him like a pig. He was impossible to catch, and was sick every where in the house because he kept trying to lick the baby oil off his rear end. They rushed him to the vet, who said his tail would never curl again and well the costs were rather large for the x-rays.

Until I got mine, I hadn't realized how funny, nor expensive they are. But they are pretty fun to have around.

Birthday Dinners out

Why is it when you are invited to someone's birthday dinner you are expected to fork over $ to pay for their dinner? I find this a very common theme.

We were invited out to dinner last weekend for a friend's BF birthday. We were okay with realizing that the dinner would include paying for his meal. Turns out that it wasn't just his birthday, but also the birthday of one of the Birthday Boy's Friend as well. So 2 birthday people's dinners.

I nearly flipped out because we didn't know the other person and only came because we thought it was for the friend's BF birthday since she made the reservations and invited people. It was not mentioned that other people had birthdays. So one guest said let's just split the check equally, which really pissed me off, because we did not drink wine nor did we intend on chipping in for people's birthdays we didn't know.

But then we got saved. A third person in the group turns out, it was their birthday the same day as the birthday boy's and when it brought up that people with birthday's should not pay, then it suddenly was 3 people not paying for meals. At that point, the friend hosting the party said nevermind, every pay their own. It was becoming way to complicated and I think she could tell that some people out of the group were feeling disgruntled over the fact they were paying for people they had never meet before (I fell into this category).

I suppose this is why I hate having adult birthday parties at restaurants. There is such an awkward feeling of whose paying for what. That it gets really complicated. I also hate the fact that unexpected surprises of costs occur (such as the two additional birthday people).

I guess one option is to have a party at your house and pay for all food and drink. This way people feel less obligated to pay and if others happen to have a birthday around the same time then great.

I wonder when it starts that you invite people out to dinner for a birthday celebration (or any celebration) and the invitee starts to pay? Does that never happen? Rarely? Or maybe when you establish yourself in your career and have more money? After you have kids and invite people over for their birthdays?

Friday, February 08, 2008

Riding out the storm?

Let's say you bought at the peak of the housing market, and since then home prices have dropped. What should you do? Panic and sell? Keep calm and wait?

I was contemplating today about our purchase of a home at close to the peak of the market. Because we moved cross country our housing purchase and sale was not within the same community. This makes debating whether our move was smart or not a hard decision to evaluate.

However I believe if we had not bought when we did, I don't think we would have bought during our time in MA, because we would not be assured of living there long enough to wait out the housing crisis.

When we purchased in 8/2005 we paid $575k for our home. I believe the peak had already passed in our new market, but was just falling in SD. Our neighbors had bought in 8/2004 for $609k an identical unit. Unfortunately they had lost one job and had to move to get another (personal decision because the woman was still working as an MD, but her husband wanted to move for a better opportunity for him). Because of this, their house was for sale in less than 6 months after they purchased.

They sold their house for $531.5k in 5/2006. Wow, we had just lost $43.5k in 9 months. But the whole numbers game wasn't over. The new owners had to pay $10k for the retaining wall, while ours were covered by our seller so add $10k to their purchase and $10k from ours = $23.5k in 9 months. Still a steep drop of 5% in less than one year. But desperate sellers = rock bottom prices (although our side of the house is nicer because the basement unit takes up less space under us so it's quiet). Ouch it hurt, but then we looked at our old condo in SD.

We had bought in 2002 for $150k, sold in 2005 for $275k, and current prices are $185-195k (this is for 500 sq ft one bd condo). Ouch, prices had tanked even more about 30%. And many people can't give away their condos.

So we were talking about our current home. Should we be worried? What if prices never come back? Are we stuck in a depreciating asset?

It really goes back to do you consider your house an asset? I don't. It's a nice place to live and I enjoy not moving. But any appreciation is gravy. Unfortunately many people bank on their homes to finance their retirement. Which gives the paper illusion of wealth. I'm sure many people never considered a home losing value. But the current situation shows it has.

So what can one do? Ride out the storm. Be prepared to live in your current place longer than you intended. I hope you genuinely love your house because you'll need to stay. Which is why people say don't buy unless you plan on living there at least 5 years and really love it. We actually love our place, intended on living here 6-7 years, and planned it to be large enough for our expanding family. So riding out this storm seems feasible.

I hope others reading this will have faith and keep on holding on. It's not an easy choice, but if you bought a house you liked and could live in, then it's easy. Buying a house solely for profit can lead to further financial pain.

One day when we move I'll write about whether it was a good financial decision. I think we'll be fine, especially because of extenuating circumstances.

