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Finance Myths and Fundamentals

September 26th, 2014 at 02:26 am

I was discussing this article with someone online the other day, and when I mentioned that the SO and I actually did reach millionaire status by age ~30 via saving rather than focusing on income, I received what I initially thought was an odd response.

"But you don't have a million dollars in liquid cash", he said. "Stocks can go down as well as up!"

At first, I was really confused, because that comment was clearly meant as a dig, as if holding investments worth a million dollars is somehow not as legitimate as having a million dollars in cash, simply because the market could go down, but who in their right minds would (unless one were running a corporation) hold that much in cash?

But then I started to unpack the implicit assumptions in his statement, and I came to a few realizations about his point-of-view.

His comment makes the assumption (like many other people, I'm sure), that being "rich" or "wealthy" is about having a lot of money. But that is not the right way to think about it. Conceptually, money is merely an abstract representation of value, and cash is just a single form of that value. The technical and more inclusive term for "stuff with value" is "assets", and that includes anything that has monetary worth, whether it's cold hard cash, a stock portfolio, physical property, or a business.

Most individuals who are wealthy hold their net worth primarily in assets, not in cash, and there's a reason for that -- cash is static in value. I have taken three finance classes, and every single one of them opened with TVM, or the time value of money, which is a fundamental concept in finance that the value of money does not stay constant; it changes over time according to an interest or a market rate. Thus, in order for money to hold its purchasing power, it needs to earn an interest rate that is at least equivalent to inflation. That usually means not holding assets as cash, which can only depreciate over time, but as investments, which can appreciate over time.

The second part of his comment, about market fluctuations, assumes that a down market means you've lost money. But those losses are purely on paper, and would not be realized until the assets were sold, which any prudent investor should refrain from doing (if they can help it). I didn't panic at all in 2008; that was actually the year I switched to a much higher-paying job, and started hitting the 401(k) as hard as I could. And I plan on calmly riding out any future market downturns, so I'm not too phased by unrealized short-term capital losses.

Furthermore, there is another fundamental theory in finance called the Capital Asset Pricing Model, or CAPM. The basic take-home message of CAPM, as I understand it, is that risk and reward go hand-in-hand. (I don't claim to have a sophisticated understanding of finance theory, but not only was CAPM taught in finance class, it also won the Nobel Prize in economics, so I assume it's not completely full of shit.) I am chasing returns at this time, so I'm fine with taking on some risk. I am not going to fall for the trap of loss aversion like he seems to be, especially when I don't invest anything that I'm going to need anyway.

It's fairly unfortunate when people hold onto these incorrect assumptions, and they don't have a more mature understanding of how finances work. I feel like I've barely scratched the surface of this vast and fascinating topic, but what little I do know already makes a huge difference in how I approach my finances.

And that knowledge is power.

Goals for FIRE and SWRs

September 23rd, 2014 at 07:09 am

How much does one need to retire securely?

I've been trying to answer this age-old question ever since I learned how to spreadsheet. In fact, my Google Drive is littered with the desiccated remains of various retirement projection spreadsheets that I've attempted over the years, but could never figure out how to finish. Usually, it ends with me throwing up my hands and going, "It's a pointless crapshoot to try to guess 40 years into the future, but it's impossible to overshoot it at this juncture, so just maximize the sh*t out this, and you can figure out the details later."

That has been a pretty good approach up to now, but if I really want to FIRE it up in the next decade or so, I need to set actual goals and criteria for success.

I know that the standard guideline for having enough retirement savings is the 4% rule. So if your expenses total no more than 4% of your nest egg, then your nest egg can sustain you indefinitely, assuming a 7% rate of return with inflation at 3%.

And that's where I start getting twitchy. Can you really count on 7% returns in perpetuity? I know that's (more or less) the historical long-term stock market average, but there's no way to know for sure what future returns will look like. Plus, I would need to be sustained for many decades longer than a normal retiree, which makes projections even more difficult to make. I don't want to run out of money, especially given the fact that I can easily continue working and I don't have to take early retirement at all in the first place.

