We are less than a week away from our big family vacation. Hooray! Most of our planning is done, although we still have a few items to take care of before we depart.
As we head towards our departure date, I need to do laundry and pack. I also have one more Amazon Prime order to execute on. But as for our travel plan, the airline tickets are paid for, the hotels are reserved and the rental car is booked.
We vacation on a budget, but we don't scrimp. What does that mean you ask? Well it means that we always have a short term savings account earmarked for travel/vacation. We also have an automatic deposit set up, so $200 per pay period goes into our vacation/travel fund. That normally means that we have more than enough in our travel/savings account to pay cash for airline tickets. After our airline tickets are booked and our vacation is planned I often up extra savings into our travel/vacation fund to make sure we have more than enough cash on hand for our hotel, rental car and spending. This time around we didn't need to since our savings account was well funded.
I don't scrimp when I go on vacation, so I normally budget at least $100 a day for food which seems like a lot, but if you are eating out or stopping at a local brewery for a couple of $10 beers it works out to the right amount for us. I also think about and plan for other spending, we'll be stopping at two national parks, so I'm accounting for entry fees, gas, and misc. spending on a t-shirt here or there or a special souvenir. Mr. Sam likes to pick up t-shirts on his travel and he wears them a lot. I like a more upscale souvenir, a piece of art from a local or maybe a handcrafted piece of jewelry. I am picky so that means I often come home with nothing and that is ok. Baby Sam gets to pick out something fun for herself that is inexpensive and I will likely pick out something for her along the way. I normally set aside another $100 in cash for misc. spending.
All of this preplanning means that when we get home from vacation we only bring memories, a rock or two for our collection and no debt.
Showing posts with label Spending Plan. Show all posts
Showing posts with label Spending Plan. Show all posts
Monday, July 4, 2016
Monday, May 30, 2016
Amazon Mom Update
Almost a year ago, I signed up for Amazon Mom/Prime program.
What I have learned, and it is also what I expected, is that having Amazon Prime makes it super easy to buy stuff from Amazon. "Free" two day delivery on lots of items means that I often go to Amazon for my buying needs. Does that mean I'm spending more in general? Hard to know. I could be making the same purchases, but simply making them at Amazon instead of other retailers. Or I could be making more purchases since Amazon makes it so easy. I suspect it is both.
Today, I was working on my Amazon Prime subscription box. The subscription service allows one to sign up for purchases that are regularly occurring. For us, that includes diapers, wipes, diaper genie liners, baby sunscreen, baby snacks, etc. If you sign up for five items a month that ups your savings to 15% off on everything and 20% off on diapers.
So each month, we get diapers and wipes. Normally we get some puff snacks for Baby Sam. That normally leaves two items left. We have storage space, so I'm genarlly looking for something we go through a lot of and is a dry good or cleaning supply.
As working parents, coffee is a big thing for us, so today I decided to look at coffee options. On Amazon, even narrowing by Prime, that brings up thousands of choices. Select ground and hazelnut and I'm down to hundreds. Sort by price and I come up with some brands that Mr. Sam buys regularly. Ok, price per bag, price per ounce. No idea if this is a good price. Am I falling into the trap of buying something to get a discount that isn't a good deal? Cross check to the Wal-mart site and yes this is a good price.
Do the same thing for Mr. Clean Magic Eraser and I'm good to go for check out.
So bottom line, discounts can work but you have to be careful about making a poor buying choice for purposes of getting a discount.
Also, being able to get items I need delivered makes my life so much easier. Between, work, baby, family life, maintaining sanity is important.
What I have learned, and it is also what I expected, is that having Amazon Prime makes it super easy to buy stuff from Amazon. "Free" two day delivery on lots of items means that I often go to Amazon for my buying needs. Does that mean I'm spending more in general? Hard to know. I could be making the same purchases, but simply making them at Amazon instead of other retailers. Or I could be making more purchases since Amazon makes it so easy. I suspect it is both.
