Posts Tagged ‘Budgeting’

If You Could Only Buy One Thing This Spring, What Would It Be?

February 28, 2009

I was just flipping through the current issue of Lucky magazine, and the editors were asked this question – what WOULD they get for Spring, if they could only buy one thing?  They answered with the following:

  • London Sole snakeskin ballet flats
  • The perfect trench
  • Slouch slate gray trousers (like the ones shown in the Spring Gap presentation)
  • Clubmaster sunglasses
  • A wispy floral tank

Normally this is a question I would answer, knowing full well that I would buy whatever the hell I wanted, one item be damned.  However, given my financial goals and budget, it might be a good idea to choose one key item for the Spring.

I wouldn’t even know what to pick! I have plenty of shoes, I suppose I am good on tops and blazers/cardigans/jackets, so I am thinking a great pair of pants might be the place to start.  But….pants?  That sounds so boring.  I’ve already decided what I love for Spring, how could I ever choose?

What about you?  Have you started thinking about what you want for Spring?  Have you made a list?  Are you on a shopping budget?  Is there a particular item or items you’ve already got your eye on?

Debt Rally & Money Talk

February 25, 2009

It’s been awhile since I’ve talked about money. This is probably because I somehow spent $400 of my hard-earned eBay money on God-knows-what.

For shame.

The next 4 months are going to SUCK because I am aggressively paying back a 401K loan and I’ve received a pay cut, so my paychecks have shrunk considerably.

Following is a status of my debt:

Lending Club – $16,324.27

Citibank – $1,515.00

AMEX – $3,391.50

Total = $21,230.77

Note, the Lending Club total includes all future accrued interest and fees.

I’m going to be left with just $185 every two weeks for the next 8 paychecks.  I have $200 in my ING savings account, which is the seed of my emergency savings account.  During the next 4 months I will only be able to pay $400 toward my AMEX card and $120 toward my Citibank card.

As I’ve said, this is when things really start to get challenging.  No big windfalls, no large payments on cards, just trudging along, paying what I can.

I hope I do okay.

The Broken Economy & Your Retirement – When & How To Switch Gears

February 8, 2009

This post was originally meant to focus on how the fledgling economy is impacting our philosophies around saving for retirement.  It still will, but with the added layer of job insecurity and prioritizing certain types of savings/investments.

Image: Veer

It’s always seemed so easy and logical for my 20-something (alright, almost 30) self. Sure, retirement is but a wee spot in the distant future, but saving is the prudent and responsible choice. And my 401K was the magic bullet; the ideal savings solution!

I began contributing to my 401K the moment I became eligible at my first full-time job after college. In five years time I had amassed a small sum of money, which has now diminished by half. The same, sad story is echoed across the country,

“My 401K lost 5/20/50/100 thousand dollars! Half of its value!”

While it’s understandably upsetting to see such a large drop in retirement savings, it’s important to weed out some perspective from the current situation. Pulling money from retirement savings, decreasing 401K contributions or drastically changing investment portfolios are options that must be considered carefully and without emotion. Consider this before thinking about touching your 401K; this is a tax-deferred savings account, so depending on your tax bracket, there’s a 25-35% return on the money invested (now) from the get-go. This is before any market returns (or, as we’ve seen, losses) or employer matching.

Income does not decrease that much proportionately when you stop 401K contributions.  I will use myself as an example, as the first thing that entered my mind when I heard about a pay cut was whether I should stop putting money into this account.

Prior to the pay cut I was making $3,560.48 monthly and contributing 3% (not much, I know) toward my 401K, $106.82 per month.  I will now earning $3,382.46 monthly and my 401K contributions would be $101.48.

With Contribution:

($3,382.46 x 0.97) = $3,280.99 Taxable Income

Taxable Income ($3,280.99) x Taxes (27%, 0.73) = $2,395.12

Without Contribution

Taxable Income ($3,382.46) x Taxes (27%, 0.73) = $2,469.20

Please note, I have left medical expenses out of this equation.

If I stop contributing the 3% to my 401K, I will take home an additional $74 per month.  $27.48 will go toward taxes rather than my 401K.

NOTE

Normally, I would NOT recommend that anyone stop contributions.  However, I took out a 410K loan earlier in the year (something I also do not recommend, but….I’ve never claimed to be a financial genius, right?) and I am considering halting contributions for the period in which I will be paying off the loan (6 months).

To be perfectly frank, my total desperation to pay down that high interest B of A card was clouding my judgment when I decided on the 401K loan.  It was a small loan ($1,400) and I have very little in my account anyhow, and I scheduled to pay it down quickly, so I easily justified it.  As I said, it’s bad news to make a habit out of this, so I don’t recommend it.  I just figured I should be totally honest and fess up.