What I'm getting at is that I am very risk-averse and financially conservative. And I don't mean risk-averse in the sense of investing; on the contrary, I'm fairly risk-tolerant there because I know my timelines are flexible. I'm risk-averse in the sense that my mind always jumps to worst-case scenarios. I don't like being on the edge. My natural tendency is to save and save and save, because I don't know what could happen tomorrow and I might need that cushion. I could lose my job. (Actually, been there, done that. :P) Or come down with cancer. A tree (or a meteor) could fall on the house. The SO's Beetle could get creamed by a Mack truck. The possibilities for catastrophe are endless.

As a result of this rampant paranoia, I need to build in a large safety margin. I need to know that I can survive anything, and I'm not decreasing my financial resilience by giving up a fairly nice income. But I also want to be somewhat realistic and not let irrational fears and rampant goal inflation make FIRE unattainable, even though the honest truth is that I'd be terrified.

But I'm gonna force myself to come up with something just to get the ball rolling.

My current thought process is that I have two criteria that must be fulfilled before I would feel comfortable declaring FIRE -- a paid-off house, and two million in assets.

The paid-off house is pretty straightforward. As detailed in my recent spending review, the mortgage is by far our largest fixed expense, and knocking that out alone would drop our annual spending from $40K down to $25K, with another $5K being shaved off when I stop renting in and driving to/from NY. Furthermore, the mortgage is something that needs to be done sooner or later. We're already paying extra towards the mortgage every month, and we're on track to paying it off in about ten years.

As for the two million in assets... We already have $1M, which, according to a 4% withdrawal rate, could already (in theory, with proper allocations, etc.) support our current $40K in annual expenses. But as I've already said, I don't feel even remotely safe enough with a 4% SWR. With a two million dollar portfolio and ~$20K in expenses, that would be a 1% SWR, which I think is conservative enough. And even if something horrible were to happen to the SO, I should still be able to handle a 2% SWR on my half of the two million. And there's even wiggle room to increase spending if it really came to that.

So I think the preliminary goals for FIRE should be no mortgage and $2M. I would not be too surprised if I chicken out and raise/revise it later, but this seems reasonable for the time being. I'm already thinking that home equity and inaccessible retirement vehicles shouldn't be included in the $2M, but we'll cross that bridge when we come to it.

And I've also got some time before we reach the goal to work on emotional readiness and all that jazz.

Frustrated with Financial Advisors

July 8th, 2014 at 03:47 pm

My workplace will occasionally bring in financial advisors to give seminars and one-on-one consultations. I've been to two of these sessions, meeting with three advisors total, the most recent of which was just this past week, and have come away frustrated at the lack of productivity every time.

I understand that it's a free service, the scope of their help is limited by time, and they're likely not expecting someone like me, but I think it goes beyond that.

The main crux of the issue is that we simply don't see eye-to-eye philosophically.

For this most recent meeting, I tried to go prepared. In the past, showing my various account balances just resulted in sputters of disbelief and a request to repeat my age, so I brought my complete Social Security earnings history. When I say that my spending is such that a withdrawal rate of $20K is sufficient to maintain my lifestyle, I get asked what kind of car I drive and what model phone I have, so I actually tallied up the entirety of my annual spending to demonstrate that I am not, in fact, grossly underestimating my expenses.

But it didn't work. I still got asked to repeat my age. I still got told soothingly that "circumstances change", that expenses rise over time, and that once I get used to a higher standard of living, it's difficult to go back. The advisor took one look at the grocery line on my budget and told me, pityingly, "Well, you don't look like you eat much".

That last comment just made me laugh, because it shows how deceiving appearances can be. Now, I am a tiny, tiny person, so I guess it might seem like I "don't eat much", but that's not the case at all. I actually love eating and cooking, and I even briefly attended culinary school and worked as a prep cook at a restaurant before my pharmaceutical career took off. Our pantry is stocked to the brim, we make all our food from scratch, and we eat like kings -- all on a fraction of the cost of average households.

But what's more, that comment also betrayed the tacit assumptions made by the advisor. I am tiny because I don't eat, and she feels sorry for me because she assumed that I'm purposefully depriving myself, and that I will let it go at some point. It's fairly galling to me, mostly because it really reminds me of the condescending comments I've gotten my entire life when I tell people that I don't want kids, and they're like, "Oh, you may say that NOW, but just wait and see..."