Today, I was working on my Amazon Prime subscription box. The subscription service allows one to sign up for purchases that are regularly occurring. For us, that includes diapers, wipes, diaper genie liners, baby sunscreen, baby snacks, etc. If you sign up for five items a month that ups your savings to 15% off on everything and 20% off on diapers.
So each month, we get diapers and wipes. Normally we get some puff snacks for Baby Sam. That normally leaves two items left. We have storage space, so I'm genarlly looking for something we go through a lot of and is a dry good or cleaning supply.
As working parents, coffee is a big thing for us, so today I decided to look at coffee options. On Amazon, even narrowing by Prime, that brings up thousands of choices. Select ground and hazelnut and I'm down to hundreds. Sort by price and I come up with some brands that Mr. Sam buys regularly. Ok, price per bag, price per ounce. No idea if this is a good price. Am I falling into the trap of buying something to get a discount that isn't a good deal? Cross check to the Wal-mart site and yes this is a good price.
Do the same thing for Mr. Clean Magic Eraser and I'm good to go for check out.
So bottom line, discounts can work but you have to be careful about making a poor buying choice for purposes of getting a discount.
Also, being able to get items I need delivered makes my life so much easier. Between, work, baby, family life, maintaining sanity is important.
Friday, April 22, 2016
Keeping Up With the Joneses - Part I
So, for the past few years, probably five or so, more and more of my friends and peers, and even people who report up to me at work (so, I'd consider them non-peers) have been buying homes at purchase price points ranging from $700,000 to a million.
I find this phenomenon strange, but also incredibly alluring.
Let's start with an analysis of these folks. I will start with the ones who started this trend, and I do believe there is a somewhat contagious trend among friends that equates to keeping up with the Joneses. The ones who started the trend, in my humble opinion, likely made smarter choices.
1. It started with my friend Mary, all names changed to protect the innocent, and her husband George. Back in 2011, they actually got a great deal and paid mid $500s for a home that is now likely worth close to $800,000. They bought a 5000 square foot McMansion in a better school district, they have a small child, with 5 bedrooms, 4 baths in a new development. Their family consists of 3 people and they do not plan to have any more children so this is a house bigger than they need. Their real estate taxes are more than $8000. They took out a $400,000 mortgage. Five years later they are putting in a pool. The house they sold they had owned since 2002 and they made about $50,000 profit when they sold it. They were buying in a buyers market due to the 2008 real estate crash which means they were also selling in a buyers market.
Mary is in the same profession as I am, I assume she makes similar money to me. Her husband is in law enforcement. While he makes less money, he has a great pension that will be coming to him (and soon) such that their retirement savings is less crucial. I have one other friend who will have a federal pension, but she cannot collect said pension until closer to traditional retirement age. George will be able to start collecting his pension in less than 10 years and his pension is for life. As a result, they don't have to save as much for retirement.
2. Jennifer and Alan were next. They are a dual income, professional, couple. Both are in the same profession I am in. They have three kids.
In 2012 they bought a 4 bedroom, 3.5 bath, 5000 square foot home. It also has a 2000 square foot out building (with air conditioning) and a pool. They bought the home for $775,000 (the prior owner had bought it for $800,000 so, again, it was likely a good buy) and it is likely worth close to a million now. Taxes are $14,000 a year. They took on a $620,000 mortgage. Later they took on a $35,000 home equity loan.
They held onto their prior house for a couple of years, while the Florida real estate market improved (likely a smart move), and they later sold it in 2015 for a $265,000 profit. I don't believe they took that profit and reduced or refinanced the mortgage on their current home, rather before they sold their prior home they put it into a trust and I assume the profits also went into that trust.
They have engaged in a variety of real estate and trust maneuvers in the last few years. This is probably because Alan also bought an office building and they are creating protection for their other assets.
Does it sound like I'm stalking my friends' personal business?? Well I guess I am. All of this information, at least in Florida, is public record and readily accessible on line. I also am learning from what they are doing, and that is both positive and negative (more on that later).
