Month 1 Done & Done

7.31.2011

Holy cow!  Month 1 of the Spending Fast is done!  I can't believe how fast it went, how not fun it was, or that actually saved money!  Below are this months details.

My total savings this month was $973.00!  Usually I have to take about $200 out of my savings account every month just to break even.  This month, however, I didn't even touch it!  Plus, I had extra that I used to start my retirement account!  While on the Spending Fast, I'm counting my short term savings account (my credit union) and my retirement account as "necessities," so while I'm technically saving money in these accounts, I'm not counting that towards my "Spending Fast savings" which I hope to use as a down payment on a house next year.  So, technically my total reason.for.the.spending.fast.house.down payment.savings for the month is $575.00!

After my first pay period (July 1-15), I opened my high interest money market account and deposited what was left of my paycheck into that account.  I have to admit, while it was thrilling, I was literally sick to my stomach.  How is it that I actually had this much money left over every pay period?  And where did it go?!  One month of frivolous spending is the equivalent of ½ a semester's tuition!  I feel like I need to go lie down when I think about the waste.

Overall, I consider Month 1 to be an epic fail even though I was able to save a lot to stay within my projected budget.  I went over in almost every category of my "necessities," but because I cut costs in other places, and had some extra money come in, I was able to pretty much break even with my projected costs..  Here's the break down of where I went over (the things in red are not counted "necessities"):
  • Bus pass: $25: Before I committed to buying a 30 day bus pass, I wanted to make sure it was something I would be willing to do, so I purchased a 5-day pass.  I didn't know that it was good for 5 consecutive days, and not "five uses."  I bought it on Friday, July 1st, expecting to use it again after the 4th of July weekend.  When I went to go to work Wednesday morning, July 6th, the driver informed me that the pass had expired and while she would let me ride to work, she tore up my pass.  What a WASTE OF MONEY!
  • Groceries $48:  Because my juicer broke, I figured I could wait until my birthday to get a new one.  However, I am not willing to give up juicing everyday, because to be honest, it's not only good fore me, but I have severe digestive problems that only seem to dissipate when I juice regularly.  I have been buying juices at the store, such as the Naked juices, and other organic, fresh juices, and they're costing a fortune!  I went over my grocery budget nearly $35 on juice!  I think I'm going to have to just bite the bullet and purchase a discount juicer.  Also, on one of my juice runs, I had something to do and asked my brother if he would go get them for me.  When on a Spending Fast rule #1, don't spend money, rule #2 don't give other people your debit card!  He came home with a box of Twinkies, a Kit Kat bar, and a flavored sparkling water for about $13.  I flipped out, and am still hoping he'll pay me back.
  • Dining out $8:  I completely eliminated dining out from my necessitates budget.  I have been making myself a big salad for lunch everyday, and I supplement with other fruits, vegetables, or other healthy snacks.  However, I recently started an intense exercise program, and I noticed that I'm usually hungrier than my normal salad.for.lunch. routine can handle.  One day, I joined some co-workers for a more hearty lunch, and it cost me $8!
  • iPhone App $2:  Because I am now taking the bus, I downloaded the transit information to my iPhone (still haven't cancelled it yet...).
  • Highlights $80:  I went over budget at my hair appointment.  I was really shocked, but to be honest, it was kind of worth it
  • Concert $25:  Remember that FREE NKOTBSB concert I went to?  It turns out the friend of my brother ended up asking for some money.  He wanted the money for at least one ticket, so I split the cost with my brother.
  • Taxes: $28:  Because of my raise, I ended up paying more money in taxes which I hadn't anticipated.
  • Roth 401K $100: This was the biggest money shock of the month!  Again, because of my raise, a lot more was contributed than I had estimated/budgeted.  I was literally sick to my stomach at the sight of that ginormous number.  I'm not sure if I will have HR change it to make the contribution less, or just leave it (more money for me later right?)
  • Tanning Membership $25:  I cancelled my tanning membership one week BEFORE the Spending Fast began.  However, that particular company requires 30 notice before they'll actually cancel it.  Because my payment due date fell within that 30 days, I still had to pay for the month of July, plus a $5 cancellation fee.
  • Exercise Program Extras $20:  If you ever order exercise programs online or via TV, please please please read the fine print!  I ordered an exercise DVD back in January, and because I never check my bank statements, I didn't realize that I was being charged $20 a month for a "club membership" from the company!  Essentially it was payment to be able to chat in an online support forum.  I never used it, and because I didn't read the fine print, I didn't even know about it.  Again this company requires cancellation notice, so I was stuck with a $20 payment in July, and one more in August!  MONEY WASTED!
  • Experian.com $15:  Again with this one, READ THE FINE PRINT!  When I payed for a copy of my credit report, I did not read the fine print, and was enrolled in a membership program with Experian.  I called to cancel but they would not refund the $15.
All in all I went over my projected budget by $248.00!  Just think, that could have been extra savings this month!

While I didn't have to buy gas this month and was able to save some money in other categories, I was SAVED by some extra income I had come in.  Apparently, last year, when I paid off my final credit card I paid $100.00 more than I should have (how I did that, I have no clue).  Of course, the Credit Card company never said a word.  When I pulled my credit reports and noticed that the account was still showing a balance, I called them.  They informed me that it wasn't a balance, but a credit, just sitting there.  "Well can you send that to me?" I had to ask.  They did, and then updated my report with all three credit bureaus.

I also noticed four errors on my credit reports that have since been deleted or updated.  If you haven't pulled your credit report in a while, DO IT!  It's worth the 10 minutes it takes to do so.

I also received my Flex Spending reimbursement from my insurance which helped.