Um, no. I know what I want, it's not the same as what you want, please don't project yourself onto me while ignoring what I actually say, because it causes you to come to incorrect conclusions about me, which makes me quite grumpy.

The truth of the matter is, at our current level of spending, we have almost everything we could possibly want, and I frankly don't know what else to spend money on. I don't want a bigger house; I actually prefer it small and cozy. I don't want a fancy car -- I barely even want a car at all, although I accept that I need one at the present time. I don't want a smartphone, I'm perfectly fine with my six year old phone, and I don't even have texting or a data plan.

And as for food... When I can make gorgeous artisan bread for less than a dollar per loaf, why would I ever want to spend more? And even if I go hog-wild and stop subbing walnuts for pine nuts in my pesto recipe because pine nuts are too expensive, I still don't see my grocery bill increasing by that much, because at the end of the day, any raw ingredients, even pine nuts, simply don't add up to more than a few hundred dollars a year.

Perhaps the hardest fact for these financial advisors to wrap their heads around is that I really and truly do not find consumerism to be all that appealing. For me, frugality is not a form of masochistic self-deprivation; I genuinely find it much more satisfying to live a simple and efficient lifestyle. As a result of these dispositional differences, all of their advice and experience is predicated on a set of assumptions that do not apply to me.

I think this is a big part of why haven't felt comfortable and in sync with these financial advisors. (Hell, I think this is a big part of why I feel out of place in this world. :P)

There was a bit of good news that came out of this session, though. After I finally got her to stop fighting me on the validity of my numbers, she conceded that she does think I can early retire in ten years. Actually, she doesn't think I need more than five years, especially if I can line up a side hustle. Obviously, I won't just take her word for it, but at least this tells me that I'm not on a wild goose chase. This is a realistic and achievable goal.

I just have to work out all the details.

'O Capitalism' relaunched -- Welcome to Catching FIRE!

June 17th, 2014 at 03:55 pm

In honor of the relaunch of this blog, I am rechristening it! It's new name is Catching FIRE.

"FIRE" was an unknown term to me until recently. It all started when I was listening to an episode of Marketplace Money, and heard an interview with the man who runs the website, Mr. Money Mustache. That interview caught my attention because he described the simplest way I've ever heard to determine whether one can retire.

Take your annual spending, and multiple it by 25. If your retirement fund is worth at least that, then you're good to go. If not, you need to either save more or cut spending until you reach that magical 25 times or 4% ratio.

Curious, I tried it. Our current annual household spending is around $40K. Multiply it by 25, and you get one million dollars. With my net worth sitting at around half a million, and the SO's at around $400K...

Wait, what? Is it true that we're that close?! That can't possibly be! I know we're very good savers, but to be 90% of the way to retirement by age 30 is simply absurd. As they say in The Princess Bride, "INCONCEIVABLE!"

I've been saving for retirement since my first job out of college, but actual retirement has always been a very abstract concept because it was such a long way off. I knew that theoretically I should front-load retirement savings while time and the power of compounding was on my side, but I never thought I'd actually reap the fruits until decades later.

In The Millionaire Next Door, financial independence was defined as the ability to maintain one's lifestyle without working for a wage. While that sounded like an awesomely powerful achievement, most of the millionaires in that book were self-employed entrepreneurs. I knew that entrepreneurship wasn't really my style, so I figured that particular brand of financial independence was out of my reach. I'd have to run the traditional rat race, and just do the best that I can in that arena.

So I put my head down and plugged along, and resigned to continue plodding for the next three decades... until this 4% rule blew my mind out of the water. And after browsing on the MMM forums, I was introduced to the concept of FIRE -- Financially Independent, Retired Early -- and it all started to come together. You don't have to be a small business owner to achieve financial independence. All you need is to grow enough assets to generate the cashflow required to support your living expenses. That's not rocket science. I mean, I can do that.

All of a sudden, financial independence and retirement went from a dreamy and remote "someday" to concretely achievable in the not-so-distant future. And what an awesome, dream-come-true achievement that would be. Rather than some abstract and impossibly far away concept, I have a solid goal to plan and strive for now.

We're gonna catch some FIRE.

My net worth: 2006 vs. 2014

June 16th, 2014 at 09:27 pm

I was reading back over some of my old entries, and discovered that in 2006, my net worth was $5K.

