I actually went yesterday, but the hours posted on their website was wrong. Grrrr.
Anyway, I got my library card, and took out four books.
- The Money Book for the Young, Fabulous, & Broke, by Suze Orman
- Personal Finance for Dummies (my father recommended this one)
- Smart Women Finish Rich, by David Bach
- The Millionaire Next Door, by Thomas J. Stanley and William D. Danko
I'm particularly intrigued by that last one, actually.
Since we're being hit by a tropical storm tomorrow, going to B&N on Friday might not be such a good idea, so I'll probably skip my trip tomorrow (especially since I don't, um, own an umbrella). But I get to finish Suze Orman's book anyway, so yay.
Archive for August, 2006
I actually went yesterday, but the hours posted on their website was wrong. Grrrr.
My entire life, my mother has entreated me to ensnare a rich man so that I will never have to worry about money again.
I used to think that this reasoning was shallow and silly (and in large part because I want to be financially independent and not have money play a role in the power dynamics of my relationship). But now, I also think it's just plain wrong.
Let me explain.
To start off, the first critical flaw in this plan is that there just aren't many rich people in this country. According to the wealth distribution in the US (data from 1998), the vast majority of nation's wealth is in the hands of a tiny fraction of the population.
For those who don't feel like viewing the reference link, here is the take-home message. The top 1% of the population own 38.1% of the nation's wealth. The next 9% own 32.8%. The next 20% own 24.4%.
What does that leave the rest (60%) of us? Only 4.7% of the nation's wealth.
I use this grossly uneven wealth distribution to simply conclude that statistics will not be on your side when it comes to meeting an eligible rich bachelor (or bachelorette). Unless you're an insider on Wall Street (or the White House??), I highly doubt you can just go out there and seduce a multi-millionaire. What a bummer, eh?
Another flaw in the nab-a-sugar-daddy approach to financial security is actually an observation I made while in high school and college. I went to a pretty elite high school and college, so there was a large population of wealthy kids there. Perfectly eligible young sugar daddies, right?
Wrong. I realized that the "rich kids" in my high school and college weren't rich *themselves*. It was their *parents* who were rich. After all, these kids weren't even out of school yet, much less earning money! Most of them don't even work, because they don't qualify for financial aid and the associated work-study jobs.
Furthermore, I noticed that kids born with a silver spoon in their mouths were not responsible with money. Most of them took money for granted, and didn't know how to manage it. At best, they spend freely and irresponsibly; at worst, they are spoiled rotten.
Would it truly do me any good to marry one of these rich kids? I would say no. Because even assuming he gets a large inheritance from his parents in the near future--which is not likely considering life expectancy and estate taxes, a kid with unproved earning power and weak money management skills will probably not remain rich for long. Chances are, the inheritance will be blown, and you'll be right back where you started, or worse--in debt, because this kid may not know how to replace the money that he's spent.
Okay, but what if your guy is actually earning a sizable income, and not just mooching off his parents. Well, that's good, since at least there will be fresh income coming in. But what would a large paycheck accomplish if it is spent every time? Maybe he won't spend himself into debt, but this doesn't exactly build wealth either. It merely maintains a constant state of treadmilling and survival.
Now what if your guy is responsible with money? Maybe he earns less than the others, or doesn't have a rich family, but with proper asset management, future financial security seems much more likely. And what's best is that monetary responsibility is a personality trait rather than an act of circumstance, so you don't need to find this guy in the top 1% of the population.
This is the train of thought that brought me to one of my seminal conclusions about choosing a spouse. It's not about finding a guy who is rich, or earns a high income. It's about finding a guy who can manage the money that he does earn.
And in case anyone thinks I've just killed romance, I'll be the first to admit that love is important, too. But love won't feed you or pay the bills, and I'm nothing if not practical. And this is a finance-related blog, so I'm not going to talk about mush on account of it being off-topic.
So there you have it. Another late-night insomnia-inspired ramble from Mimi. Maybe I *should* get a real life (or some sleep!).
It's done! It's winging its way to Vanguard via certified mail right now! I had to walk through the pouring rain to go to the post office, but THAT'S OKAY! At least I got to leave work on time!
After this, it's $333.33 a month, with a little extra tacked on at the end to max it out. Hopefully, I'll make it.
I need to electronically transfer the next rollover next March. I have a two week window to do this.
Tomorrow: Go to the library after work, get a library card, and get to know their personal finance section very, very well. *squee!*
I'm tired. I'm bored. I'm gonna blog.
Just for fun, I'll list some of my odder habits that relate to frugality.
- I haven't bothered to buy a trash bin for my room. I'm using an empty bulk Cheerios box. The top flaps hold the plastic bag in place rather nicely!
On a slightly related note, one old pasta sauce jar holds my change, and another holds my sugar. An empty teriyaki sauce bottle has been requisitioned to hold my olive oil (which I bought as a gallon). A hummus container holds an aliquot of salt. At least I'm refilling my bulk soy sauce in an actual soy sauce bottle.
- I only have one pair of socks that do not have holes in them. And I don't mean little holes. I mean GIGANTIC HOLES WHERE MY FOOT ACTUALLY FALLS OUT. I really do need new socks, eh?
- (This one shocks the hell out of my co-workers.) I never buy lunch, even if I don't brown bag it with leftovers. I just fast all day until I can get home and cook. And I'm perfectly fine and functional. I even get hyper and work faster, which I kind of like.
- I fast before free meals so that I can eat more. Especially buffets. I love free buffets.
- When I was a college student, I tightly budgeted my meal points because I saw people running out of points all around me and was worried that I'd do the same and starve. I ended up feeding not only myself, but also my bf, for an entire semester, and we bought whatever we wanted. I probably could have fed even more people if I'd tried.
- I feel a compulsion to budget my expenses as if I were making minimum wage (although I'm counting CT minimum wage, not the federal one--federal minimum wage is too little, even for me). Just so I can tell myself that I will make it even in the worst case scenario. Because I am that paranoid.
- I get free haircuts every two years by donating my hair to Locks of Love. I *do* do this out of caring (and I know my hair is really nice), but the free haircut is definitely a bonus. Does that make me a horrible person?