Modifying 401K Investments

We’ve discovered that 401K accounts are not the “magic bullet,” but they are still valuable. The trick is to realize that all accounts are not created equal. I know it can be intimidating and time-consuming, but do some research into your 401K investment options.  The general rule of thumb when investing for retirement is that you should take on less risk as you get older (or, the closer you get to retirement).  This means an investment portfolio heavy in stocks when you’re younger, transitioning into a more conservative portfolio as you get older.

At 29, I’m not all that worried that my 401K has dwindled by 50%, because I have 35+ to ride the market. This is an ideal time to educate yourself and take control of your investment portfolio. Depending on the 401K, owners often have a great deal of flexibility in choosing and diversifying their portfolios. Now is the time to focus on bear market funds and invest more aggressively, if appropriate given your retirement timeline.

Paying Down Debt V. 401K Investments

You can punch the numbers all you want, but I feel that this is a totally personal decision.  One that should be based on the amount of your debt, what you’re 401K account looks like, your age, and how the debt is impacting your psyche.  If paying off your debt more aggressively will push you to remain motivated and make you feel more sane, by all means, prioritize it.  As lines of credit are SO hard to get these days, it might be prudent to halt (or reduce) contributions for a short period of time to focus on debt repayment.

Emergency Savings

I’ve always scoffed at this advice, not because it’s bad advice, but because it’s entirely unrealistic for the greater portion of the population.  How is a person living paycheck to paycheck going to amass a respectable amount of money in an “emergency” savings account?

My opinions around this have changed with the job market being what it is.  Respectable amount notwithstanding, a liquid savings account – even a modest one – is incredibly important to have in this climate.  It could mean the difference between paying rent with cash or withdrawing money from a credit card at 30%.  It could mean groceries for a month.  I could mean having the money for your kid’s dental work instead of begging a family member for a loan.

For me, this means shifting some of the money meant for debt repayment and a vacation into an emergency savings account.

And yes, I am not happy about it.

Job Update No. 2

February 7, 2009

Alright folks, so here’s the deal.  As I said earlier, it was announced that, effective immediately, everyone in my company would be taking a 5% pay/salary cut.  I am going to keep this fairly vague as it makes me a bit nervous to write about my job.  Some of you know where I work, so I just ask that you don’t say anything in the comments.

There will be layoffs, next week.  I thought this might be the case as next Friday is a payday.  They will happen across the company.  There are two pieces of good news here; one, I am fairly certain that I will not be laid off, and two, I don’t think they can possibly lay more people off after this.  It’s the 8th round of layoffs I’ve witnessed, and I’ve been with company for 5 years.

I didn’t ask who was being laid off and I don’t want to know.  My boss told me that “none of us” will be going, and I asked that that meant those of us (just 3) under him, or those of us in Creative Services.  He answered that between the three of us no one would be going.  This means at least one person will be going from CS.  Which…..fucking sucks.  Just a few years back there were roughly 30 of of us in CS, now there are 10 – including two directors and our VP.

My boss and I have positioned ourselves as pretty valuable assets for the company, luckily.  We’re multi-functional, we actively try to save the company money, we’re good at what we do, and we’re flexible.

That said, we’re on a sinking ship.  We’re on credit hold with most of our vendors and sales are crap.  I would guess that roughly 20% of our stores will be closing in the near future, which is just under 10% of our fleet.

The powers that be ARE doing what they can, but as we’ve seen, it’s certainly not out of the realm of possibility that our company could shut down completely.  I do think that our CEO will fight to the end, it’s privately held, family run company.  And although we’re small to mid-sized, the brand would be missed.

At this point, I am having to reevaluate both my spending, budget and dept repayment goals.  Obviously now that I have a consolidation loan, that will be a large, fixed monthly payment.  I will continue to pay as much as I can toward the other two credit cards that remain open.  However, additional money coming in will need to be saved.  I am worried that I have thrown thousands toward my credit cards in the past few months.  It was GREAT to do so, but I think I need to start building up some emergency savings, just in the case the axe does fall.

However, in case you think I’ve lost ALL perspective, I consider myself to be very lucky.  I still have my job.  I also have parents who can and will help me out if and when I become unemployed.  This doesn’t mean they will pay all of my bills while I leisurely look for a new job, but that’s a HUGE deal, knowing that you have that cushion waiting for you.  Most people don’t have that.