Extra Income:  $321.00
Over Spent:  $248.00

Dang!  While my $973.00 is pretty great, I had the potential to have saved $1,542.00 (the $973 I saved + $321 om extra income + the $248 I overspent)!  It's crazy to see how quickly the little things add up, and what a huge effect they can have on the big picture.  I guess I can't get too down, I was still able to save more than I ever thought possible, and now I'm determined to try harder next month. 

Where Did the Savings Go:


$ 575.00 was put into a Money Market Savings Account
$198.00 was put into my Roth 401(k) Retirement Account
$76.00 was put into my Emergency Savings Account
$124.00 went towards a Signature Loan I used for tuition last year

Say Cheese

7.29.2011



I really want a Canon EOS 5D Mark II

Keep Reading...

Filling a Void

7.28.2011



During the six months to a year before I started the Spending Fast, I was buying a lot of stuff.  Way more than normal.  I was spending money on clothes, makeup and gifts for others that were doing nothing but creating clutter and chaos in my life.  None of it had any value to me, and it wasn't even stuff I really wanted.  Just stuff. 

Then one day, a thought came into my head.  It was something I had heard years ago, "When things make us happy, there is something bigger missing our lives."  This struck me, and hard.  What was missing in my life?  What void was I trying to fill with stuff?  I was in a great relationship, I have a wonderful family, and good friends.  I have tons of hobbies, I've even learned and nurtured new ones.  So what was the problem?

I was raised a member of the Church of Jesus Christ of Latter Day Saints {more commonly known as Mormon}.  However when my parent's got divorced a few years ago, I stopped going to church.  I was angry at the world and took it out on God.  Whenever I would think about that void in my life, thoughts of church would immediately follow, so one day, I went back.  For the first time in a long time I felt peace.  I felt happy. 

I continued going, not only to Church, but to all of the activities my church offers.  Social activities every Monday night, mid-week religion classes, and various other activities and service opportunities.  In no time, my desire to spend money on stuff had quickly diminished.  I feel that because my life is more in balance, my finances are greatly benefiting!

Is there a void in your life that is impacting you spending?  What is it and what are you doing about it?


Weekly Money Check-up

7.25.2011


1. The most I’ve spent this last week was on:  My hair!  I went over my Projected Budget by about $80.  YIKES!  It looks awesome though!  The best part is I didn't even have to make sacrifices to "save" money.  I went into the salon and pretty much asked "what can I get for X amount?" and then explained to my stylist about the Spending Fast.  Luckily for me, she just moved to a new salon, and because she is paying less to rent her station, she is charging less!  She also felt inspired by my determination to do the Spending Fast, and flattered that my hair was my one luxury.  I was able to get a full head of highlights with 3 colors for $160+tip {Down from the $220+tip I normally spend!}!  It killed me to go over budget, so I'll just have to sacrifice somewhere else to make up for it.

2. Today I am thankful:  I am thankful that my brothers are my best friends.  Really, where would I be without them?  I love that we can hang out and do nothing, and have the best time doing it.  I also love that they look out for me when it comes to dating, and take a very active role in helping me decide what to wear {a guy's perspective is important}, and are genuinely interested in how the date(s) went. 

3. Money can’t buy happiness. One free thing I did last week that made me happy was:  I went out to Lake Las Vegas this weekend.  It's been there for years, but as a local, I don't really take advantage of the "touristy" things that are available to me.  We ate dinner on a cafe balcony (which I didn't pay for), and after listened to a free live concert for hours, from a dock on the lake.  The night was gorgeous, the lights were beautiful, and the music & company were fabulous!  It was one of the best evenings I've had in a long time.

4. I will consider this week a success if I:  Pay all of my bills by Friday and find a really good hiding place for my debit card!  I need to get rid of it so I stop going over my "necessities budget."

5. A good friend is: hard to find, so I'm so glad when I find a good one!

The Purchase Process

7.22.2011


For a compulsive spender, like myself, err former self, OK fine, I'm still working on it; buying things I didn't necessarily want or need was just a way of life.  I've mentioned before that I hate shopping, hate it!  But if I happened to run to the store for a white tee shirt, I might pick up a new Spring wardrobe too. 

The hardest part of the Spending Fast so far has been not going to places where I'll spend money (ie. pretty much everywhere).  Target, Walgreens, CVS, the mall, you name it, I'm not going.  However, there are times when I have had to go to the store, for example to buy my groceries.  I had no idea how much fun buying groceries is until I wasn't allowed to buy anything else.

In order to help keep me on track (and this will work for anyone trying to save money), whenever I feel the urge to buy something, I have been doing a little exercise to help me get over it.  I have even gone so far as to put this exercise onto a Post-It note which I have stuck to my debit card.  The exercise is as follows:

1.  Ask yourself "Do I NEED it?"
Yes → Proceed to #2
No → Put it down and walk out of the store.
2.  Ask yourself "Do I already have something like it?"
Yes → Put it down and walk out of the store
No→ Proceed to #3
3.  Ask yourself, "Is it well made? Will it last a long time? Is it a classic style that I won't get sick of? Is it a neutral color that will go with what I already own? Do I LOVE it!?"
Yes → Proceed to #4
No → Put it down and walk out of the store.
4.  Ask yourself, "How much is it really worth?  How long will I have to work to pay for it?  Do I have coupons?  Will it go on sale?  Is it cheaper somewhere else?  Is this the lowest possible price I can pay for it?  Is it worth spending the money on?
Yes → Proceed to #5
No → Put it down and walk out of the store.
5.  Sleep on it. 

6.  Repeat this process.  Do you still want it?
Yes → Buy it.
No → Don't buy it.

Typically, I've found that for every single item mentioned on Ooo, Sparkly Things, I don't need them as much as I thought I did after going through this process.  Does it work for you?

Netflicks revisited

7.21.2011



Lately, I have been obsessed with finance blogs.  What I find the most interesting about them is that they are all written by 20-somethings who are either still in school, or recently graduated.  These "kids" are just like me, they've gotten into financial trouble along the way, and now are desperate to make a turn around.  They have become financially savvy and share their inspiration and the lessons they've learned here on the Web.