- Now this one might actually bother people, but when I'm on my own (or with the (ex-?)bf or someone else who does not mind), I don't flush the toilet every single time after I pee. I just don't see the need to flush an ENTIRE TANK of PERFECTLY GOOD DRINKING WATER just to get rid of a little pee. I'll flush every third time or something.
Okay, now that I've thoroughly grossed everyone out, I'll retire for the night.
So in my last entry, I established that I like to cook. A lot. Every day, in fact.
I thought it might be interesting to ruminate over how I got to where I am now. Because looking back at my history, I assure you that I wasn't always like this.
In the wee years of my youth (um, 10-ish years ago?), my mother told me that I needed to learn how to cook, because it's something that I'll have to do for my future husband.
Being a budding feminist who abhorred traditional gender roles (and, um, a rebellious teen to boot?), I was extremely indignant and offended, and vowed that if I even got married in the first place, *my* husband would be the one that cooked for *me*, thank-you-very-much. And I refused to cook out of sheer spite (or engage in any activity that could remotely be construed as "domestic", for that matter).
And this continued on... until college. Where everything changed.
Suddenly, I didn't have parents who cooked for me anymore. For the first time, I was responsible for feeding myself. And although there was a mandatory meal plan, the food served in the dining halls... left... much to be desired, let's just say, both culinarily as well as nutritionally.
Obviously, I wasn't alone in having to deal with this. I saw my college friends react by dropping frighteningly large amounts of money on eating out meal after meal, and I thought, "There is no way that such expense is sustainable!"
The turning point for me came when one of my friends invited me and a bunch of our friends to hang out with her at her mother's house. Her mother had prepared a meal for us, but she had no idea that in this particular group of people, vegetarians outnumbered carnivores, and one of our members was fully vegan.
The vegetarians ended up doing all right, all things considered, but the poor vegan had absolutely nothng he could eat. Even the salad had mayo in it.
My friend's mother was very apologetic, but it was my vegan friend's response that surprised me.
He said, "It's okay, please don't worry about it, this happens all the time. If you don't mind me looking through your fridge and cupboards, I can make myself something to eat."
And that was exactly what he did.
That was when it clicked. Being able to cook was a powerful skill, because you are no longer limited to someone else's menu. And this is especially relevant when you have dietary restrictions. I realized that as long as I needed to eat, I should be able to cook. Otherwise, I'll just be continuously reliant on others to provide one of my most basic physiological needs. And in most circumstances, I'll have to pay through the nose to get it.
I immediately stopped resisting learning how to cook to rebel against gender roles. Cooking is not relevant to gender. It is relevant to survival. It is a useful and indispensable LIFE SKILL. Being able to feed oneself is not only an act of responsibility, but an act of self-love.
I started to teach myself how to cook the summer after freshman year. It was rough at first, but I kept trying, and I gradually improved. And I've never looked back. When you get right down to it, cooking is edible biology and organic chemistry, and I am nothing if not a science geek, who is curious about how food is made, and likes to eat well.
Recently, my new roommate, who cannot/does not cook at all, has gotten me thinking about all of this again. I've been whipping out meals every single night, and he apparently likes what he sees. He's always coming out of his room to survey what I'm making when I'm busy in the kitchen, and he'll constantly ask to try my food. I have given up on ever expecting to have leftovers (and the tragically small and low-quality cookware in the apartment does not help matters).
If I were in his situation, I would say, "Hey, can you teach me how to do that?"
Him? "I'll pay for all of your food if you'll make what you make for me, too."
Consumerist till the end. Trying to buy my services.
I'm not sure if I'm flattered or insulted. But maybe I'm just overly sensitive due to my history. (I just feel uncomfortable cooking for males who don't cook themselves. I am not their goddamn mother. Or wife, for that matter.) I *could* put the money I save (all of $60/mo, heh) towards an iPod, but... I still feel... used. I don't want cooking to turn into a chore or an obligation.
I told him I'll think about it. And that if he wanted this, he would seriously need to get bigger pots and pans, because the ones he's got can barely fit enough food to feed just me.
Wow. I don't really know what to say. I probably should have seen this one coming.
My monthly food/grocery bill comes to about $2/day, or $60/mo.
Apparently, this is highly unusual, even among frugalistas.
What's more is that I don't even particularly try very hard. I mean, I "try" to get my grocery bill to $50/mo, but even in the past, before I started watching my finances, I've never gone above $75.
(The only exception was when I was stocking up my kitchen/pantry from zilch when I first moved out on my own. I hit the neighborhood of $150 that first month due to my decision to buy all of my nonperishables in bulk. That cost me up-front, but won't in the long run.)
So how *do* I pull this off?
To answer this question, I'm going to carefully analyze my food buying and eating habits, and present my findings below.
All right, here goes.
I buy nonperishables in bulk.
I know this is pretty standard practice for frugalistas, but I'll describe it anyway.
After I first moved, my colleague (and now roommate) took me shopping at Costco. I used this opportunity to stock up on bulk nonperishables at wholesale prices.
I bought standard staples such as butter, sugar, oatmeal, canned tomato products (crushed and diced), cereal, pasta, rice, olive oil, soy sauce, ketchup, and others. I knew it'll be a hard initial hit on the wallet, but the favorable unit price is ultimately worth it, as I won't run out for months and months.
I mostly buy fresh, seasonal produce.
After that one-time stock-up of nonperishables, my regular shopping took over. I shop weekly, and I mostly buy fresh produce (fruits and vegetables). I buy small amounts of each produce so that it won't spoil before I eat it, and I shop often to ensure a constant influx of fresh produce.
I also make an effort to be aware of what produce is in season. I do this for two reasons. The first is that the quality of the produce is highest during its peak season. The second is that sales are very common when a produce is in season.
So, for instance, you will never catch me paying more than $1/lb for tomatoes during the summer, because I *know* that tomatoes are in season, and that each week, at least one grocery store *will* have them on sale.
I usually end up spending a little over $10 a week on produce, or about $40 to $50. The rest of my expenditure consists of items like dried/canned beans, eggs, sauces, and the like.
I do not buy junk food.
Going from what I do buy to what I don't buy, we come to junk food. This one is actually a tough one that requires discipline on my part, because I actually really like junk food.
I consider any food that is high in fat and/or sugar without being rich in nutrients to be junk food. So candies, chocolates, Doritos, cookies, and ice cream are all junk food, but sugary cereals are okay because they are vitamin fortified.
