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?