I am given such hope, because most of them are after just a few short years, out of debt and have net worth's (Seriously?  A net worth is such a grown up thing to have!) ranging from $20,00 to $300,000!

$$$

I recently discovered a blog called 20 Something Finance, and I'm so glad I did.  I found an article on his blog about Netflix.  Before beginning the Spending Fast I cut my Netflix subscription from to the $9.99/month plan.  This plan included unlimited streaming and 1 DVD rental at a time.  Even with the cut because, just a few months ago, the plan only cost $8.99/month.  (Netflix raised their prices in December).  But, seeing as how I was cutting going to the movies and all other non-free forms of entertainment from my budget, $10, seemed fair.

G. posted information that Netflix is once again raising their prices!  I haven't received any kind of notice from them about my account, so I got online to check.  Those sneaky buggers!  They didn't send out formal letters, or e-mails, and they are not even announcing the price increases on their website- except for a small disclaimer on the "Your Account" section.



Unlike December's $1.00/month price increase, the new costs take effect tomorrow (July 22, 2011) and are upwards of 60%!  They are now charging separately for Unlimited Streaming and DVD rentals. 



Subscribers may still choose to have both but at much higher prices than before (and the number of DVD's per month is limited to only 4).



So how does this effect my Spending Fast?  I'm cutting my account yet again.  I've decided to stick with just the Unlimited Streaming for $7.99.  A co-worker informed me today that Netflix is eventually doing away with all DVD rentals and will only have a movie streaming system.  However, the price will not remain at $7.99, but will jump to about $30/month!

For now, I'm keeping my plan, but at anytime the prices go over $10, I'm cutting it completely.  But remember, if you want to change or cancel your account, you have to do it TODAY, because these new prices take effect tomorrow!

How does this affect your Netflix membership?


Free Money Tracker!

7.19.2011


I'm not sure if anyone has noticed, but I uploaded a free money tracker to the sidebar of this blog (Click the picture to open the Excel document)!  As I have previously mentioned, I think the word "budget" is a dirty word.  It automatically inflicts overwhelming feelings of failure before one has even begun to create it.

Unfortunately, some way of tracking finances is essential to anyone who wants to come out on top!  I have created a "Money Tracker" if you will.  It is a super simple spreadsheet, allowing you to plug and chug your numbers every month.  There is also an area for "Projected" amounts (ie "budget" ick!), in case you feel so inclined. 

I am finding this spreadsheet very helpful during my Spending Fast.  I know exactly how much is going where, and it also helps me to see where I can cut back.  Below are the simple instructions on using this document.

Using this template is really quite simple. I have tried to include common expenses that most people have. If you need to add to your template to suit your needs, feel free to do so. Also, if there are any categories that do not apply to your current lifestyle, don't use them! This sheet is free for the tinkering! It is here to help you!

Step 1: Input Your Projected Costs.


Your Projected Costs or Projected Monthly Expenses are a guess of what you think you pay for a specific item every month. If you have no clue what you're paying, (yikes!) that's OK! Just grab a recent bill, or look up your last payment online; I recommend rounding to the nearest ten dollars.

For example, if you spent $57.25 on your cable bill last month, project $60.00 (The template will also automatically round to the nearest dollar). This will give you a little leeway until you're more knowledgeable about your finances, and can fine tune your "budget" (ick!).


Step 2: Input Your Projected Monthly Income


Your Projected Monthly Income is where you will put in what you think you make every month. I know it seems strange, but would you believe there are millions of people out there who have no clue how much money they make?!? 

I have included room for two paychecks (for each traditional pay period), if you get paid more than twice a month, you're lucky! Pass go, collect $200 and add another Income row! I have also added space for extra income. This is for money you might make from a side business, extra money from tax refunds, or just money you found on the ground.


Step 3: Your Projected Balance



Now that that's done, it's time to check you Projected Balance.  This is going to be the rough estimate of how much money you'll have leftover after all of your expenses are paid. The Projected Balance takes your Projected Income and subtracts your Projected Expenses. This number will show you a guess of whether you are overspending or not.


If you projected balance shows up in the red (i.e.: ($600)), you have a problem, and need to re-think some of your expenses, or find a way to add extra income. You definitely do not want to be in the red, EVER!  If your projected balance shows up as a green number (i.e.: ($200)), hooray! You're doing alright, and have leftover money - hopefully to add to your savings, or retirement!

Step 4: Input Your Actual Monthly Income





When you get your first paycheck of the month, you are going to enter the Gross Income in your Actual Monthly Income area for paycheck #1. The Gross Income is what you get before Uncle Sam robs you blind. It's the number you were paid for the work you did (not what was actually given to you).



I then want you to go to the Taxes section and enter the actual amount of taxes taken from your check, all of them. The total for this number will show up in blue. I don't want you to get confused and think this is "extra" money you have in your "budget" (ick!), I just want you to know how much you're paying (this will also help you determine what tax bracket you're in- which is useful in planning for retirement.  See here and here).


Next go to the Savings and Investments section. Since many of these contributions come directly out of your paycheck, enter them as well. They will also come out as blue numbers; because it's not money you actually have in hand, its money you've already spent (aka saved).

Step 5:  Input Your Actual Expenses



As you spend money throughout the pay period, find what it is you spent money on and then enter what you spend in the Actual #1 Column.  Actual #1 means "what you actually spent from your first paycheck of the month - typically between the 1st and the 15th.