Today, my net worth is around half a million.

That's two orders of magnitude increase in eight years. Whoa.

Granted, my salary did almost triple between then and now, which is very helpful. And I've always tried to keep expenses low, so I can save more of my income. And I've had help -- ever since my SO moved in, we share expenses and live very efficiently.

But I must also point out that I haven't actually been trying to grow my wealth. All I've been doing is maxing out my retirement accounts, and auto-investing in some index funds. It's all very passive, autopilot, set-it-and-forget-it style investing. Aside from logging into my checking account to pay off my credit cards every month, I can go months without checking my other financial accounts.

A few months back, though, I logged into mint.com, and noticed that my net worth topped half a million. I was in total shock. That was a huge milestone.

I am well-aware that in recent years, the stock market has been going gangbusters, which obviously contributed to the exponential growth of my net worth -- a pattern which will likely not hold forever.

But it also made me acutely aware that the playing field has now fundamentally changed.

Instead of generating wealth by saving income and watching those savings accumulate in a linear fashion, I now release those savings into the market, for it to do what it will. Instead of having savings be the main driver of increases in wealth, market appreciation is now the primary source of the (exponential) increases (or decreases!) in wealth. It's an entirely new paradigm, and it is a little frightening.

This is why I need to learn more than just how to play good defense -- or even offense; my salary is not going to triple again. I need to learn how to manage and balance investments, because that is the only path forward. I guess I'm in the big leagues now. Gotta step up and own it. Or at least try.

Flash Forward

June 16th, 2014 at 05:00 pm

It's been a while, but I am back, and I am rebooting O Capitalism!

When I started this blog back in 2006, I had just graduated from college, and was starting to work through the ins and outs of being on my own. After figuring out the basics of frugal living and financial management (including the magic of compounding interest), and especially after landing a terrific new job, I sort of went on autopilot for a while, and stopped thinking about and working at personal finance.

However, a lot has happened over the past six years, and here's the whirlwind cliff notes version. After changing jobs, I bought a house (2008), my SO moved in (2009), we got some cats (2009, 2010), I lost my job (2011), I earned a Master's degree (2011), I found a new job out of state (2011), I paid off one of my student loans (2011), I replaced the 14-year-old car I inherited from my parents (2013), I refinanced my mortgage (2013), and that brings me to now.

This year, 2014, I am turning 30. It's hard to believe that time has flown so fast, but I am officially bidding good-bye to my 20s and young adulthood. I feel like I need to reassess where I've been, where I'm going, and plot a fresh new course for the next decade. After all, this is a long game.

Let's play.

While you were gone...

March 23rd, 2008 at 09:59 am

I've been sitting here, trying to decide how to portray this past year, whereby I transformed from a bright-eyed and bushy-tailed academic wannabe to, well, a corporate whore. Wink

For anyone in biomedical research, especially in academia, the funding situation is getting dire as NIH grants become more and more scarce. Labs, including my own at Yale, were running out of money, and new grant applications still get continually rejected. My PI's (principle investigator, also known as the boss or head of the lab) attempt to solve this problem involved hiring more postdocs, and pushing his staff as far as they can stand, and then some, to try to eke out the publications that the lab needs to renew existing grants and land new ones.

I don't think anything has shaken my faith in science more than reading and generating data for my PI's grant applications. I'd do the experiment once, and get a small positive effect. I'd repeat it, and get a small negative effect. The third time is the charm, and will finally answer the question, right? Nope, the third result is *no* effect.

If I had to draw a conclusion, it would be that there is no effect. What ends up happening? The PI grabs the result that fits with his hypothesis, plops it into the grant application like it is fact, and pretends that the other two results don't exist.

Meh?

I've heard the justification. "We must put our best foot forward in the grant application to get the money FIRST, and then we can explore the complexities in greater detail AFTER," he explained. Um, okay. That's great and all, but if your hypothesis is WRONG, or even seriously flawed, you won't be able to publish those coveted Shiny Papers In High-Impact Journals, even if you get the money.

Right? Or am I missing something here?