I avoid them because they are unhealthy and generally more expensive per unit price than the raw ingredient they are made out of (see the end of this post for a sample analysis of potato chips).
Occasionally, however, I do break down and get something. Usually ice cream, because I do have a weakness for it. I tell myself that at least it has calcium.
I do not buy processed foods.
I think this one is implied by what I've written above, but I'll say it explicitly. I stick with the rawest form an ingredient can get, and avoid processing whenever possible.
So, I get potatoes instead of frozen french fries or tater tots, strawberries instead of strawberry jam (I'll buy peanut butter, though; don't know how to make peanut butter), flour/sugar/butter/etc. instead of premade cake mix, and I've never bought those pre-made dinner package thingies before. Honestly, I've never even had them, because my family never shopped at American supermarkets, and I never ate pre-made food from a package.
Which brings me to...
I cook from scratch every single day.
And I don't give myself a choice in this matter, because I simply do not keep ready-to-eat foods around, with the exception of fruit.
For me, food is *made*, not unpacked and heated. Or maybe I'm just a snob. But I stew all of my own soups, I mash my own mashed potatoes, and I bake my own my cakes, cookies, and muffins. Yes, it takes a lot of work, but I actually really enjoy cooking, and it doesn't have to take more than an hour.
I am a vegetarian.
I haven't mentioned meat or fish at all for a reason. I've been vegetarian for the past four years. It's probably another reason why I don't buy pre-made foods--most of them are meat-based, and I can't eat them. I don't think stores sell much in the way of pre-prepared vegetables.
I get my protein by eating a wide variety of grains, beans, and vegetables--and supplement with tofu for complete protein. I don't know really what meat costs, but tofu, at $1/lb, is probably much cheaper than most meats. Actually, picking up a circular, the only meat I see that's around $1/lb is raw chicken.
I base my meals around carbohydrates, and supplement with vegetables and tofu.
When I look back at my menus, the main course, so to speak, is almost always a starchy, carbohydrate-rich food, such as pasta, rice, or potatoes. Occasionally, I'll base a meal around beans. The remainder of the meal consists of vegetables and tofu.
Some examples of meals are pasta with tomato sauce, topped with sauteed garlic, onion and bell pepper. Or fried rice with broccoli, celery, squash, and tofu in soy sauce. Or vegetarian chili with home-baked cornbread. Or avocado and cucumber sushi rolls with miso soup. Or mashed potatoes with mushroom gravy with steamed sweetcorn on the cob with butter.
This generalized meal structure ensures that I get the bulk of my daily caloric intake from very cheap sources (both pasta and rice have around 1700 calories per lb, and 1 lb of either rice or pasta can definitely be bought for under a dollar), while my nutrient intake is covered by my fruits and vegetables. And I've done nutritional analyses on my diet--I'm covered very well, with the possible exception of Vitamin B12.
I never eat out.
I stopped being able to justify it once I realized how cheaply I could eat on simple, raw ingredients. It's also hard to ensure that your food is vegetarian when you eat out. So I only eat out when I'm taken out.
So that's about all. I'm not familiar with how most Americans approach food, so I dont really know how I compare/differ.
Maybe you can enlighten?
Went grocery shopping today. M&M Farms.
- corn (3 ears): $1.00
- (Huh. I seem to have misplaced my receipt. Argh. Will fill this in when/if I find it.)
- total: $9.97
This will probably be it for August. Total grocery (food) bill for this month: $62.11.
If I omitted the junk food run for the (ex-?)bf, that drops the total down to $51.40. I am pleased with myself.
I've also realized that the paperback edition of A Feast for Crows by George R. R. Martin is coming out in a month. Scifi/fantasy fans have been waiting for YEARS for this release. So this will be my "splurge" purchase for September. I get a 10% employee discount at the Yale bookstore, too!
Yes, collecting scifi/fantasy books is my personal expensive habit. So shoot me. I haven't indulged in a long while.
I also realized that I've wanted to read Nickel and Dimed ever since I heard about it. I'll put that on my reading list for B&N Fridays.
Following in the tradition of last Friday, I spent another two hours reading personal finance books today.
I was able to locate many of the suggested titles, and skimmed through a few of them.
The book that I settled on to read this week was Suze Orman's The Money Book for the Young, Fabulous, and Broke. I chose that one this week because it covered the topics that are currently the most relevant to me.
I am handling student loans, building my credit for the first time, looking to milk my (ephemeral) youth for maximum returns in retirement, and starting to save for large future purchases such as a car and house, and accumulating assets for generalized investing.
A few things that I learned:
- I need to get my three free credit reports at annualcreditreport.com before the end of the year to have an idea of where I stand in terms of my FICO score.
- My (what I feel is an) obscenely high credit card limit ($10,000) is actually a good thing, because it lowers my debt-to-credit ratio, since I never carry a balance? I thought I heard somewhere that high credit limits counted against you because it could be seen as 'potential' debt, so I'm still a little confused on this point.
- I've been considering getting a new credit card with more/better rewards, and if I do, I shouldn't cancel my current one to preserve my credit history.
- I shouldn't be in a hurry to pay off my student loans. I've actually been leaning more towards this position myself as I realized that money going into 45 years of compounding interest at >10% returns is much better than reducing 10 years of 4% to 5% student loan interest. Yes, it requires deferring the emotional gratification of shooting down that debt, but I think the numbers justify it.
- "Saving is for a short-term goal that you hope to reach within five years or so. Investing is for the long term." Short term savings can be placed in high interest CDs, money market deposit accounts, and money market mutual funds.
- A Roth IRA is better than a 403(b). I was planning on maxing out my Roths anyway.
I stopped before I got the the investing and car/house buying chapters of the book. I'll finish them off next week.
I also hope to start on some books specifically on investing. I just discovered that there was an entire investing section!
I finally went to the bank and asked about how to withdraw my matured Roth IRA and move it into Vanguard. I won't break any account minimums, apparently, so yay!
I also called Vanguard, and opened a Roth IRA account there. Right now, the money is earmarked for the Target Retirement 2050 Fund, but I might change it.
Tomorrow, I'm getting the check for the Roth IRA from the bank, and I will have to go to the post office to mail it to Vanguard.