For example, if you spent $12.13 on hairspray, simply find the category Personal Care, then go down to Hair/nails and in the Actual #1 Column, enter $12.13.  Again, the template will round this number to the nearest whole dollar amount. 
When you are entering your expenses, you have to add them and enter the total, the tracker won't do that for you.  So, if you spend another $75 on a perm, you'd go the same cell mentioned above and enter $87.13 ($12.13 + $75.00) and the tracker would round that number to $83.
Do this with everything. EVERYTHING you spend for the pay period. If you're doing the Spending Fast, this should be easy, because you're not supposed to be spending money, therefore you'll have less receipts to keep track of!
Repeat Steps 4 & 5 for any other paychecks/income you receive for the month.

Step 6: Your Actual Balance



After you've completed the above steps, take a look at your Actual Balance.  This is going to be the actual amount of money you'll have leftover after all of your expenses are paid. The Actual Balance takes your Actual Income and subtracts your Actual Expenses. This number will show you whether you are overspending or not. 

If you Actual Balance shows up in the red (i.e.: ($100)), you have a problem, and need to re-think some of your expenses, or find a way to add extra income. You definitely do not want to be in the red, EVER!  If your projected balance shows up as a green number (i.e.: ($1)), hooray! You're doing alright, and have leftover money - hopefully to add to your savings, or retirement!

Step 7:  Your Total Difference


At the end of the month, look at the Total Difference in the bar one the top left of your template.  This number is your Projected Expenses minus your Actual. This is the only number you want to be in the red! If it is, that means you spent less than you anticipated you would spend. Congratulations!



This number will also match the Difference over on the right side of the template. Here the same number will  appear, but because it is your Actual Balance minus your Projected expenses, the color will be opposite of the Total Difference. You want this number to be green. Green means you saved money! Let's recap to avoid confusion:
  1. If the Total Difference is red than Difference is Green = Good!
  2. If the Total Difference is green than Difference is Red = Bad!
  3. If the Total Difference is $0 and the Difference is $0 = Not great, but at least it's not red!

Tada!  That's it!  Pretty easy right?  I hope you find this template useful, and good luck!  To see a sample of this Money tracker, click the sample below!

Cutting Costs



When I first told my mom about my plan to start the Spending Fast, her first concern was a very important one, "So what does that mean for your hair?"  I'm so glad my ma' knows where my true priorities lie. 

But seriously, do I need to pay for the salon while I'm on the spending diet?  My answer is, "yes." 

Once again with this challenge, my "necessities" are at my discretion.  I am not paying for a gym membership, as Anna did, but I am going to continue getting my hair colored.  Why?  At heart I am a blond.  I've been every color under the rainbow, and I always go back to blond, it just feels like me.  For women who color their hair, it might be more cost effective to color at home.  This is always good for women wanting to darken their hair 1-2 shades, women who want to cover grays, or women who want to warm up or tone down their natural color.  As a self proclaimed beauty junkie, I do not recommend at-home-hair-color for women who go blonder and are not natural blonds.  JUST DON'T DO IT.

I get my hair colored regularly about every eight weeks or so.  My girl is really good, but can be pretty expensive.  Expensive = not Spending Fast friendly.  So while I decided to count my highlights as a necessity, I also didn't want to cheat myself out of maximum savings.  I have a hair appointment on Saturday, so I've found ways to cut the cost and save myself money. 

The first cut is hair cuts.  For the next year I am not going to get a hair cut.  My girl charges about $35 for a trim - not a cut, a trim! - which I think is a little much for a girl pinching-her-pennies.  When my hair was shorter, it was always worth it, but now that it is longer and still growing, I've asked my mom to trim my hair when I need it. 

I also usually get a full highlight, but for the next year will only be getting partial highlights (only the top half of my head). 

I am also stretching my in-between time from 8 weeks to 10 weeks.  Did you know that stretching this in-between time can actually save you two salon trips every year?!  Amazing.

After talking to my girl about making these changes, I have cut my normal salon bill by close to 60%! 

I have to remember that I'm doing this spending fast to hep myself.  If I am not willing to cut some of my luxuries I have failed before I even begin.  Because my salon trips are a necessity for me, but a want for others, I compromised, and made this "need-want" Spend Fast Friendly.

Protection Portfolio


Roth 401K, The New Kid on the Block.

7.18.2011



Did you know I recently went to a New Kids on the Block (and Backstreet Boys) concert?  It was LEGIT!  I seriously had the best time! 

Speaking of New Kids on the Block, have you heard of a Roth 401k?  Wait, Morgan, I thought it was either a Roth IRA or a 401k?  In the past a traditional 401k or a Roth IRA were the two main retirement options, but since 2006, there's a new kid in town; the Roth 401(k), and sorry Donnie Wahlberg, he's looking finer than you...

A few weeks ago I spent a good couple of days researching 401(k)'s and Roth IRA's, and had decided to go with a Roth IRA when I became eligible for one at work.  I even went so far as to research different mutual funds and stock options!  Imagine my disappointment when open enrollment at my company came, and a Roth IRA was not an option! D'oh! Crap, now what?!  My only investment options were a traditional 401(k) or a Roth 401(k)?

A Roth 401(k)?  What?

Generally a Roth 401(k) is a hybrid between a Roth IRA and traditional 401(k).  It seems to have most of the benefits of a Roth IRA, with most of the benefits of a traditional 401(k); the best of both worlds!  In my opinion, it's a darn good way to go when it comes to saving for retirement.  And ultimately, it's why I chose it as my employee retirement option (although, I am in the process of setting up a separate Roth IRA account).

It's like a Roth IRA because:

Just like a Roth IRA, with a Roth 401(k), after-tax money is invested; you miss out on the initial tax break [that you get from a traditional 401(k)], but you're taxed your current income tax and not taxed a penny when you take out your money after age 59 ½ (typically when you're in a higher tax bracket).  Not even your interest earnings are taxed!