I find this phenomenon strange, but also incredibly alluring.
Let's start with an analysis of these folks. I will start with the ones who started this trend, and I do believe there is a somewhat contagious trend among friends that equates to keeping up with the Joneses. The ones who started the trend, in my humble opinion, likely made smarter choices.
1. It started with my friend Mary, all names changed to protect the innocent, and her husband George. Back in 2011, they actually got a great deal and paid mid $500s for a home that is now likely worth close to $800,000. They bought a 5000 square foot McMansion in a better school district, they have a small child, with 5 bedrooms, 4 baths in a new development. Their family consists of 3 people and they do not plan to have any more children so this is a house bigger than they need. Their real estate taxes are more than $8000. They took out a $400,000 mortgage. Five years later they are putting in a pool. The house they sold they had owned since 2002 and they made about $50,000 profit when they sold it. They were buying in a buyers market due to the 2008 real estate crash which means they were also selling in a buyers market.
Mary is in the same profession as I am, I assume she makes similar money to me. Her husband is in law enforcement. While he makes less money, he has a great pension that will be coming to him (and soon) such that their retirement savings is less crucial. I have one other friend who will have a federal pension, but she cannot collect said pension until closer to traditional retirement age. George will be able to start collecting his pension in less than 10 years and his pension is for life. As a result, they don't have to save as much for retirement.
2. Jennifer and Alan were next. They are a dual income, professional, couple. Both are in the same profession I am in. They have three kids.
In 2012 they bought a 4 bedroom, 3.5 bath, 5000 square foot home. It also has a 2000 square foot out building (with air conditioning) and a pool. They bought the home for $775,000 (the prior owner had bought it for $800,000 so, again, it was likely a good buy) and it is likely worth close to a million now. Taxes are $14,000 a year. They took on a $620,000 mortgage. Later they took on a $35,000 home equity loan.
They held onto their prior house for a couple of years, while the Florida real estate market improved (likely a smart move), and they later sold it in 2015 for a $265,000 profit. I don't believe they took that profit and reduced or refinanced the mortgage on their current home, rather before they sold their prior home they put it into a trust and I assume the profits also went into that trust.
They have engaged in a variety of real estate and trust maneuvers in the last few years. This is probably because Alan also bought an office building and they are creating protection for their other assets.
Does it sound like I'm stalking my friends' personal business?? Well I guess I am. All of this information, at least in Florida, is public record and readily accessible on line. I also am learning from what they are doing, and that is both positive and negative (more on that later).
Monday, January 11, 2016
Pulled the Trigger
I wanted to keep my old car, a 2006 sedan, for another year. But, it didn't happen. My old car was simply becoming too unreliable, especially since I'm often driving Baby Sam. So, my options included investing about $4,000 in repairs or moving on.
I opted to move on. While I could have kept my old car and invested in repairs, our lifestyle and needs have, with a baby, changed. Babies bring along stuff, strollers, bikes, pack and play contraptions, etc. So even if I spent the money to repair my car, I still felt like it no longer fit our needs for a family car. Mr. Sam has a relatively new truck, but since its an open air bed truck, we don't normally use it for family trips or travel.
We ended up doing the research, test driving several models within the class we were interested in (small SUVs), shopping for the one we settled on, negotiating sale, finding financing, buying the car and selling my old car within a week.
Which means, instead of paying off our car debt this year (Mr. Sam's truck will be paid off by summer), we added a new debt to our family budget. We paid for my nused car half in cash and then financed the other half at 2.8%. I was bummed that I couldn't get 0% which is the interest rate on Mr. Sam's truck loan. But, its a short loan, 24 months so the interest total overall is low.
I'm disappointed that we didn't save up and pay in cash for my nused car, in the same way I was disappointed that we didn't pay cash for Mr. Sam's truck (we basically did the same thing for Mr. Sam's truck, paid half in cash and then financed the other half except we got 0% since it was a new truck). I believe in Dave Ramsey's plan to never have another car payment in your life, yet here we are with car payments. On the other hand, I need reliable transportation both for family and work and I didn't want to empty out our savings account solely to avoid taking on the debt.