Thursday, February 07, 2008

January Cash Use

Did the grand experiement work? Or fail? I think it worked in some ways but not in other ways. It was a bit weird to use cash. I hate spending cash, so the cheapskate in me came out. I can stick to a credit card budget, but with a cash budget, I look at everything and decide I don't need it period. Plus I got more serious about my diet and we barely ate out because I was following my weight watchers flex plan.

So how did that work out? Well we spent $63 eating out for the month. Realize we each get $10/week or $40/month to eat out for lunch/blow money. I use mine for fun stuff I might want, while DH usually eats out once a week with coworkers. So I did use my blow for a lunch out with DH. But I'm not sure if the cash affected out spending or following the WW diet did.

We did spend $91 on groceries. This was definitely a conscious decision. One which I'm not sure was wise. Why? Because we ate more out of the pantry without replacing any of it. This means either this month or the next month we'll have to replace our pantry stock and end up spending more. Also I specificaly did not buy meat and ate vegetarian meals because I didn't want to spend money. I think my DH was a bit unhappy that I said no to steak, seafood, etc.

So did this work? I guess it did. But I wouldn't say it was a good experiement. We spent less money, significantless than budgeted. But I wouldn't say it was a happy month. Instead we had were miserable because we changed our eating habits to conform. I am glad to know if need be I think we could survive 1-2 months from our pantry if necessary.

Should we switch to an all cash system? I don't know. It might be pretty miserable to live always trying to save money. At least with credit cards, I know what I'm spending and how we're doing in categories. And we don't overspend and feel okay with buying some luxuries. With cash, I feel as though luxuries are bad. It's a mental block.

I do however think this February our grocery bill will be quite high because we'll be restocking the freezer and pantry. Or I could try to curb my spending on a CC. Hmm...

Wednesday, February 06, 2008

Food Inflation

I just got a letter in the mail yesterday from the Food Bank in our area. Because a neighbor works there, we've been donating both food and money to the association. From talking with her, she thinks the increase in people using the food bank has spiked in our area.

From the letter, it appears that more people are using the Food Bank because of rising costs. But I don't think that's the whole story. Where we live, people will pay for heat first, then go to the food bank for food. Since last year there was a 40% increase in natural gas, which translate to an appropriate raise in that budget category. Where to cut? Food.

But food prices according to this letter have skyrocketed. The letter says that in 1 year food prices in our are have gone up 5.7%. The largest 1 year increase in years. Milk is now $4/gallon and eggs are up nearly 50%.

I was pretty sure that food prices had risen since January 2007. But seeing it calculated in black and white mad me worried. A 5% increase in food is a lot when you consider other budget areas are rising faster. Usually food is the first place people try to cut, but what happens when they are not able to cut because the prices have caught up to their cuts?

Do you think you'll be able to cut your food budget by 5%/year? If this keeps up, and budget areas like heating, fuel, health insurance increase 10-20%/year where would you cut from?

My goal this year is to keep our food costs about the same as last year. We spent on average $300/month, but so far this year I am trying to get us down to $250/month. I have no idea if this is realistic or possible. But last year I started coupon shopping again, and while I saved $50/month in toiletries, cleaning supplies, etc, I feel the $50 went straight back into the grocery budget.

Tuesday, February 05, 2008

Saving troubles?

Do you have trouble saving money? I do. People are probably scratching their heads wondering how and why do I have trouble saving. Well I like to spend money.

So to circumvent this bad habit and tendency, I have to automate everything. Our 401k is automated, ESPP automated, Roth IRA automated. I don't see the money ever. Our savings is pretty much done before it ever hits the checking account on payday.

But after that, I have trouble savings. If you asked me to set aside $100/pay period, I'd scrunch my nose and sigh. I'd look at the money in the account and know I'd want to spend it. Either going out to eat, vacation, fun, anything pretty much.

And I'm sure I'm not alone. I'm not a saver by nature, I'm a forced saver. A mortgage is an enforced savings plan for me because I doubt I'd have the willpower to pay less rent and save the difference (unless automated). But I'm sure things would come up that I would "have" to do. I also pay all my bills automatically, again so I don't see the money until it's gone.

So are you a forced saver, spender, a natural frugalite? Is it a natural tendency or are there people who just love to save?

Monday, February 04, 2008

Every Financial Decision

Every financial decision you makes affects all your future decisions. Whether the decision is wise or foolish, it influences your future decisions.

But is that a good or bad thing? Does it make sense we allow our previous experiences to color our choices? Or should each decision be independent of the past?

I sat over the weekend talking with people about our financial mistakes. Whether every move we've made has been good or bad. And pretty much every person said it was a bad move. And most would go back in time and change things.