A Roth 401(k) may also be rolled over to a Roth IRA account, tax free.  This is great for people who know they will likely change jobs in the future.  [A traditional 401(k) can also be rolled over to a traditional IRA with no tax payment, but if it rolled to a Roth IRA, you will pay taxes on that amount.]


It's like a 401(k) because:

A big difference between a Roth IRA and a Roth 401(k) are the penalties paid for early withdrawals.  Some people choose to use their Roth IRA as an emergency savings account.  What this means is that you deposit your after-tax money, which grows because of interest.  You are allowed to withdraw money from the principle (the money you personally invested) at any time you choose, but you are not allowed to withdraw money earned through interest [just like a traditional 401(k)].

Let’s say you contributed over a 3 year period just $8,000 to your Roth 401(k). Lets also say that over those three years your ROTH 401(k) grew to $10,000. So $2,000 (or 20%) of your account balance is the earnings portion of your Roth 401(k), and $8,000 is from your contributions. The 20% is the important figure here. Now let’s say you need to take $8000 out of your ROTH 401k. Here is how it will work. When you withdraw $8000, 20% of the $8000 or $1600 would be taxed as ordinary income and if you were not at least 59.5 years of age at the time of withdrawal you would also owe a 10% penalty on that $1600 as well.

With a Roth IRA you could have withdrawn $8,000 of contributions penalty-free regardless of your age. With a Roth 401(k) there is no way to designate that you only want to withdraw from contributions
Another difference comes into play with employer matching.  If you receive an employer match, it will work like the match for a traditional 401(k), the money given to you by your employer will be taxed when you pull it out at retirement.

The Roth IRA option isn't available to people who make more than a certain income ($105-120K for singles, and $167-177K for couples).  With a Roth 401(k) you don't loose eligibility if your income grows too large. 

Roth IRAs also have limits to how much money you can put into them.  Typically (in 2009), the contribution limit was $5,000 each year.  So if you had one Roth IRA, you could save a maximum of $5,000 each year; but if you had 5 Roth IRA accounts, you could not contribute $5,000 to each account, only $1,000.  Like the traditional 401(k), the Roth 401(k) has a $16,500 yearly contribution limit, allowing you to save the maximum amount for retirement.

Points to Ponder

Because the Roth 401(k) plan is still so new, it is pretty rare; most companies don't offer them (only about 10% of companies in the US).  If yours doesn't bug the heck out of your HR department to offer one! I can't tell you what type of account to choose, but as far as us young people, who have a lot of working years left in us, I think this is the best way to go.  Just to review:


{**Additional $5,500 for people over 50 Image Source}

The Bottom Line

Saving for retirement is so important, and us YF&Bers (twenty to thirty somethings) can not rely on Social Security to be there for us.  Start saving today, whatever you can.  Research the best option for you, and then follow Rule #1 of retirement planning: Don't touch your retirement savings until you retire!

Weekly Financial Checkup


I found this great segment over at My Pretty Pennies, and decided it is a good way to keep my finances in the forefront of my mind.  Hopefully I can try to update every week.

1. The most I’ve spent this last week was on: My Roth 401(k) account.  I opted to have a certain percentage of my paycheck deposited directly into the account, however I was not planning on the raise I got last week.  "Holy Ssshhhhh-ugar!" was my thought as I glanced at my paycheck stub and realized that twice the amount I had budgeted for was contributed to my account.  I'm still not sure if I'll leave it alone, or change it to reflect the original dollar amount I had planned on...  I guess since I'm not spending money this year, I don't really need the extra...

2. Today I am thankful:  for my job!  I know a lot of people out there hate their jobs, but I'm quite pleased with mine.  Especially because of things like retirement benefits, and annual raises as well as bi-annual bonuses. 

3. Money can’t buy happiness. One free thing I did last week that made me happy was:  Had a movie night with my brothers.  We made popcorn and watched Tangled.  It was so nice to just hang out with my best friends!  Plus that movie was HILARIOUS!

4. I will consider this week a success if I:  Prepare my projected budget for August.  I really need to tweak some numbers so that I stay comfortably within the budget.

5. My favorite cuisine to prepare is :  Cereal!  Between my mom, my grandma, and BF (an executive chef), I have zero reasons to cook.  I do enjoy a nice bowl of cereal every night before bed, and I have to say, I make the best bowl of cereal this side of the Mississippi!

Why I chose a Roth IRA over a Traditional 401K

7.15.2011



As soon as I started reading my Suze Orman books, I got really excited about saving for retirement.  I remembered when I was in high school I would frequently tell myself two things:
  1. When I turn 21 I'm going to work as a waitress, because in this town, waitresses make bank!
  2. When I turn 22 I'm going to start my retirement account and by the time I retire, I'll be rich!
I actually only accomplished one of those goals... until now!  For the first time in my life (age 27) I have become eligible to participate in my employer's retirement options.    Until August of 2010, I had never had a full time job except school, so if I did work for a company who offered retirement benefits, I didn't qualify. 

Participating in a retirement plan has always been important to me because by the time I'm 70, there won't be much left in Social Security, if anything.  You're welcome Baby Boomer generation.  I hope you're enjoying being retired at age 55 as well as that nice boat my Social Security Contributions paid for...

Imagine my disappointment when I found out my company doesn't match retirement contributions!  Aww man!  It looked like I was on my own to secure my future; that's a scary thought for a twenty-something!  I had briefly studied the differences between 401Ks and Roth IRAs but take it from me, I am NO financial expert.  In the end I decided that the Roth was the way to go.  If my company had offered a match, I would have no doubt chosen a Traditional 401K,  anyone who turns down free money is a dummy!  But they don't, so I chose a Roth IRA.   