I opted to move on. While I could have kept my old car and invested in repairs, our lifestyle and needs have, with a baby, changed. Babies bring along stuff, strollers, bikes, pack and play contraptions, etc. So even if I spent the money to repair my car, I still felt like it no longer fit our needs for a family car. Mr. Sam has a relatively new truck, but since its an open air bed truck, we don't normally use it for family trips or travel.
We ended up doing the research, test driving several models within the class we were interested in (small SUVs), shopping for the one we settled on, negotiating sale, finding financing, buying the car and selling my old car within a week.
Which means, instead of paying off our car debt this year (Mr. Sam's truck will be paid off by summer), we added a new debt to our family budget. We paid for my nused car half in cash and then financed the other half at 2.8%. I was bummed that I couldn't get 0% which is the interest rate on Mr. Sam's truck loan. But, its a short loan, 24 months so the interest total overall is low.
I'm disappointed that we didn't save up and pay in cash for my nused car, in the same way I was disappointed that we didn't pay cash for Mr. Sam's truck (we basically did the same thing for Mr. Sam's truck, paid half in cash and then financed the other half except we got 0% since it was a new truck). I believe in Dave Ramsey's plan to never have another car payment in your life, yet here we are with car payments. On the other hand, I need reliable transportation both for family and work and I didn't want to empty out our savings account solely to avoid taking on the debt.
Friday, January 8, 2016
Updated 2016 Savings/Financial Goals
Still working on our goal planning, some changes since I last posted.
Definite goals:
(1) Max out 401k for each of us, the limits have not changes for 2016 so that is $18,000 for each of us for a total of $36,000. Automatic payroll debits are in place, I will just need to check them in January
(2) Finish funding our 2015 IRAs - $8900, The 2015 IRAs must be funded by 4/15/16. As such, we will have some heavy upfront savings of about $1110 per pay period between 1/1/16 and 4/15/16.
(3) Fund 2016 IRAs $11,000 for the both of us, this number also is unchanged from 2015.
(4) Baby Sam'college fund, add another $5000 this year.
Tentative goals:
(5) Add to emergency fund, reducing this annual goal to $5000 (this year we saved $10,000)
The above savings goals total $65,900. The highest savings number we have ever hit with our savings efforts is @$64,000 (back in 2013). So, this would be a stretch for us, especially with our child care expenses for Baby Sam.
I've deleted the nused car savings goal, because I went ahead and bought a nused car in December. More on that in a later post.
Debt killing goals:
(1) Pay off lingering credit card debt in the amount of $4261 (this was at $6500 in my last post, we've made progress).
(2) Pay off Mr. Sam's new car, remaining debt $2000.
Above debt totals at $6261.
Also, I'd like to reduce our total debt to under $450,000 total. At present our debt total is at $491,863 (this number went up due to the nused car) which would require killing the above credit and car debt and also killing another almost $35,602 in debt. I think that is this is may be a reachable goal since we paid off @$34,000 in debt this year.
Additional financial goals:
Roll over old 401k to my current employer 401k. This has been a previous goal, and guess what it is still an item on my to do list.
Definite goals:
(1) Max out 401k for each of us, the limits have not changes for 2016 so that is $18,000 for each of us for a total of $36,000. Automatic payroll debits are in place, I will just need to check them in January
(2) Finish funding our 2015 IRAs - $8900, The 2015 IRAs must be funded by 4/15/16. As such, we will have some heavy upfront savings of about $1110 per pay period between 1/1/16 and 4/15/16.
(3) Fund 2016 IRAs $11,000 for the both of us, this number also is unchanged from 2015.
(4) Baby Sam'college fund, add another $5000 this year.
Tentative goals:
(5) Add to emergency fund, reducing this annual goal to $5000 (this year we saved $10,000)
The above savings goals total $65,900. The highest savings number we have ever hit with our savings efforts is @$64,000 (back in 2013). So, this would be a stretch for us, especially with our child care expenses for Baby Sam.