And then there were my PI's ill-conceived attempts to save money, like giving every lab member a monthly budget for their experiments. Now I take care of keeping the lab stocked with "common" lab supplies, while the other lab members ordered the specific reagents they needed for their own experiments. But after the budget got imposed, everyone was afraid of ordering reagents and spending money, so they all ended up coming to me and asking me to order their reagents for them, since I'm "in charge of ordering stuff"; but really, they just wanted my name on the bill instead of theirs. In fact, in the weeks prior to my departure, I was informed that members of the lab were specifically saying amongst themselves, "Oh, X, Y, and Z reagents are expensive, but we need them for the experiment! We must make Mimi order then before she leaves!" Rolleyes

I could go on and on about how the budget crunch, and my PI's clear inability to effectively manage his funds and his staff, sent everything into a downward spiral, but I'll spare you the grisly details. Let's just say that I grew increasingly bitter, disheartened, and I completely burnt out.

By the summer of 2007, I was already sending out e-mails and scoping out new jobs. I got my driver's license, moved in with my boyfriend, and started carpooling to work so that it forced me to adhere to a consistent work schedule, rather than pouring in countless hours of unpaid and thankless overtime. I also enrolled in culinary arts classes at a local community college, because all I could think about at work was how much I'd rather be cooking at a restaurant. It's the same kind of manual labor, minus the biohazard.

I got a break during November, when attending a conference. (Me and three other postdocs crammed ourselves into a tiny motel room for five days to cut expenses. After that experience, we vowed never to do that again. Two guys, two girls, two bed, and one smoker did not a pleasant experience make.) I found out that a major pharmaceutical company in the state was hiring. Immediately, I sent in my resume.

The Monday before Thanksgiving, my PI comes into the office while I'm alone (I'm always the first one in, so he knows when he can find me alone), and asks me "what my plans are". I answered in the usual fashion, that I was going to stay until next summer, and then move on to industry. He replies that the funding situation is bad, and that I should start looking for jobs as soon as possible; the job market's not great, it may take me eight months to find something; I should even consider looking out of state! But, if I do get an offer, they'll probably want me to start right away, so I can leave earlier than next summer if I want to. Even next February!

Hint hint.

My PI can be incredibly passive-aggressive and manipulative, I can recognize a layoff warning when I hear one. Lovely. Maybe it's because he found out that I was no longer working 15 hours a week in overtime, thanks to my need to catch my carpool? Or that I was taking culinary classes, which had nothing to do with the Lab To Which Everyone Must Devote Their Entire Being? Or that my name is associated with all the major lab supplies expenditures? Or did he just choose me because I was the only staff without a family, and had the best chance of landing another job? Or because he knew I'd planned on leaving anyway? It didn't matter. It was done.

(Did I mention he had this talk with me the Monday before Thanksgiving? I had a really crappy Thanksgiving.)

But then, in December, I got a call back from Major Pharmaceutical Company. They wanted a phone interview! And then they wanted an in-person, on-site interview! I went out and spent $250 on an interview outfit, including $150 at a specialty shoe store on the only pair of shoes that fit me that I found acceptable. (As it turned out, I'm a size 4.5. Department stores don't even carry below a size 6, so I had to go to a specialty shoe store and pay the premium.)

The day after my interview in mid-December, I get a phone call. They're making me an offer! And paying me $10,000 more than I'd asked for.

I had a good Christmas. Wink

I told my PI of my job offer in January, and gave him my two weeks. I could tell by his body language that he was surprised and even dismayed that I would be leaving so soon (it kind of figures that he realizes at that particular moment that I am not, in fact, easily dispensable), but I insisted that my new job wanted me to start as soon as possible, and I would be taking a week off between jobs (the ONLY time I have EVER taken off), and two weeks was all that he was going to get.

My PI completely avoided me my last two weeks. He didn't attend my farewell lunch. I couldn't even find him on my last day to say goodbye.

And so, I closed that particular chapter of my life, and turned over a new leaf.

On January 28, 2008, I officially became a corporate whore. Smile

And corporate whore-ism never felt so good. Wink

I want a hybrid or an EV

January 6th, 2007 at 10:01 pm

Here in the northeast, it has been a very mild winter. Temperatures have been consistently hovering in the 40's and 50's.

New York City broke the records for latest appearance of snowfall. And here in CT, except for a light flurry in the first half of December that lasted for only few hours, it has also been snowless.