Why?  First and foremost I have a few very important cards up my sleeve when it come to retirement... the first being time!  I am young, I am just starting out in the business world, and I'm not going to retire for close to 40+ years.  The other card I have to play is that my career will inevitably change.  Currently I work in an office at a borderline entry level position.  I know I won't work here for the next 40 years, and I know that my salary will eventually increase (I'm currently a Pre-Med/Dental student).  What this means is that:
  • I can contribute whatever amount I can, and it doesn't have to be a large amount.  Even $50 a month is better than nothing.  Because time is on my side, that $50 a month will grow and earn interest for the next 40+ years!
  • With the Roth IRA, I am paying money with my "after tax pay."  Why is this better for me than a traditional 401K when the 401K is paid pre-tax?  Well currently, because I am entry-level, and in a very low tax bracket (about 15%), I'm not actually paying that much in taxes.  When I withdraw my funds at retirement time, the tax is already paid, so I what I have in my retirement account is what I can use. 
  • With a 401K I am contributing with my "pre-tax pay" which seems awesome (hooray no taxes!  Take that Uncle Sam), and subsequently would put me into a lower tax bracket (Less income = lower income tax bracket).  Seems ideal right?  Consider this...  Currently, I am practically in the lowest tax bracket possible, and with my career plans (dentist), I am pretty much guaranteed to make more money in the future, putting me in a higher tax bracket.  When I pull out my retirement funds, I will be taxed based on the bracket I am in at that time.  Many dentists are in an income tax bracket of 40+%!   
Let's think about this and get a better visual of this explanation, I am 27 years old. I currently have $4,800 each year to contribute to my retirement.  My current tax bracket is 15% and my future tax bracket will be about 40+%.  If I retire when I am 70 years old, the money I can actually use from:
  • A Roth IRA account would be $1.7 million
  • A 401K account would be $1 million
Both of these numbers are crazy.amazing.great, but which would you rather have?  Again there are things to consider such as inflation, potential matching, other issues, etc. but this example is just for demonstration purposes.

The Roth IRA may not be the best retirement fund for everyone, but because I'm young, because I don't make a lot of money and therefore don't pay a lot of taxes, and because I (hopefully) have lots of time left to work, it's better for me to stick with the Roth.  For those who are a little further along in life, a Roth may not be the best way  to go.  It's important to get educated about your options and most importantly, start contributing, whatever you can, TODAY!  Even if it's just couch change, or one days worth of Starbucks, or your first born child, wait, not that..  Well you get the idea.

The big picture

7.14.2011



During the two weeks between deciding to participate in a year-long spending fast, and actually starting it, I really became aware of "the big picture."  I was at work one afternoon, and a co-worker and I decided to take our afternoon break.  We walked to the store on the corner for some iced coffees (no matter how hard I try, my homemade ones just don't taste as good - if you have a recipe, I'd love to hear it!).  I bought the large size, and took my sweet-treat to the cash register to pay.  It cost me $2.15, no biggie right?

Wrong! 

On average I bought some kind of iced coffee drink, whether it be from this store, Starbucks or where ever,  2-3 times per week.  That's nearly $350.00 each year for a little cup of coffee! 

The past two weeks since I started the Spending Fast, I've really been trying to keep this in mind.  Focus on the big picture.  So far it's been fairly easy.  There are times when I want to buy something, but I've been forcing myself to go through a thought process, and by the time that's done, the urge to spend has worn off...

L'equip Mini


This one to be exact...

Free Cupcakes!

7.13.2011


Today is a day for celebration.  What better way to celebrate while on the Spending Fast than giving away free cupcakes??? 

These aren't just any cupcakes, they are delicious, free CHOCOLATE cupcakes!  None of that vanilla or carrot cake nonsense (Seriously!?!  Carrots are a vegetable and vegetables don't belong in cake!). 

AND...

Thy also have green frosting... GREEN!  Like the money I'm trying to save!

What are we celebrating, you ask?

Oh, just that I got a raise at work today!!! 

HOORAY!  More money to save!

Chubby is Good

7.12.2011

I think the Jell-O marketing campaign makes me want to buy them even more!

Lately, because of a medication I've been taking, my lips (as well as skin, eyes and hair) have been drier than the Sahara Desert. 

Keep Reading

Killing Two Birds

7.11.2011


I got the idea for my "Financial Goals" from the book I'm currently reading: Women & Money Owning the Power to Control Your Destiny.  In it, Suze Orman has what she calls the "Save Yourself Plan."  Geared specifically towards women's finances, each chapter outlines what every woman should do/have financially.  Each set of goals is designed to go in order and can be done in small steps, or conquered all at once.  The book spaces them out by month, so that accomplishing them will only take about 1-3.

Two of my financial goals for the month of July were to check the interest rate my current savings account offers, and look for banks that currently offer higher rates.  I also wanted to check how the interest on that account was compounded.  Next I wanted to set up a money market account where I would put all of my funds saved from the Spending Fast, and eventually turn into my Emergency Savings with eight months of income.

Today, I killed two birds with one stone!

I first checked the Federal Funds Rate.  The Federal Reserve is our government's bank. The big wigs at this bank meet eight times a year and decide if they are going to lower, raise or leave unchanged the key interest rate, the Federal Funds Rate.  All of our country's banking institutions base their interest rates off of the Federal Funds Rate.  Per Suze Orman, any institution offering an interest rate that is less than ¾ of a percent lower than the Federal Fund Rate is not worth banking with.  For example, if the Federal Reserve Rate is 5.0%, don't bank with anyone offering 4.25% or less!  Today, the Federal Funds Rate for general savings and Money Market Accounts is 0.25%.  (Seriously?  That number is tiny!)

Suze is getting my hopes up, because in her books, every interest rate she mentions is upwards of 8.0% (but this book was written back in 2007, before the economic crisis).