I've deleted the nused car savings goal, because I went ahead and bought a nused car in December. More on that in a later post.
Debt killing goals:
(1) Pay off lingering credit card debt in the amount of $4261 (this was at $6500 in my last post, we've made progress).
(2) Pay off Mr. Sam's new car, remaining debt $2000.
Above debt totals at $6261.
Also, I'd like to reduce our total debt to under $450,000 total. At present our debt total is at $491,863 (this number went up due to the nused car) which would require killing the above credit and car debt and also killing another almost $35,602 in debt. I think that is this is may be a reachable goal since we paid off @$34,000 in debt this year.
Additional financial goals:
Roll over old 401k to my current employer 401k. This has been a previous goal, and guess what it is still an item on my to do list.
Wednesday, May 6, 2015
Cars, cars, cars
Back in 2008, the first year of this blog, we saved up $17,000 and I bought a 2006 nused car. While that feels like a short time ago, its been almost 7 years. That car has served me well, but last year (and the prior year) it cost me a pretty penny in repair costs.
Now that we have Baby Sam, and I have to wiggle and wrangle that baby stroller in and out of my trunk (even though its very large) and as the car approaches the 10 year mark, I've started thinking that I need a new/nused car. I'm thinking about a small SUV or cross over type of car. Something with a larger back storage area (not a trunk) so I can more easily fit the baby stroller and all the stuff that goes along with a baby.
The length of time Americans keep their cars has grown. On average, a new car is kept for 71.4 months (or just under 6 years). On average, a nused car is kept for 49.9 months (a bit over 4 years). In my situation, I've exceeded the average for both data points. since I've been driving my nused car for more than 6 years.
I generally do well with resisting the influence of friends and colleagues, but most everyone I know is driving a newish car. In fact, I recently got together with a good friend and she has a newly leased SUV. In the last 15 years she has had 5 cars and I have had 2. In our family, I was the one with the nice car since Mr. Sam was driving an old 1998 truck. But, that's not true anymore.
While I'm starting to pine for a new car, our financial situation is stretched. We have the expenses of the baby, indeed we still have a little baby debt. We have Mr. Sam's truck debt. And, we've barely made any progress on our 2015 savings goals (indeed we've hardly started). We also have child care costs and a college fund to feed. So, if I can hold off on a new or nused car for a couple of years, we'd be much better off.
As a result, my tentative plan is to start a nused car fund now so I feel like I am working towards a goal. I need to also spend some money to get my car cleaned and tuned up, oil change, tire rotation, etc. If I do that, I'll feel like my car is in better condition and won't be so antsy for a change.
Now that we have Baby Sam, and I have to wiggle and wrangle that baby stroller in and out of my trunk (even though its very large) and as the car approaches the 10 year mark, I've started thinking that I need a new/nused car. I'm thinking about a small SUV or cross over type of car. Something with a larger back storage area (not a trunk) so I can more easily fit the baby stroller and all the stuff that goes along with a baby.
The length of time Americans keep their cars has grown. On average, a new car is kept for 71.4 months (or just under 6 years). On average, a nused car is kept for 49.9 months (a bit over 4 years). In my situation, I've exceeded the average for both data points. since I've been driving my nused car for more than 6 years.
I generally do well with resisting the influence of friends and colleagues, but most everyone I know is driving a newish car. In fact, I recently got together with a good friend and she has a newly leased SUV. In the last 15 years she has had 5 cars and I have had 2. In our family, I was the one with the nice car since Mr. Sam was driving an old 1998 truck. But, that's not true anymore.
While I'm starting to pine for a new car, our financial situation is stretched. We have the expenses of the baby, indeed we still have a little baby debt. We have Mr. Sam's truck debt. And, we've barely made any progress on our 2015 savings goals (indeed we've hardly started). We also have child care costs and a college fund to feed. So, if I can hold off on a new or nused car for a couple of years, we'd be much better off.