Cherry blossoms are blooming in Brooklyn, because the wildlife think that it is spring.

Earlier, I placed my new cilantro plants outside on the deck for the day, where it was 61 degrees, because I was worried that it was too warm in my room, as cilantro is a cool-weather herb, and will bolt to seed when soil temperatures rise above 75 degrees.

And in the context of An Inconvenient Truth, Al Gore's documentary on climate change (which I've already watched four times), all of these signs are quite, quite disturbing.

Currently, I don't drive, and I'm rather enjoying the monetary savings. The occasional hassle of having to take public transportation or carpool or walk is worth not having to pay for insurance, gas, parking, and maintenance expenses every month.

But I'm also a bit of an environmentalist, and burning one gallon of gasoline adds 19.8 lbs. of carbon dioxide into the atmosphere. And if I don't absolutely HAVE to do that, then I WON'T.

I'm going to delay getting a car for as long as I can bear it. If I can hold out for a few more years, hybrids will hopefully drop in price. If electric vehicles (EVs) become widely available by then, even better. I'm willing to pay a little extra if it means lower emissions (and lower gas expenditure!).

I'm also lusting after solar panels (or hydrogen fuel cells) for generating my own electricity, and growing my own food organically.

Someday. If the world doesn't end, first.

Go Dems!

November 8th, 2006 at 11:37 pm

I don't know if I'm asking for trouble posting this, since I've been advised to never discuss religion or politics on the internet and/or with strangers, but...

SQUEE! Go Dems for taking back Congress! And buh-bye Rummy. Good riddance.

Without even going into other issues (don't really want to open that can of worms on a public forum), I, for one, am sick of the financial indiscretions of this Republican administration.

I fully and freely admit that I am nowhere near educated or informed enough to feel comfortable presenting an ind-depth argument supporting my views, which are subject to change, but at the moment, I'd call myself a FISCAL conservative.

That means responsible, sustainable government taxation and spending. I generally side with taxing the rich, and government spending for necessary or good causes (social justice, education, research and development, etc.).

Oh, did I mention minimal government debt? Yeah, can't forget that one.

What has this current administration achieved? Tax cuts for the rich, spending cuts in non-military research and development (which happens to pay my salary), corporate handouts, burgeoning national debt, and a downright financial HEMORRHAGE into Iraq (which has also achieved next to nothing), none of which is consistent with my financial philosophy.

Now I have no clue if the Dems will do any better, but I think it's time for a regime change.

In other words, I'm with the kitty on this one. Big Grin

A diamond is forever?

September 21st, 2006 at 01:01 am

I watched "The Sixth Sense" a while back, and I remember this scene from it (don't worry, no spoilers).

Anna is showing an antique engagement ring to a young Indian couple.

ANNA: It's Edwardian. Beautifully worked. Entirely platinum with a mine cut diamond and an actual color Burmese Sapphire... It's timeless.

YOUNG MAN (looking wide-eyed and somewhat horrified): You got anything a little... plainer?

YOUNG WOMAN (brimming with indignance): Plainer? You want a plain ring to go with your plain fiance. Is that how it is?

YOUNG MAN (knows he's in trouble now and backpedalling furiously and hilariously): No, baby. Don't get in a tizzy. It's just... you're so beautiful... you're like a Burmese Sapphire all by yourself. You don't need all that.

YOUNG WOMAN (neither impressed nor appeased): Uh-huh.

I remember being very amused by this scene because I sympathized with the man. Big Grin

And then there's a story that a friend told me, about her friend who recently got married. It wouldn't have been quite so big a deal if the girl wasn't just 19, and dating for all of three months before becoming engaged (and married 9 months later).

Oh, and then there's the Ring. A 1.5 carat diamond, surrounded by 0.5 carat diamonds, with 0.25 carat diamonds going all around the band. The stones were already in his family, so he just had to spend $2000 getting them set in the band.

"Just" $2000.

My friend estimated the cost of the stones to be at least $20,000.

EEK!

I wouldn't have believed this, except I actually *saw* a $25,000 diamond engagement ring in the Costco jewelry display case the other day.

Actually, I thought it cost $2500 until I realized I missed the extra 0. It did seem to *sparkle* more once I realized my error.