I have heard that banks with the highest interest rates are actually online banks, but I still wanted to check as many as I could.  I went to Bank Rate and searched for Money Market Accounts with the highest APY (annual interest rate, not the "Rate Post Intro"), taking into consideration that I also wanted an account with no minimum balance and no fees.  Some banks require that you have a certain amount of money (usually in the $1,000 range) in your account in order to get the interest rate advertised; or in order to avoid banking fees; and some banks charge a yearly fee just for having an account with them.  I say all of that is money WASTED!  You may as well throw your money in a fire if you have an account that charges fees.

DING DING DING!

I found one!  I checked out Sallie Mae's offer.  A few of my student loans are with Sallie Mae, so I am a little familiar with them.  After reading and doing a little more research, I decided to open a money market savings account with them.  I was able to open an account with no fees, no minimum opening deposit, and a 1.15% interest rate that is compounded daily!  (1.15% is almost 5 times the Federal Reserve Rate!)
I am now going to use this as my primary savings account from now on.  I am not closing my current savings account at my credit union however, because I have a student loan who's monthly payments are automatically withdrawn from that account.  Plus, it's always a good idea to bank through a credit union!

Temptation

7.10.2011

{The Temptation of St. Anthony by Salvador Dali - Image Source}

I think one reason that I haven't really felt the pressures of the Spending Fast yet, is that I have been really conscious of not putting myself in the way of temptation.  As far as my spending habits go, I never made big purchases.  It was too stressful and made me anxious, so a $500 purse was never an issue.  But I had no problem making a ton of small purchases that added up to (if not exceeded) the price of that purse!  So for the last week, I have made it a point not to go to stores - except for the grocery store.

Yesterday, however, I had to go to Walgreens to pick up a prescription.  I wasn't nervous, I thought, "I'll just walk straight back there and leave, without looking at anything."  When I got back to the Pharmacy counter they informed me that there was a problem with my prescription, and asked me if I could just "hang out" in the store for between 15-45 minutes while they got the problem worked out.

My palms got sweaty, and my voice cracked as I answered, "sure."  Rather than go sit in my car in the 120° F heat, I stayed, in the air conditioning, amidst a myriad of temptations. 

After 45 minutes the Pharmacy called my name over the loud speaker, I paid for my prescription... and a $1.29 Chapstick.  Yep, I did it! Take that temptation!

PS.  I only bought the Chapstick because the medication I was picking up makes my lips/eyes/skin really really dry.

Bella Beach Cruiser

7.08.2011



This Bella bicycle is made by Beg Bicycles.  Isn't she gorgeous?


 

A Celebratory Semi-Cheat

7.07.2011


I almost cheated today!  Yep, I just celebrated my 7th day on the Spending Fast, and already I was about to slip!  I had a doctor's appointment today, and on my way there, I stopped at the gas station.  I had EVERY intention of going in, not to buy gasoline- a necessity, but of buying a delicious French Vanilla iced coffee...

I don't know what came over me.  I stopped drinking coffee years ago, but for some reason today, I felt like if I didn't get one, I would die.  I even justified it to myself because I wasn't actually paying for it with my "regular money," I was just going to use some money I got from my car ashtray.  Oh the shame!

When I went in, I talked a while with the cashier- My co-workers and I used to go in there daily, so we're friendly.  I told her about my spending fast, and where I got the money, and that it technically wasn't cheating.  She told me that I shouldn't feel too bad, because the sweet drink was on sale this month for only $0.99!  In my head, my brain was already doing the calculations: $0.99 + tax x 365 = $390! a year!

I decided I was strong and I started to walk out the door.  She stopped me, scribbled something down on a post-it and gave it to me....

"Free coffee Thursday"

"It's a coupon!" she said.  I filled up my cup and was so glad I didn't cheat!

I Needed a Little Motivation



I've been on the Spending Fast for exactly one week today!  {Insert applause and cheers here.}

It really is nothing to write home about, after all, I still have 51 weeks left.  There has been at least once or twice, every day this week, where I have gotten an urge to purchase something.  Chapstick, Naked Juice, Pretzel with Cheese... nothing huge, but you know, the stuff that usually screws me because it adds up.

I put a post-it note on my debit card that warns me against spending money, and it seems to be helping.  I also think the fact that I've told EVERYONE.I.KNOW that I'm doing this has been a positive thing.  No one is asking to borrow money, and when someone wants to do something, they are the ones coming up with ideas of things to do for free!  Everyone is being very supportive.  Still, I have an urge to spend. 

My usual mentality would be, "OK, the bills are paid, so now what can I buy?!?"  It honestly never occured to me until last night that just because there is money in my account, doesn't mean I need to spend it.  Still, when bordem hits I find myself looking for motivation to keep going; something to tell me that this is all going to be worth it.  Up til now (and it might last longer), the challenge of saving every.single.penny has been a good motivator.  I almost feel like one of the extreme couponers on TV, actively making a conscious effort to save.  To be honest, it's kind of a rush.  Yesterday, however, I got a huge kick in the pants! HUGE! I'm talking solid gold motivation that I hope will last a while...

I went to the bank to apply for a credit card (again, not to use, but simply to increase my debit to credit ratio).  While I was waiting to be helped, I picked up the FORECLOSURE binder that was on the table and flipped through it.  There were so many houses listed in the community where I someday plan to buy a home!  I stumbled upon a photo of a house I liked and read the details:

2,100 sq. ft.
3 bedrooms
2 ½ baths
$170K

Hmmm.  I asked the teller if this was a set price, or if the bank negotiated foreclosures.  He told me that they negotiate, and whle most of the foreclosures in that area were marked at $170,000, they were actually being bought for just over $130K!  I couldn't believe it!  Compared to the almost $1,000,000 this house would have cost just a few years ago (during the crazy housing boom), this was practically free!  It was a big number, but small enough to where I thought, "Yep, in one year, I can afford that!" 