As a result, my tentative plan is to start a nused car fund now so I feel like I am working towards a goal. I need to also spend some money to get my car cleaned and tuned up, oil change, tire rotation, etc. If I do that, I'll feel like my car is in better condition and won't be so antsy for a change.
Friday, March 20, 2015
Updated Net Worth and Housekeeping
I'm continuing to work on getting our finances back under control. I spent some time this morning working on updating our net worth numbers. Our net worth is now above the $1.5 million number.
Net Worth IQ web site continues to be flaky, but when its up I prefer to keep my data there. I've added entries for November 2014 - February 2015 but they are not accurate. I will be working to add the correct data over the next couple of weeks.
Additional good news, our primary mortgage is now below $220,000. I will be super excited when its below $200,000 although prepaying the mortgage is unlikely to be something we will be working on any time soon.
In baby news, I opened a savings account at Wells Fargo for Baby Sam for monies received as gifts. We have been researching college savings plans and at this point we have settled on a 529 plan rather than Florida Prepaid. More about that research later.
Finally, I am almost done with our 2015 Spending Plan which will influence and direct our 2015 Plan. More about that later too.
Net Worth IQ web site continues to be flaky, but when its up I prefer to keep my data there. I've added entries for November 2014 - February 2015 but they are not accurate. I will be working to add the correct data over the next couple of weeks.
Additional good news, our primary mortgage is now below $220,000. I will be super excited when its below $200,000 although prepaying the mortgage is unlikely to be something we will be working on any time soon.
In baby news, I opened a savings account at Wells Fargo for Baby Sam for monies received as gifts. We have been researching college savings plans and at this point we have settled on a 529 plan rather than Florida Prepaid. More about that research later.
Finally, I am almost done with our 2015 Spending Plan which will influence and direct our 2015 Plan. More about that later too.
Thursday, March 5, 2015
2014 - Final Savings Numbers
(1) Max out 401k(s) - $22,588 65% (goal is $35,000)
(2) Max out IRA(s) - $11,000 100% (goal is $11,000)
(3) Add to e/r fund - $10,400 104% (goal is $10,000)
(4) Roof project - $5,000 100% (goal is $5,000)
(5) Vehicle replacement - $5,000 100% (goal is $5,000)
(6) House projects - $3,000 100% (goal is $3,000)
Total: $56,988 83% (Goal is $69,000)
So, we saved almost $57,000 in 2014. While a respectable number, we missed our goal by $12,000. Mr. Sam was not eligible for his 401k until midway through the year and that is one of the main reasons that our 401k savings number was reduced in 2014.
We did have some major expenses in 2014 that are not reflected (entirely) in our savings goals. First, a new car for Mr. Sam which was paid in part with cash. Second, a new roof for one of our properties. The roof was a savings goal, but also cost more than what we saved and we could no longer put the project off.
We also incurred some debt in 2014. Mr. Sam's new car was paid in part with cash (about 40%) and the rest is loan. Second, we added to our family in 2014 (which is why I've been away from the blog for so long). We had considerable expenses related to the conception (via IVF) and related to the nursery and birth (most covered by insurance, but a big chunk that was not). We also had a major house project prior to the baby arriving. We are working on paying down the baby debt and it will be part of our 2015 savings/debt killing plan which I am working on creating.
(2) Max out IRA(s) - $11,000 100% (goal is $11,000)
(3) Add to e/r fund - $10,400 104% (goal is $10,000)
(4) Roof project - $5,000 100% (goal is $5,000)
(5) Vehicle replacement - $5,000 100% (goal is $5,000)
(6) House projects - $3,000 100% (goal is $3,000)
Total: $56,988 83% (Goal is $69,000)
So, we saved almost $57,000 in 2014. While a respectable number, we missed our goal by $12,000. Mr. Sam was not eligible for his 401k until midway through the year and that is one of the main reasons that our 401k savings number was reduced in 2014.