For now, I plan on spending the weekend sleeping, listing some things on eBay and drinking wine.  Next week will likely be quiet here on the blog.

xo

My Dilemma – Far Flung Friends & No Money

February 5, 2009

Penny & S, Photo: Carly

Right, so I live in Sacramento. It’s….fine. There are worse places to be, of course. David and I live in a super cute highwater craftsman in a nice neighborhood near downtown, our parents are both close by, the weather is mild. I could deal with living here for a few more years, if my friends hadn’t all left.

I do still have friends around, but my BEST GIRLS are gone. And, I need The Girls to feel complete.

Carly moved to Boston two and a half years ago for grad school and now works as a writer in the city.

S moved to NYC in the summer of 2008 for med school.

L moved to Phoenix 4 years ago and STILL hasn’t returned. She can’t like it there that much!

H currently lives in Philly, although she’s from NYC. But she gets a pass because we met in California while she was here for college.

So my problem is this, we talk on the phone, we IM, we email, we sometimes send love notes…..but we don’t see each other nearly enough. Conversations with these four friends nearly always evolve into plan-hatching; vacations and visits. Where we might meet up (last year it was Palm Springs), when I can make it to see one or more of them (NYC to see S & H last October) or visa versa and how on Earth we will find the money to do so.

Even now, I am talking with H in G-Chat about going to Hawaii this fall to stay with her best friend, and Carly wants me to visit Boston in July (when I have to take a week off of work – forced), which would be so fun!

So then, friendships are important, but what’s a girl on a budget to do?

Budgeting Methods – Which Is Best?

January 30, 2009

Everyone has their preferred methods for budgeting, be it software like Quicken, Excel, a piece of paper or their partner (the easiest, so I’ve heard).  I received an email from a reader this morning inquiring about how I budget my money, and I thought it would be an ideal time to share this information with my readers, and also do some research on free on-line solutions.  I’d also be interested in hearing how all of you manage your budgets.

The first step in setting up a budget is to determine your goals.  Would you like to track your spending?  Get an overview of your finances?  Perhaps become more organized overall?  Each person’s goals are different, and a budget can, and should, be tailored to meet those goals.

If you would like to get a global view of your finances and spending, on-line websites such as Mint and BudgetPulse could work well for your needs.  Each site allows you to upload all of your accounts (checking, savings, credit cards, etc.), keep and eye on trends in your spending and track budget-to-actual numbers.

Geezeo is a another site I’ve just discovered and I must say, I like it MUCH better than Mint.  Accounts are updated faster, the tools are more useful, and it’s interface is just as nice.  The only negative I have discovered is that they are not yet linked to ING.

Quicken Online is now free, and I would suggest this above all other money management web-sites.  I have not yet signed up for it so I cannot offer a review, but I imagine it’s a great resource.  The downside is that you might have to input some of your information.

Other Money Management Sites

DimeTracker

PearBudget

Finicity

Expense Register

Clear Check Book

Wesabe

I highly recommend checking out My Money Dot Gov for information around the basics of financial planning.

Budgeting, The Old Fashioned Way

If, like me, you find software and on-line resources too much (or not enough), I recommend Excel for managing your budget.

Excel is an incredibly useful program that I hope you all are familiar with.  Playing around in Excel totally satisfies my obsessive-compulsive need for precision and neatness.  You see, when it comes to money, I tend to fall into the following trap: EVERYTHING must be correct down to the penny.  If I balance my checkbook and it’s off 43 cents, I will either spend hours trying to figure out the mistake or say “fuck it” and end up overdrawing my account because I choose to ignore it all-together.  I’m very odd in this way.

I’ve managed my budget in Excel for about 4 years now.  So, obviously, a budget will not keep you out of debt or financially responsible.

At the end of each year I set up a workbook, laying out every pay period in the far left column (I am paid bi-weekly).  I then plug in my pre-tax deductions (health care and 401K) and taxes.  I do this because it makes it easier to make changes if I have to take unpaid time off, and I have two “extra” paychecks a year from which my health care expenses are exempt.  In the bottom row each category is totaled.

Budget: Net & Gross Income

Budget: Income Totals

I then dive into my fixed expenses like rent and my car insurance.  I also note when each is due and how it’s paid.  Every expense is deducted monthly, which is why I lay out every pay period instead of combining into monthly sums.  It is easier for me to split out which expenses are deducted from which pay period.  As it happens, rent usually comes out of the first pay period of the month and all other fixed expenses are deducted from the second.

Budget: Fixed Expenses

Next comes my variable expenses and my disposable income.  I leave this for last as I can make adjustments easily given how my fixed expenses may impact my available cash, so I can muck around with these payments and keep an eye on my disposable income and how it increases/decreases.  I try to leave myself around $200 per pay period, sometimes it’s less, sometimes more.  I also have a column for notes.