Anyway, these recent events have caused me to reflect upon the nature of EDAs--Expensive Displays of Affection. I know it's not Valentine's Day, but I've made my peace with V-day when I turned down a gift of an iPod shuffle two years ago.

I don't know if this makes me a horrible person, but a $25K ring would simply horrify me. I'd probably be more likely to dump the guy than accept the engagement offer.

I know different people value different things, but EDAs never impressed me. Maybe it's because it is such a transparently manipulative marketing scheme--the product of a consumerist culture that tries to place a price tag on everything, including "love".

And since "love" is supposedly "priceless", you can charge whatever you want for it, since the main emotional value of EDAs come as a direct consequence of their high monetary costs. How convenient!

Furthermore, this marketing scheme shamelessly capitalizes on the "If you truly loved me" mythology, which is ultimately meaningless because you can use it to justify just about anything.

Observe:

"If you truly loved me, you'd get me this ring."

And:

"If you truly loved me, you wouldn't need a ring to prove it."

Two polar opposite statements, and both are "validated" by the "If you truly loved me" myth. This is the main reason why I never use this expression.

Now this does not mean that I don't have any romance in my soul, or even that I don't like pretty rocks. Actually, I love pretty rocks. I find their molecular crystalline structures and indices of refraction to be sexy as heck... in the name of chemistry and physics. Wink

But if you must pop $25K on something to display your affection? Don't buy a ring, or even a fancy wedding/honeymoon.

Put it towards a down payment on a house that we're going to buy together. *That's* true commitment, to me.

Now if only the SO read my blog... Heh. Big Grin

What's important about money to me?

September 18th, 2006 at 07:13 pm

I'm currently reading David Bach's "Smart Women Finish Rich."

Don't have many thoughts on the book yet, as I haven't gotten too far, but I did enjoy his "values ladder" exercise. It was definitely a perspective I hadn't considered before.

Ask yourself the question, "What's important about money to you?", and keep reiterating with, "What's important about _________ to me?" Then, use that answer to realize how money can make your life *better*.

What a concept, right?

So, what's important about money to me?

Security. I want to know that if anything happens to me or my family, I'll be all right. Whether it's unemployment, an injury or medical emergency, a natural disaster, or even a death, I don't want to live in fear of what the future may hold.

Independence. I want to be completely self-reliant. I want to have my own job/career so that I can support myself. I want to have my own car and own a home. I want to answer to no one--not the landlord, not the debtors, not anyone.

Freedom. I want to be able to make choices that make me happy. I want to choose the career path that I desire, without having salary be a limiting factor. I want to be able to have children if I decide I want to raise them. I want to be able to reconcile the two.

How am I heading towards those goals? I'm medically insured, and I'm starting an emergency fund. At some point, I'll need to know the financial ins and outs of my family. A will or a trust would be good to set up and have.

I'm relatively self-reliant now, but I need to get my driver's license, so that a car becomes an option. I do like the freedom of not having a car, but I want the option to be available. I'm saving towards a house down payment.

I've made tentative plans for the next four to five years regarding saving for retirement. If I can match my projections, that will free me up to pursue graduate school and a possibly risky academic career, worry-free.

I'm not quite sure how to financially prepare for the prospect of creating little ones, but I'll start with saving for a house, and figure it out from there.

Financial planning is so much more fulfilling when you have concrete and heartfelt goals in mind.

Why I invest

September 9th, 2006 at 06:55 am

In light of all the investment talk of the past few entries, I have a confession to make.

I used to be scared of investing.

Oh, I "knew" that it was the "smart/right" thing to do with your extra money. And that if you do it "well", your money can "work for you", and theoretically multiply itself into unimaginable proportions.

But I didn't trust it in my *gut*. I didn't feel comfortable or confident. What does it mean for money to "work" for you, anyway? You're the only one who can do *real* work. Earning money from the stock market seemed so... intangible. Abstract. Fake, even.

And I've never been much of a risk taker. I've always preferred to play it safe. When I *have* money, I want to *keep* it, and *know* that it's there in the bank, not in perpetually fluctuating share prices. When it earns, it's not real to me, and when it loses, I feel sick.