Because the neightborhood was so close by, I drove over to take a look.  It was gorgeous!  The house is a two story located on a corner lot that was beautifully landscaped with grass, tress and flowers (you don't see grass in Las Vegas)... Because it is on a corner lot, the backyard is gi-normous and did I mention it has a pool!?!?  I didn't get to go inside, but I was sold on the outside alone (plus I have friends that grew up in that neighborhood so I am familiar with the floor plans). 

My goal at the end of this year is to have saved enough to put a down payment on a house.  While I know that that house probably won't be around by then, it was enough motivation to get me EXCITED, genuinely excited about saving!

Walking in the Spider Webs

7.06.2011



Once I made my official list of needs, I realized that there were still places I could cut costs.  For example, I have an iPhone, and I hate it.  No, seriously.  I've had three iPhones, the OG version, the 3G and the 3GS and I have hated them all.  Currently I am just waiting for my upgrade to become available so I can take a hammer to my current phone.  Everyone loves this piece of garbage phone, but I swear it's the devil.

I think a big reason for my dislike is that I really don't take full advantage of it's capablities.  I use it as a phone, to text, an iPod and sometimes I use the internet.  I don't care about the games or other apps, and most of them crash anyway.  I carry a really nice camera in my purse with me, so I don't NEED the camera function, and I have three iPods, not counting the one on my phone.  I have the internet at home and at work, and for the sake of the Spending Fast, I really don't NEED it on my phone. All I do online anyway is blog and shop, and internet shopping is out, and internet-window-shopping would just be torture.  So, blogging can be done at home, instead of in traffic... I kid, I kid.

By removing the internet package on my phone plan, I can reduce my monthly bill by 50%!  That would put another $50.00 in my pocket every month!  I know that cell phone companies are funny about the iPhone and internet packages, so I'll have to look into it. 

I'm not completely sure I'll make this switch, haven't I given up enough already? But, at the same time, it does help me to see dollar signs, and the motto "go big or go home" keeps popping up in my head.   If the phone company won't let me, maybe I'll consider trading in my iPhone for a dinky one that doesn't do anything but make phone calls and text.

Independence

7.05.2011



Financial Independence and Independence Day...

Normally the two don't go hand in hand, but I have to say, I had the BEST five day weekend (and subsequently the first five days of my spending fast), and I didn't spend a penny!  Originally, I had a trip to San Diego planned for this weekend.  When I learned of the trip about three weeks ago, I knew I would be on the spending fast, I tried explaining that a road trip wasn't in my budget of $0.00. I actually even tried to justify spending the money because the trip wasn't a "fun trip."  Well, it would be fun, but it was a trip to see my dad who was deploying out of Oceanside, CA; the beach was just a nice bonus.  My dad begged me, "Just $100, if that... please, for my Father's Day present?" 

OK, it wasn't that pitiful, but you get the idea.  So I planned for it, saving as much as I could beforehand.  Anyway, as luck would have it, the deployment and subsequent trip were cancelled (Anna must be looking out for me).  Needless to say, I was a little bummed about not having any plans for the 4th of July Holiday; I really wanted to play in some water, and get a tan, *sigh.*  However, I ended up having one of the best weekends ever, and didn't spend any money!  Here's a quick breakdown:

Friday
BF was really wanting to have a date night.  I usually pay for our date nights, because about 1/3 of BF's take home pay goes to paying medical expenses (he has epilepsy, and because his employer's insurance denied him coverage, he is paying out the rear for independent coverage).  Since I'm now on the spending fast, I told him our usual $100 dinners, etc. were now a thing of the past.  It's going to be only free activities from here on out.  But, he still wanted a date night, so we plotted...  I had a frozen yogurt coupon from a church event, and he had free movie passes!  We went and saw the new Transformers movie , and ate frozen yogurt afterward it was a great date!

Saturday
I got invited to the lake with some friends from church.  To beat the holiday drunks crowds we arrived at the lake at 4:30 am!  My girlfriend drove ($0 gas money) and it was too early to really eat anything (no food = free food).   There was only one other boat on the entire lake and the water was like glass.  After a few hours of wake boarding, tubing, and knee boarding, we called it a day... Even though it was still only breakfast time!  I spent the rest of the day lounging by the pool, eating free groceries from my house.
Sunday
I went to church and then came home with every intent on visiting my grandparents.  However, my little brother sent me a text and asked if I was busy.  I assured him I wasn't, and he then told me that his friend had two tickets to the NKOTBSB concert and wondered if we would be his guests.  "Grif, I would love to go, really, I've been trying to get the sold-out-tickets for close to eight months, but I just can't spend the money."  He was disappointed, but called the friend and broke the news.  No less than 10 minutes later he called me again, "the tickets are free, so get ready!"  What? Free concert tickets?  This never happens to me!  Griff assured me that his friend would rather have people to go with than go alone, even if he didn't get his money back.  WOO HOO!  So, we went to the New Kids On The Block/ Backstreet Boys Concert!  We ate dinner beforehand, and snuck in bottled water in my purse.  Free concerts are so much better than regular concerts!
Monday
Since Monday was the 4th of July, I knew I wouldn't spend any money because everything was closed, but I still wanted a day of all the free fun I could get.  I started by going to a parade my community puts on every year.  It was really close to home, so my family and I just walked over.  After that, I headed to BF's parents house for a day of swimming and BBQ.  Later that night, we lit fireworks and sparklers, we then watched the "big fireworks" and listened to patriotic songs.  It was a typical Independence Day celebration, but I haven't had a traditional 4th of July celebration in a long time.  It was such a great day, and it was FREE!

PS.  BF's brother didn't bring enough diapers for his kids, if anyone is looking for a way to get free diapers, adult depends and saran wrap is not the way to go... Trust me!
Tuesday
Today, I didn't have to work, so I relaxed at home and nursed my wicked sunburn (which was also free).
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