Budget: Variable Expenses

Excel Formulas

Excel can get rather complicated but I use very simple SUM formulas in my budget.  You can learn how to do this here.

I Just Paid Off My J Crew Card

January 30, 2009

$1,730!  With my tax refund!

I never thought I would be so thrilled to get rid of my tax refund within in 2 minutes of getting it, but it felt great.

And, I just got a J Crew reward card in the mail and I threw it away because I have to use my credit card.

Being responsible sucks.

I will be posting a budget update later in the day.  My flash drive ate my budget AGAIN so I will need to spend a few hours working on it.

Charitable Giving – Do You Factor This Into Your Budget?

January 18, 2009

Charitable giving ranked at #8 on MSN Money’s 9 Financial Resolutions For 2009.

“It’s easy to forget those less fortunate when you’re feeling less fortunate yourself. Don’t, says Bernhardt, of Bernhardt Wealth Management. Not only do charitable donations help you save on your taxes, but helping others can have a positive impact on your psyche and, if enough people donate to domestic causes, the economy.

‘It is important in times like this to have a grateful heart and a thankful heart for what we have because there are a lot more people worse off than we are,’ Bernhardt says. ‘These charities all need volunteers, so it doesn’t have to be money. But if we can make that financial contribution, ultimately, we should.'”

– MSN Money

As I’ve mentioned before, I do make charitable contributions throughout the year, but I don’t worry about deducting them from my taxes.  At the moment, I have $20/month contributions going to both V-Day and Greenpeace, with plans to add a steady, monthly contribution to Planned Parenthood in 2009.

How about you?  Do you donate to any charities with time and/or money?  Is this something you factor into your budget or do you simply contribute lump sums when you have some extra cash?

How Will You Spend Your Tax Refund?

January 15, 2009

Image: Veer

I know that we are a few weeks away from even beginning to think about taxes, but I’m already there.

My taxes are incredibly straight-forward and I usually file straight-away. I don’t own a home or business and I don’t itemize. My charitable donations each year range from $200-$500 and I don’t feel it’s worth the extra trouble.

It takes me roughly 10 minutes to complete my taxes online using the TurboTax website. I usually get a return just north of $1000.

There are innumerable ways to look at a tax return. As a windfall, a boost to short or long-term savings, an opportunity to pay for a yearly expense (such as car insurance or property taxes) or a means to pay down debt.

I will (begrudgingly) use a large chunk of my return to pay down debt. More specifically, that B of A card with the ridiculous APR. I would also like David and I to put $100 to $200 apiece into our Travel Fund.

Are you expecting money back from the government this year? If so, how do you plan on spending (or saving) the money? Do you traditionally use your tax return for something specific each year? Or do you – God forbid – usually owe?

On Being Spoiled & Mothers

January 10, 2009

My mother and I have gone through our periods of not liking one another all that much.  Nothing truly awful; my long period of being a moody and depressed teen, her discovery that I was 5 figures in debt at the age of 22, catching me high on cocaine and cutting me off, etc etc etc….

When I was younger I simply thought my mom had a stick up her ass.  She was (still is) totally Patty from My So Called Life.  Exactly like her.  She even looks like her, except with brown hair.  She was always the strictest mom, and she always seemed to be so disappointed in me.

As I’ve grown up we’ve morphed into great friends.  She’s a lot more light-hearted than when I was younger.  Even though I am my Father’s Daughter (we are incredibly alike), she is the one who is more empathic when I am struggling.

I’m totally spoiled.  Always have been, though not necessarily with “stuff.”  I’ve been spoiled with time and attention (although not so much that I turned into a monster).  I just have cool and loving parents.  And I thank my lucky stars every day.

I met up with my mom this morning to hit the farmer’s market.  As we poked around the bok choy and drank our coffees, she asked me how my finances were doing.  I hadn’t planned on telling her about my overdraft drama, but since she asked, I spilled the beans.  This is nothing new for her, she’s seen it all with me.  She took me straight to the bank and asked me how much I needed.  I guessed 80.  She gave me $120.

I can’t begin to tell you how relieved I felt as I deposited that money into my account, knowing that it would post straight-away and I would not be charged more overdrafts.

“If you find yourself in trouble, talk to us, don’t ignore the problem,” she told me.

I wish I could share this blog with her, but I cannot just yet.  I have no desire for anyone to know the current state of my finances, although I do have a few “real life” friends who are reading the blog.  But I do want to send out a big “I love you mom” into the Internet wilderness.