Would I? I had to say no. Sure it was a mistake, like purchasing our house, it's declined in value by 5%. But I like where I live. And if we hadn't bought it, we might have not bought while living in Boston. Do I think that's a mistake? I think potentially it could have been just because of the cost of renting, moving, and instability.

And yes a couple people say they regret their student loans. But they don't regret their degrees. So how do you measure if your financial decision is a mistake? You can only evaluate it in hindsight.

So while ever choice affects the next, it shouldn't stop you from moving forward and making the best decision possible with the information available.

Would you go back and make different financial choices in your life?

Sunday, February 03, 2008

Compromising about money?

How do you compromise about money with a spouse? Does the "Spender" or "Saver" usually win? Is there a fine a line between overspending and living with one's means, or cheap living versus frugal?

In our household I'm the spender. And for the most part I win all spending battles. So if I want something, I usually get it. Sounds terribly spoiled right? But you'd have to take it in full context to really understand why I win spending battles. I'm married to naturally frugal and thrifty person, and he realizes and acknowledges this fact happily.

I enjoy spending money and living a comfortable life. By normal standards however, I'd say I'm way below average. I don't ever shop or go to malls. I enjoy eating out, but realize it's not good for the pocketbook or body. So in general I'm definitely not a spender on the life scale, and I've often been considered "frugal" by most friends/family/coworkers.

However, if i sit on little to the conservative side of spending/saving my DH takes it to the extreme. He hates to spend any money unless I insist or absolutely necessary. There are times where he will want to do a home project but not want to buy the materials to do it.

For example, our fireplace cost $4k, and DH desperately wanted it and felt it would save on heating costs. Turns out he was right. But I had to pull the trigger, by going to the store with DH and forcing us to purchase the fireplace. He had done the research on model, efficiency, installation, etc, but couldn't bring himself to spend $4k. He would say he want it, but wouldn't actually move forward with the purchase, even though I said it sounded like a great idea and trusted his judgement. Turns out, it's a fantastic fireplace and we worry less about freezing pipes and flooding (priceless after you've already flooded your downstairs neighbor the previous year).

So in our relationship while DH has to compromise about money, I think he allows me to win the battles because he would do it, but is unable to really "pull the trigger" and spend money.

In every relationship there is likely a saver and a spender. Which are you and how do you handle who wins the spending argument? Is it easy being married to a saver? Or are there different levels of savers and some are harder to compromise with than others? Or has being married to a saver influenced you to become a saver yourself?

Saturday, February 02, 2008

401k Debit Card?

OMG, what is this country coming to? It appears we're taking saving down to a new low. Instead of saving for retirement, we're about to start using it as a regular savings account. This article talks about how companies are starting to implement 401k Debit Cards.

Companies are attaching actual debit cards to people's 401ks. They walk up to an ATM and are able to take out the cash saved in the account. Unlike traditional 401k loans, the borrower pays back the "Loan" like a credit card and not through traditionally payroll deductions. This makes it easier to borrow money without a thought.

Also the 401k loans might become like revolving lines of credit. People are able to take money out immediately and pay it back immediately.

One immediate risk is that people will take everything out and never return it. They will drain any retirement savings before they even retire. A second problem is how will they money have time to grow in investments if people continually are tapping into it? Will they pay transaction fees for moving into and out of the plans mutual funds?

Since traditionally 401k loans take a long time and lots of paperwork, this method will save companies time and money. However it will make accessing an individual's 401k way to simple and easy.

I think it's a stupid idea. Problems will arise immediately and it will quickly become apparent that people when given the opportunity will spend all their money rather than wait for deferred gratification. So I guess this program will be in place for maybe 1 year.

Friday, February 01, 2008

January 2008 Net Worth

What a roller coaster month in the market. We lost about 10% of our 401k in January, but kept on contributing to it. We've got another 30 years before we touch it, so it doesn't matter what we did. Overall our retirement savings gained $122, solely due to the fact we made our 2007 Roth IRA contributions and left it in cash. We didn't have time to buy anything before the year was out.

Second, we increased our cash position to $14k, decreased our stock position by $8k. And we decreased our mortgage by $700 and our CC $100. So we'll keep the cash on hand till this summer. No bashing, but DH has participated in the employee stock purchase plan (ESPP), but we're not sure where the money is. So next month we'll get it straightened out.

Also I forgot to wrap up my CC rewards for the year. We earned $300 from Citibank Simplicity, $200 from Citibank Driver's Edge, Amex $115, Discover $120 = $465 for the year. Not a bad rewards year. Also we'll be earning rewards from having the Costco Executive membership. I wonder if it'll be worth it this year?