If the post office loses this check, there will be hell to pay.
I also did some minor grocery shopping today, at the HK grocery.
- 2 boxes of tofu: $1.15/each
- 1 dozen eggs: $0.99
- mushrooms (at $1.89??): $1.27
- total: $4.56
All in all, not a bad day. I still have so much more to do, though. I'll feel much better once everything gets set up and settled down.
I really enjoyed last Friday's excursion to Barnes & Noble to read up on personal finance.
I think I want to make a habit of this. I'm going to go every Friday.
I want to learn more about:
- basic economic theory
- investment options and how to evaluate them
- how current events interplay with the world economy
- real estate
- inspirational tales of success
- anything else that might be interesting and/or useful
So, recommend your favorite book to me! In fact, recommend ten! Tell me what the book is about, why you like it, and, if applicable, how it has helped you.
The roommie went on a Costco trip today. He had just shelled out $900 out of the $1000 in his bank account for late car taxes, got 13 gallons of premium gas at $3.49/gal, doesn't get paid for another two weeks, and decides that he had to go to Costco because he "ran out of orange juice and has nothing to drink."
So, I went with him to pick up a few items. Wasn't really planning on it, but why the heck not? I'll seize the opportunities that are presented to me.
On the way there, I asked why he couldn't wait a few more weeks until payday, and drink water like the rest of us. He replied, "It's okay, I paid for overdraft protection on my checking account."
He then proceeded to complain about the lack of music on the 6-CD changer in his car, and expressed his desire to get an iPod to hook up to his car stereo. I offhandedly said that he'll have to wait a while before he can do that. And he said, also offhandedly, "Well, I can get it on credit."
Didn't get much at Costco, only two items.
- an 8 pack (8 lbs.) of Barilla thin spaghetti - $5.89
- 6 30-oz cans of crushed tomatoes - $5.39
- total: $11.28
Costco always screws with the grocery bill beacuse the individual items cost so much more than "usual". But these two purchases should last for two months or more.
I didn't get the gallon of chickpeas for $2.29 that I wanted, though. I wasn't sure if I could open the can and freeze the leftovers.
I also stopped my roommie from spending an additional $9.99 on drinks besides the orange juice that he "needed" to buy. He laughed, and said that he'll probably thank me in a few years.
Really, I just wanted to make sure he had enough money left to pay the BILLS.
Oh, and I was particularly amused by my reasoning against purchasing a bag of potato chips. I said to myself, "The unit price on this bag of potato chips is $2.49 per lb. The unit price for the *actual* potatoes two aisles down is $2.50 for 5 lbs. Not only are the raw potatoes five times cheaper, they aren't loaded with fat, salt, and god knows what else, proving that fresh produce is not only healthier but also undeniably cheaper than heart disease and obesity-causing junk food."
Yeah! Go me! Someone hand me a cook--oh, wait, nevermind.
God, I'm such a dork.
I just broke up with the bf.
I don't curse much usually, but I'll make an exception this time. Children, please cover your eyes.
I guess the car fund just took a dip in priority. Maybe I'll lower it to $250/mo, and up the emergency fund by $100.
In the meantime, I think I'll go cry some more now.
I feel like I need to do house cleaning regarding my various bank accounts--or at least re-evaluate if they're suiting my needs, and if I can do better.
So, in the next series of entries, I will analyze which accounts I have, which accounts I want/need/is best, and how to get from the former to the latter.
In conjunction with this, I'll also figure out how my money will navigate these accounts for minimum fees and maximum returns.
I'll just start off with what accounts I've got.
Currently, I have accounts with two banks: Bank of America, and ING. First, I shall discuss what types of accounts I have with each bank, look up and write down what their features are, and how I use them.
Bank of America
Regular checking account
I got this account four years ago for when I started college. At that time, it was still Fleet Bank. We chose it because it offered free checking to students at my college, and it was the only bank with an ATM on campus--a reasonable consideration at the time (but no longer relevant now).
This account gives me check writing, an ATM/debit card for cash withdrawals and check deposits, and online banking and bill pay. I use all of these features. BoA is also pretty ubiquitous, which is also convenient.
Here are the minimum requirements to avoid fees, copied from their website,
- A $750 minimum daily balance in one checking account.
- A $1,500 minimum daily balance in one Regular Savings or Custom Savings account.
- A $5,000 minimum daily balance in one Money Market Savings account.
- A $5,000 average daily balance in checking linked with savings, Money Market Savings, CD or IRA accounts.
Regular savings account
The maintenance fee of $3/mo is waived with an automatic monthly transfer of $25 or more from your Bank of America checking account, or with a minimum daily balance of $300.
The interest rate is 0.5%, and the APY is 0.5% (erm, what's the difference between the two??). The interest is compounded daily, and awarded monthly.
I think we can all agree that the interest rate sucks. I'm seriously re-thinking this particular account.
Power Rewards Visa credit card
This is my first and only credit card. I didn't really want it, not after hearing all the horror stories about credit card debt, but after urging from both my family and alumni friends, I agreed to get one to work on my credit score.
BoA was, like, sending me card offers every other week (because they were imagining a "CLUELESS COLLEGE STUDENT JUST WAITING TO BE LURED INTO LIFELONG CREDIT CARD DEBT" stapled to my forehead, no doubt), so I just decided to bite, and show them who's boss. They knew how much money I had in my accounts, so I was essentially preapproved.
I have no idea what the interest rate is, but it doesn't matter because I use it for groceries, books, and online purchases, and I always pay it off every month. I forgot once, because I was paying it online the day the balance was due, and didn't realize it took a business day to process. Never did that again. Now I pay it on the first of each month, along with my rent. They're not making another penny off of me.
Fixed Term IRAs
I have two fixed term Roth IRAs with BoA, again, opened for me by my father. One has a little over $6000 with an interest rate of 4.78% and an APY of 4.88608%. It matured last Friday. The other has a little over $2000, with an interest rate of 3.2%, and an APY of 3.25%. It matures next March.
I think that in order for these Roth IRAs to be fee-free, I need to maintain a minimum of $10,000 in my BoA account. But I'm not 100% sure.