We did have some major expenses in 2014 that are not reflected (entirely) in our savings goals. First, a new car for Mr. Sam which was paid in part with cash. Second, a new roof for one of our properties. The roof was a savings goal, but also cost more than what we saved and we could no longer put the project off.
We also incurred some debt in 2014. Mr. Sam's new car was paid in part with cash (about 40%) and the rest is loan. Second, we added to our family in 2014 (which is why I've been away from the blog for so long). We had considerable expenses related to the conception (via IVF) and related to the nursery and birth (most covered by insurance, but a big chunk that was not). We also had a major house project prior to the baby arriving. We are working on paying down the baby debt and it will be part of our 2015 savings/debt killing plan which I am working on creating.
Monday, December 16, 2013
Another Budget Proposal
In my humble opinion, if you have a budget, a spending plan or some other written system for managing your personal finances you are way ahead of most people. Having a plan and working that plan, whether it is an envelope system, an Excel spreadsheet, an allowance system, etc. will help you kill debt, save more and have better control over your money.
We work off a spending plan/allowance system, but even though we have a plan that works for us I still am interested in reading proposed plans by the experts.
Mitchell Weiss via NBCnews.com suggests the 25% plan (25% for taxes, 25% for housing, 25% for debt and 25% for living expenses). I think his advice of planning your budget before locking in expenses is a good one. If you are going to limit housing expenses to 25% of your before tax income, then you need to know that number before you buy a house or rent an apartment. And limiting big expenses is a great way to free up income to kill debt or save money.
But, the rest of the advice fell flat for me. First, I was surprised that he would include payroll taxes in the budget plan. It is true you need to pay attention to taxes, but I think most budget plans and advice just utilize after tax income which to me seems easier. I guess if you are an independent contractor or you run your own business this advice makes more sense since you will be responsible for taxes.
25% of pretax income for housing seems reasonable, most guidance provides for limiting housing expenses to no more than a third of after tax income.
I thought the debt advice was lame. Sure, limit your debt obligations to 25% of your gross monthly income, but that ignores a whole variety of issues. Maybe your budget should be set up to put more towards debt if you are trying to kill debt, etc. And since this advice seems geared towards recent graduates it ignores the topic of student loans all together.
Finally, the last 25% of the formula is for living expenses. But, living expenses is supposed to also include savings for an emergency fund. Nothing in the post mentions retirement savings, so I would assume that long term savings is also supposed to come out of the last 25%. I prefer a budget plan that prioritizes savings rather than lumping it together with living expenses.
We work off a spending plan/allowance system, but even though we have a plan that works for us I still am interested in reading proposed plans by the experts.
Mitchell Weiss via NBCnews.com suggests the 25% plan (25% for taxes, 25% for housing, 25% for debt and 25% for living expenses). I think his advice of planning your budget before locking in expenses is a good one. If you are going to limit housing expenses to 25% of your before tax income, then you need to know that number before you buy a house or rent an apartment. And limiting big expenses is a great way to free up income to kill debt or save money.
But, the rest of the advice fell flat for me. First, I was surprised that he would include payroll taxes in the budget plan. It is true you need to pay attention to taxes, but I think most budget plans and advice just utilize after tax income which to me seems easier. I guess if you are an independent contractor or you run your own business this advice makes more sense since you will be responsible for taxes.
25% of pretax income for housing seems reasonable, most guidance provides for limiting housing expenses to no more than a third of after tax income.
I thought the debt advice was lame. Sure, limit your debt obligations to 25% of your gross monthly income, but that ignores a whole variety of issues. Maybe your budget should be set up to put more towards debt if you are trying to kill debt, etc. And since this advice seems geared towards recent graduates it ignores the topic of student loans all together.
Finally, the last 25% of the formula is for living expenses. But, living expenses is supposed to also include savings for an emergency fund. Nothing in the post mentions retirement savings, so I would assume that long term savings is also supposed to come out of the last 25%. I prefer a budget plan that prioritizes savings rather than lumping it together with living expenses.