Interest from a bank--now that's concrete. That's real. That's dependable. And if I have to sacrifice possibly higher returns, then so be it. After all, I'm a frugal person. I can work hard, and make what I earn be enough. I'm not a spendthrift who can ever spend a million dollars, nor do I need to make that money off the stock market. I just gotta keep chugging and saving.

That was me, all of one month ago.

What made me change my mind? Simply the following train of thought.

Assuming that I start work at age 20, retire at age 65, and die at age 90, I will work for 45 years, and be retired for 25.

That means I'll be retired for 25 / (45 + 25) = 35.7% of my adult life. Thus, I'll need to save 35.7% of my salary if I want to keep cash flow and standard-of-living consistent during my working and retirement years.

That seems a bit high, but okay. I'm capable of saving that. Heck, I'm probably capable of saving more if I put my mind to it.

But hang on a second, what if I plugged in some real numbers? Say I wanted to have $40K/year income during retirement. This isn't an extravagant or unreasonable figure, especially considering inflation. Over 25 years, that adds up to...

...one million dollars.

*double-take*

Yup, it's one million all right. "I'm not a spendthrift who'll ever spend a million," eh? Well, I sure am eating my words now. But at least it's better than eating them at age 65 when I have, um, nothing else to eat.

That realization caused me to set my retirement goal at one million. And actually, that's a conservative goal, because not only am I concerned about inflation, I'm also worried about the increased medical care costs (such as prescription drugs) associated with being elderly. I may not be happy about degrading health as one ages, but I'm not in denial, either. So I'd actually like to have two million in order to feel reasonably secure.

Well, can I reach that goal? Let's see...

I'm making $32K/year. At that rate, $1.44 million will pass through my hands over the course of my entire working career.

That's not enough to put away one million, but I won't be staying at this job forever. My income will surely rise if I become a professor or go into industry. But it'll also decrease if I go to grad school, and remain the same if I do the postdoc grind.

No matter how I played with the numbers, even the most optimistic lifetime earnings projections never hit three million.

And this was assuming NO time off for children (and the costs associated with raising them!), unemployment, medical emergencies, or personal/natural disasters.

Oh, and it's also before taxes and living expenses are taken out. Since those are, you know, totally minor.

I also analyzed the situation from a different perspective.

If $40K/year is 35.7% of my annual income, my annual income must be...

...$112K.

But in that income tax bracket, I'll be losing around 45% of my income to taxes. If I'm saving 35.7% for retirement, that leaves me... 19% of my income to actually live on.

That's slightly over $20,000 per year. That's actually how much I've got now, after taxes. Buy a house on this income? I'm dreaming. EEK!

That's when it truly hit me. I *can't* save enough to properly fund retirement. It's just not feasible. If I make $2.5 million during my lifetime and take out $1 million for 25 years of retirement, I'll have $1.5 million left for 45 years of PRE-retirement. Or I'm going to have to somehow raise my annual income to something much higher than $112K/year, and do it, well, NOW.

It's just not going to work.

I *need* to invest. Without those returns, I won't make it. It's as simple as that. I know you can also use real estate, but that's a form of investment, as well--one that takes more capital than I'll have in a very long while.

So... that's why I am investing. It's risky in the same way driving motor vehicles is risky--yes, you can crash, but the vast majority of the time, you'll get where you're going. And if you do crash, chances are, you will recover and not die, especially if you've buckled up (diversified).

How far I've come in just one month. Now if only I can convince my mother that I haven't gone bat sh*t insane... She harbors my old view on investing, and she's horrified by what I'm thinking/doing. Oy.

Marrying 'rich' isn't all it's cracked up to be

August 31st, 2006 at 12:00 am

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!).

In case you need more proof that I am, indeed, insane

August 28th, 2006 at 11:11 pm

I'm tired. I'm bored. I'm gonna blog. Smile

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. Smile

On cooking, self-reliance, and being bought

August 28th, 2006 at 10:16 pm

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. Smile

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.

So what the heck am I eating on only $60 a month?

August 27th, 2006 at 01:28 am

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. Smile 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?

My roommate and I...

August 17th, 2006 at 12:00 am

...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.

In which I talked myself out of an iPod for two years straight

August 11th, 2006 at 12:33 am

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. Frown

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.