My father opened a joint account for/with me a few years back to take advantage of the high interest rate. He transferred a lot of my work-study savings from BoA into this account, as well as a lot of his own money. Because I can no longer distinguish which money is mine and which is his (unless I ask him for the tax returns that he did for me for the past four years or count up all of the debits to my BoA account from the past four years), so I just call that account the "Seed money" account.
Since I got my job, my paycheck has been direct deposited into ING (with the exception of three checks). I opened a subaccount called "Income" to hold them.
I also started subaccounts for the various goals I'm earmarking funds for--car, house, and emergency. And possibly Roth IRA.
All right, in the next installment, I'll critique these accounts, and figure out what I'd like to change.
David Bach says: "Pay yourself first," eh?
All right, then. Here's my new monthly budget plan, based on his advice. I know that he thinks that budgets don't work, but I probably wasn't the type of person he had in mind. I 'budget' all the unavoidable expenses so that I know exactly how much I can pay myself with afterwards. It's not like I need a budget to help me limit my spending.
Okay, let's start off with income.
At $16.15/hr and 37.5 hr/wk, I'm making a gross of $2600/mo. Furthermore, my gross income for 2006 will total around $17,400.
I still don't know how much taxes I'll owe, but my father is sending me last year's tax software Any Day Now. He also says that after plugging my figures, I should not owe more than $900 in taxes for 2006.
So that gives me around $2350/mo to work with. I think. I hope.
Paying others (boo):
Rent: $500 (sigh)
Utilities: no clue yet, guestimate $100 total?
I try to save by not plugging in my second and third computers, and turning off the one I do use when I'm away at work, but sometimes, I wonder why I even bother. My roommate has tons of electronics, runs the AC all day/night even when it's not hot, and wastes gas by burning his food by leaving the stove on for an hour.
Even though I don't spend more than $60 most months, I always allow myself $100, because skimping on food seems... unwise and unnecessary. And I might actually end up accidentally starving myself if I don't cut myself some slack here (I've actually lost weight... which is NOT GOOD). But I can make an effort to take the extra $40 that I never spend and put it towards paying myself at the end of the month.
Student loans: $134
That's the amount due for Stafford, starting September, which I've put on automatic debit (yeah, automation! Reduced my interest rate by 0.25%, too!). I still haven't decided if I want to accelerate repayment on this because I've been hearing mixed reports. But at least the interest is tax-deductible!
Union dues: $40
I get free health insurance and dental thanks the our union. I fully support them, and don't begrudge them their dues. I just have to turn in my member registration form!
Now, for the good stuff. Paying myself (in approximate order of importance):
Roth IRA: $333.33/mo
This will max out the $4000/year contribution limit over the course of 12 months. My father says he'll make up the rest if I don't make it to $4000 this year, but I think I can do it on my own.
I currently have $8262.09 in two Roth IRAs in Bank of America. These were deposited by my father for me a few years back when I was still young and naive and had no idea what he was doing and thought it was all quite silly to start saving for retirement so early. *whacks younger self in the face repeatedly with something smelly*
Anyway, the rates suck, so I want to roll it over to Vanguard. Except Vanguard requires a minimum balance of $5000 to waive the maintenance fee. And while one of my BoA Roth IRAs has matured (the one worth $6000, so I can satisfy Vanguard's minimum), the other one does not mature until next March. But if I move the matured Roth IRA, I'll be hit with a charge from BoA for dropping below its minimum.
I'm still trying to figure out how to resolve this mess. This is why I haven't signed up for a Vanguard Roth IRA yet. But when I do, I will AUTOMATE the $333.33/mo transfer.
403(b): 20% (~$520 pre-tax)
In order to max out the $15,000 yearly contribution, I'd have to deduct $1250 per month. While I'd love to do max this out as well, I don't think I can handle a >50% paycheck reduction.
David Bach recommends at least 10%, which would be around $260 for me. But I think I can handle 15%, which is why I made it 20%, or $520.
Now, I just have to GET OFF MY LAZY ASS AND FILL IN THE VANGUARD FORMS AND TURN THEM IN. *cracks whip*
Car fund: $400
My car fund has a target goal of $5000 in 12 months, or about $400/mo. I may not end up spending it in a year, but it'll be good to have this around when I do finally get around to buying a car.
House fund: $40
Although a house down payment is many, many years down the line, I feel like I should start saving for it now. Can't hurt, right? The car fund gets priority for now, but once the car fund is fulfilled, that money will probably go here. And in the meantime, I think this is where I'll plop my excess grocery money.
Emergency fund: $100
If I should have at least 3 months worth of expenses in it, then $3000 is my target. I'm going to keep this conservative for now.
Savings: whatever is left
I'm terrified that I won't have anything left to go here at the end of the month, though. This is so weird for me, because I'm used to putting *all* of my unspent money into savings, which amounts to half (or more) of my paycheck. But now, I'm "paying" myself so much that I'll hardly have anything left!
And my savings will need to fund any shortages to my Roth IRA maximum, as well as any unforeseen expenses, such as clothing, public transportation fares, and dental co-pays (I'm in serious denial about the existence of cavities). And this will probably also need to supplement my various funds (car, house, emergency).
I know this should be right, but why do I feel so panicky? Am I cutting it too close? Doing too much too soon? What if I can't handle this? I do have a father-supplied savings buffer, but I don't allow myself to see it as touchable. If I end up dipping into it, then I'll have to re-evaluate this budget.
I know I still need to discuss cash flow, but I think I'll put it in a new post. This one is overwhelming enough as it is.
Instead of taking the shuttle straight home after work today, I did two things.
1. I walked to the Salvation Army store I found a month or two back, and looked at their hours. Monday through Saturday, 9 to 5. So I can go during my lunch breaks, or on Saturday. It's a bit of a hike from my apartment, but hey--free exercise!
2. I then walked to the Barnes & Noble, found the Personal Finance section, sat down on the ground, and spent 2-1/2 hours reading David Bach's The Automatic Millionaire.
I even took notes.
I still need to clean up my scribbles and come up with a concrete plan of action, but that was 2-1/2 hours well spent. I'm definitely going back and reading more, both from him, as well as the other books. I still have a lot to learn.
I can do this. I'm not making much now and I probably won't make much for the remainder of my career, but I can do this. At the very least, I'm going to try.
A bit of good news, at last.
I found a bus that goes to/from New Haven to a Park & Ride Lot four miles outside of Middletown.
I'd still need a car, but this cuts costs drastically.
I decrease my daily mileage from 60 mi to 8 mi, for a decrease of 87%! Plus, I save on $100/mo parking. And I probably can get a cheaper car, since it won't be driven so hard.
The bus fare is $3.60 per way, for a total of $180/mo--if there is no commuter discount/monthly pass, which I can investigate. But with the savings in gas and parking, I still come out $100 on top, compared to the previous estimate.
And the bus schedule is perfectly synch'ed with my work day.
This just might work.
...got to talking a little about finances in the past couple of days.
We are essentially polar opposites. I find our differences to be very interesting.
Now he and I make approximately the same salary. After rent and utilities, we have approximately the same amount of "disposable" income remaining--namely $1400 or so.
And here is where our spending parts ways.
I cook all of my food from the least processed source materials, to the cost of $2 per day.
He does not cook at all (doesn't know how), and feeds himself with pre-made, processed foods.
My car plans, if I go through with it, will involve a small, fuel-efficient used car that costs in the neighborhood of $5K. I am not buying it until I can pay in cash, and upkeep will probably be $400/mo due to considerable use.
My roommate bought a large, new, luxury sedan with a powerful engine that guzzles gas like a maniac. It was worth $50K when he bought it. He pays $450/mo on the car loan, plus an additional $150/mo for insurance. He buys premium gas at $3.50/gal, but I don't know how much he spends on gas per month.
I earmark $1000/mo for savings--$500 for retirement, and $500 for my car fund. Any excess money at the end of the month goes into general, non-earmarked savings.
He spends his entire paycheck every month. He has no savings whatsoever, no retirement fund, and insists that he likes it that way. He's going to enjoy his life in the present, and not worry or care about when he's old and retired and half-dead anyway.
Now, he sounds like your typical spendthrift, but here's where things get interesting. He doesn't spend his money negligently, a little on a latte here and a little on some piece of junk there.
He purposefully decides that he wants a particular type of product (mp3 player); he does research on which product is the best quality (60 GB video iPod); he then finds the best deal on that highest quality product and buys it no matter how much more expensive it is compared to the other "lower" quality products.
What do I do? If I allow myself to actually want something non-essential and decide that it can go in the budget and finally get past the "decide to buy" stage (the entire process of which is like pulling teeth), I'll choose the lowest tier product that fulfills my needs, and look for deals there.
Now, I'm not going to criticize him about his financial choices so long as it doesn't interfere with his half of the rent and utility payments, but I can't help but wonder if we both respresent extremes on the spending spectrum. He craves the satisfaction and ego-boost derived from expensive and high-quality material goods, while I crave the safety and security of accumulating significant assets in bank and retirement accounts.
How debatable are the merits of our two positions? Is hardcore saving truly better, or can we both benefit from a little moderation--him in spending, and me in saving?
Because in some ways, I have to admit that he's a very impressive individual, because he has amassed a large amount of fancy equipment on a relatively limited income.
But when one considers the fact that yesterday, he realized that he was overdue on the $1K in taxes that he owes on his car, and he needs to open a third credit card account (that has 0% interest for nine months) to charge it on temporarily, because he doesn't have enough in checking and isn't getting paid for another two weeks, I think I may prefer my approach to finances, after all.
Roommate drove to M&M Farms today, a cheap fruits and veggies place, and brought me along!
Here's the damage:
- bananas: $0.66 ($0.39/lb)
- onions (3 lb bag): $1.69
- watermelon: $1.34 ($0.39/lb)
- 2 avocadoes: $0.99/each
- poatoes (5 lb bag): $1.89
- carrots (1 lb bag): $0.50
- apples: $1.53 ($0.89/lb)
- green peppers: $0.66 ($0.79/lb)
- tomatoes: $1.70 ($0.89/lb)
- garlic: $0.27 ($1.69/lb)
This should last me at least another week, I think.
Still need to buy:
- chickpeas (to make hummus?)
- chocolate morsels (to make chocolate chip cookies!)
- pasta (buy in bulk?)
- AP flour (or wait till the bread flour I bought by accident is used up?)
- tortilla chips (if I'm making guacamole)
- broccoli (I'm addicted, and I refuse to apologize for it)
- romaine lettuce (to make salad?)
Grocery bill thus far this month: $36.30. I'm still on target for $60/mo, or about $2/day.
I've been thinking of buying a car.
I don't even have a driver's license yet.
Everyone thinks I'm some sort of weirdo-freak for not driving (um, grew up in New York City?) and is not sure how I get by without one (by walking, taking public transportation and carpooling?). People keep telling me that I'll need to get a car eventually, so stop resisting already. But I counter by saying that I get along fine, and I'm saving loads of money--and the environment, to boot.
Why am I finally considering it? Because I'm a sucker who misses her bf in Middletown, and he doesn't drive either. If I moved back to Middletown, I could room with him for cheaper rent, but I'd have get a car and drive to New Haven to work.
So I thought I'd crunch some numbers and get a sense.
According to my father, he says I should expect to spend $4000 to $6000 on a decent, fuel-efficient used car. I'll trust him, since he's neither trying to sell me a cheap junker that will get me killed, nor persuade me to overspend on something I don't need.
Now, I just signed a one year lease in New Haven. That means I'll have a year to save (and learn to drive!), since I'd really rather not take out a car loan.
I'd have to put away $500 per month to reach $6000 in 12 months.
This does not include:
- driving lessons (at $30/hr)
- driver's license test ($40)
- actual license ($77)
- license plate/registration ($150)
And then after I get the car, I have to continually feed it money monthly. Here are the figures, as far as I can estimate them:
- insurance: $800/year (get it with my family)
- parking: $90/month (ouch, right??!)
- gas: 60 miles/day round-trip at 30 mpg and $3/gallon for 25 days = $150/month
- maintenance: ???
- property tax: $360/year
Rounding up on the gas, since I'm sure that particular figure is tragically optimistic, everything comes out to be about $400/month.
All of this (one year of saving $500/month, plus $400/month afterwards) for the opportunity to split $775/mo rent, heat not included. (I'm currently paying $500/mo w/ heat included.) Oh, and the joy of seeing my bf every day.
Wow, the frugal part of me is screaming that it is SO NOT WORTH IT.
Then why have I put saving for the car into my budget?
Damn it. DAMN IT. *whacks oxytocin upside the head*
Went grocery shopping on Monday. Mostly because I couldn't get at my old food, which was locked in my old house, and starving is Not Good.
- Green vegetable (Chinese cabbage or watercress or something; I really should know what it is called, huh?): $2.92
- Radish: $0.54
- Sparerib sauce: $2.70
- Noodles (1 lb. package): $1.00
I got all of my food back today, so I'm good again. I'm going to start compiling my price book.
When I started this blog, I was just looking to record, lab notebook-style, my daily financial dealings and thoughts.
I didn't actually expect anyone besides myself to, um, read it. (I don't think I would have written about birth control in my first post, otherwise. )
But with 500 hits in less than a week and comments on nearly every entry, to boot--I am apparently very, very wrong.
So I think it's time to introduce myself. *waves hi*
My name (online, at least), is Mimi. I'm 21 years old, currently located in New Haven, CT. I just graduated from college this May from a small and extremely expensive liberal arts institution with a BA in Biology.
I think my background explains why I tend towards frugality. My family and I are immigrants, and I grew up in New York City before moving to Connecticut for college and life beyond.
When I was little, money was always tight, and my parents' jobs were never rock-steady. When I first came to this country, my father was a Ph.D. student bringing home only his stipend, and my mother worked as a cashier in a Chinese restaurant. We lived in a crappy neighborhood (lots of muggings and shootings and street drugs), and tried to make do.
Although the financial situation eventually got better (and then worse, and then better again), money was never taken for granted. And I learned subconsciously and from a very young age not to desire anything frivolous or non-essential, and to save for tough times. I never borrowed money for anything I couldn't afford--the only exception being my education.
Now, I'm living on my own and trying not to botch it too badly. I have a pretty good head start, I must admit--I'm not a spender, I save, and I try to look ahead. I know my chosen career in the academic sciences probably won't ever bring in the big bucks (unless I sell out and to go biotech), so it's important for me to start early in learning to manage my money, and do it well.
I'll stop here for now. If anyone has any questions, feel free to comment or e-mail me. I love to chat.
- $173.61, flight to Atlanta in October. (I'm getting reimbursed for this one, though.)
- $200, summer sublet rent (half month).
- $7.50, internet (half month).
- $16.92, HK market.
- $13, round trip Amtrak tickets.
- $1.25, shuttle bus.
- $1.25, shuttle bus.
- $7.16, HK market
- $12.22, M&M Farms
- $11.28, Costco
- $4.56, HK market
- $9.97, M&M Farms
- $2.79, post office
I'll edit this as the month progresses. I just want a master log of my monthly expenses in a single place, for easy reference.
I know that some, or even most, people have trouble cutting spending and saving.
I seem to have the exact opposite problem.
I have trouble spending.
Case in point: I've been lusting after an iPod ever since they first came out, and I've been trying to convince myself to buy one for years. After all, I'm your classic young technophile, although I'm a practical one--the gadgets I want aren't just cool for show; they must be useful as well.
And useful an iPod would be. All of my music is in MP3 format on my computer. I have neither a stereo nor a portable music player. And being of the car-less variety, I spend a lot of time walking or riding buses and trains. Yes, an iPod would indeed be handy, and fill a void that would otherwise be empty.
My father tried to buy me one as a birthday gift a few years back, but I declined. I thought that an item of such an extravagance must come from my own wallet.
After years of admiring them from afar, I finally decided to purchase one during the holiday season of 2004. I had enough money saved up from work-study, and this is it, I will treat myself.
And then the Indian ocean tsunami happened, and I felt too guilty to pop $400 on a fancy toy when people across the world are DEAD AND DYING. Thanks, overactive conscience. *sigh*
Half a year later, end of my junior year, May 2005. I have a set of comprehensive exams required for my then-major. Without going into too much detail, it's this horrific three day ordeal that leaves most us scarred for life (I know I was). Anyway, I told myself that if I got honors on comps (as these exams are called), I'll have earned my iPod, fair and square.
Turns out, I didn't get honors. According to my own rules, I didn't deserve an iPod. Thwarted, once again.
Fast forward to senior year. Graduation is an appropriate occasion for an iPod, I reasoned. That's a momentous event, if ever there was one.
But as time went on, I began to change my mind. It was never a question that I would finish college. Graduation may be momentous, but it is also inevitable. I can't tie an iPod to an event that's inevitable--that's just cheating. I needed something more to justify it.
That "something more," I decided, was going to be if I got honors from Phi Beta Kappa. Because I don't qualify for standard departmental honors, having I switched my major senior year and being unable to do a thesis as a result, PBK is my only shot at some sort of honors. And I probably had a snowball's chance in hell of getting it, due to PBK's selectivity and the short amount of time I spent with my department. That should avoid the "inevitability" excuse.
So, come April 2006, I get my PBK initiation letter. I'd completely forgotten about tying an iPod purchase with this until someone reminded me. And the moment I was reminded, doubts started to arise.
How many people got PBK in my department, anyway? Is it really that special? Do I really deserve it? My GPA may be high enough, but I've only been with my department for that one year. My grades could be a fluke and the faculty couldn't possibly have enough information to make a truly informed decision to nominate me. And the PBK folk who voted me in probably picked me because my humanities major brought in all kinds of different coursework, making me look well-rounded, even though I wasn't any good at humanities and switched out.
Also, how can I possibly buy myself an expensive toy when I'm not sure if I'll have a job after I graduate and be financially stable? Maybe I'll need my savings for an emergency. I should wait until I'm earning a steady income.
So PBK didn't do it, either.
Now, a few months later, I have an income. In fact, I'm exactly where I wanted to be--at an elite academic institution, working in a high-powered laboratory, gaining valuable experience for a career in scientific research. I'm nowhere near financial straits, unless something catastrophic were to happen.
But what if something catastrophic did happen? Also, now that I'm out of college, I have $23K of student loans to repay. Shouldn't repaying those be a priority over shiny objects? And New Haven is notoriously unsafe. If I get one, I'll probably be mugged within a week. Maybe it's not such a good idea at this time, after all?
I considered making an iPod a reward for getting into graduate school. My top choice. MIT. That would certainly deserve a reward, wouldn't it?
But I know what will happen once I get there. My income will drop to a grad student's stipend. Money will be tight again. The responsible action would be to wait some more. I'll probably tell myself that I'll reward myself with an iPod when I get my Ph.D.
I can't stop myself from stopping myself.
And then there are the more mundane considerations. Should I wait for the next generation? What if I scratch or drop it? Or it breaks before its time? Wouldn't that be devastating? I don't have FireWire on my computers; music transfer will be inconvenient and slow. And it still might get stolen. And I've done fine without it thus far.
So there you have it. My eternal internal struggle. I wonder if this kind of thought process crosses the line from frugality into neurotic paranoia. Oy. I really should stop thinking so hard.
I'm moving out of my summer sublet this Friday. My roommate for my permanent housing apparently forgot this measly little detail, inconsequential as it is, when he went on vacation to Atlanta, and will not be returning until this weekend or early next week.
Being homeless this weekend = one big huge sarcastic YAY.
As a result of this little... mishap, I'll be traveling to Middletown this weekend and staying with my bf. It'll be worth the train fare.
I asked my bf if I could bring him anything from the Hong Kong grocery store near my house that sells funky junk foods that isn't available elsewhere, so he gave me a list.
(I also needed an excuse to stop procrastinating, and go on my first grocery shopping trip of the month, so I'd have something besides rice, garlic, and oatmeal to eat.)
So, off I went. Here's the final tally.
My food: $6.21
His food: $10.71
He's paid for junk food runs to this store in the past (when he was visiting me), so I'm not annoyed or anything, just amused. My purchases consisted of fruits (three bananas and a peach), vegetables (mushrooms, an avocado, scallions, and two green peppers), and a box of tofu. He requested Chinese eggplant (I got him two different varieties, totalling $1.31), and three pieces of junk food.
The moral of the story? Junk food is expensive, and I'm glad I have the discipline to rarely eat it.
I'm very happy about my peach, though. It's the little things that make me happy.
So, the take-home verdict is in. My monthly income should be $2,025.962, but I'll be rounding that down to $2,000 for the sake of paranoia and Nice Round Numbers.
Ahead comes guestimations of future expenses.
This is with a roommate. At least it includes heat and hot water, is close to the shuttle bus, and is within reasonable walking distance of my favorite grocery store.
This is split with the roommate.
Also split with roommate. Can't live without broadband. This expense doubles as entertainment in the form of internet radio and bittorrent.
Natural gas: $50
Don't really know if this is accurate, but I'll probably be footing the bill for this one alone, since I am the sole cook of the household.
I budget $100, but I usually spend $60 - $80. I also get the use and abuse the CostCo membership of my roomie. Yay! Bulk nonperishables, here I come!
Student loans: $250
Again, an overestimate of what I'm required to pay, which is $133 for my Stafford, the only loan currently in repayment.
This figure is another random shot in the dark. I need to do more careful analysis before deciding on the final amount.
Over a period of 12 months... that's approximately $10K into savings? If these projections hold true... Only time will tell.
Here goes nothing...
Hourly income = $16.15
Weekly hours = 37.5
Weeks annually = 52
Annual income = (hourly income)*(weekly hours)*(weeks annually)
Filing as single, and according to this IRS page,
I'm in the $30,650 - $74,200 bracket, which means that I pay $4,220.00 plus 25% of the amount over $30,650.
So I'll owe the following in federal income taxes:
4220 + (annual income - 30650)*(.25)
= 4220 + (31492.5 - 30650)*(.25)
Now, for Medicare, at 1.45% (is this income bracket dependent?) = (annual income)*(0.0145)
Social security, at 6.2% = (annual income)*(0.062)
State income taxes for CT:
Um... *does twenty calculations and shakes the magic eight ball...*
Yeah, I won't be counting on that figure too much. I had to skip a few steps that I didn't understand, hence the lack of documentation on here. That was way too complicated.
Total taxes = (federal income tax) + (medicaid) + (social security) + (CT income tax)
= 4,430.625 + 456.64 + 1,952.535 + 341.156
Take-home income = (annual income) - (total taxes)
= 31,492.5 - 7,180.956
Erm, yeah. I'll be so impressed if that figure is anywhere close to accurate.
D'oh, I think I have a headache now. Not to mention fully traumatized. But I finished item 1 in my to-do list.
1. Calculate my income tax bracket so I know my actual take-home pay. Apparently, I screwed up my tax exceptions. Must fix, and adjust the figures.
2. Write a proper budget based on above post-tax pay. This might need to wait a few months so I can get a sense of what the ballpark range on bills will be.
3. Figure out how much to put into retirement, based on above budget. Maybe strategically take out enough pre-tax dollars to bump me into a lower tax bracket? Does it work like that?
4. Calculate the best way to pay off my student loans. All $23K of them. Shniff. Take into account the fact that interest rates on my Stafford will drop 1% next year if I make all my payments on time. And my Perkins has higher interest rates.
More as I think of them. Damn, being an adult is complicated.
Okay, let's get this show on the road.
Got my benefits package today at the Yale new employee orientation. So, I have:
- free health plan
- free dental
- free life insurance ($5K)
...and an option to set up a tax-sheltered retirement fund (since I don't qualify for the fancier plans like matching contributions, boo). Which I'll do, as soon as I crunch some numbers and wrap my head around the two investment firm options.
Pretty decent, if you ask me. Especially the health plan, which seems to cover practically everything (including infertility treatments... o.O). I wonder how much my birth control pills will cost, though. The prescription drug benefit has a $200 annual deductible, then 80% coverage after that. Will have to compare health plan vs. Planned Parenthood. I've been getting them for a steal at $10/pack, and I have a feeling I'm going to realize that soon.
Also got free breakfast and lunch, and brought home four free drinks: one orange juice, two Snapple pink lemonades, and one Snapple mango madness. An added bonus, since I don't treat myself to flavored drinks and juices very often. If I want something sweet, I just add honey to my water.
I also 'accidentally' took (ahem) two pens and two pads of post-its. Yes, I'm shameless. Shut up.
*contentedly sips pink lemonade*
Oh, and WordPress. Cute.