Tuesday, December 3, 2013
What Would You Tell Your Younger Self?
Over at Get Rich Slowly April Dykman posed the question of what would you tell your younger self regarding personal finance. Below is my post.
I think the most important ingredients to my financial success are as follows. First, I invested in a good education which lead to a well paying, good, professional job. I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money. Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.
How about you, what personal finance guidance would you give your younger self?
This is fun!
To College Sam – walk away from the credit card offer, you don’t need that free t-shirt.
To post college Sam – good job on taking that personal finance course through the local extension system. You learned a lot and it will help you in the future. Good job on paying off that college credit card, now you really ought to cut it up. Also, congrats on opening your first IRA even though you are earning poverty wages in social services. And tell your parents thanks for paying your way through college, you probably didn’t even appreciate the fact that they saved each month your entire life to give you a great education.
To post professional school Sam – good job on paying off that student loan debt and good job on keeping your student loan debt lowish during school. You rushed into your first house purchase, but it will turn out great. Now that you are making a good living you are making a lot of good choices, paying off the student loan debt, creating your first budget (2001), investing in your work 401k and paying off all credit cards in full each month. I sure wish I could tell you that even when you are paying off your credit cards in full each month you are still spending too much money. You should have listened to me when I told you to cut up those cards post college.
A few years later Sam, just because everyone is investing in Florida real estate doesn’t make it a good investment, maybe you should do some more research before you buy that investment property in 2005, 8 years later it will be worth half of what you and soon to be Mr. Sam paid for it. Good thing its rented.
To engaged Sam, good job on picking a spouse that is hard working, frugal and recognizes that even though he has the MBA he is terrible at budgeting and bill paying so he turns it over to you upon marriage.
To married Sam, whoo-hoo, good job to you and Mr. Sam in paying off $55,000+ in just over a year during your first year of marriage. That first year of marriage in which you created your first annual spending plan (an update on the 2001 individual budget), finally cutting up the credit cards, creating an allowance system, prioritizing savings and making sure that you and Mr. Sam are on the same page when it comes to money, that will pay off big time. Seven years later and you guys have increased your net worth by $550,000.
Now, stop eating out so much. :)Looking back at my own journey, I certainly have made some mistakes along the way. It is hard not to, and many of those mistakes or detours have helped to make me a better person.
I think the most important ingredients to my financial success are as follows. First, I invested in a good education which lead to a well paying, good, professional job. I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money. Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.
How about you, what personal finance guidance would you give your younger self?
Friday, October 11, 2013
Pedi Toes Lead the Way
Pedicures certainly should be classified as a want when one is doing a budget or a spending plan. But for a South Florida gal, like me, they nudge into the category of need since my toes are exposed on a regular basis. I wear peep toe pumps at work and sandals and flip flops on the weekend so unsightly toes are something I "need" to avoid.
Over the last year or so, having a regular pedicure has turned into a regular habit for me. While I strive to avoid lifestyle inflation, I have just worked this service into my regular expenses, as part of my allowance. Said another way, while I am spending more on my toes I am not spending more in general.
I pay quite a bit to have my hair cut, I've got long hair complicated hair and this is an expense that has been part of my regular budget since college. So the spa/salon where I get my hair cut offers a very nice pedicure service which I have used with some regularity over the last few years. Basically, when I get my hair cut, every six weeks, I often get my toes done. The cost at this location is $55 ($65 with tip). A pedicure at this spot is a luxury experience, super nice massage chairs and thorough and pampered experience. The pedicure lasts quite a long time, normally at least two and half weeks or so.
On the other end of the spectrum, there is a no-frills nail salon near my office which charges $22 for a pedicure ($27 with tip). This spot is very convenient and has later hours so it is an easy stop after work. But, there are no massage chairs and I don't find it to be a relaxing experience. The pedicure from this place lasts a week or so.
So recently, I bought a Groupon for a day spa located near my home (I had no idea it was there) and had a great pedi and mani for $30. It is a great spa, new and well appointed (meaning that it had great massage chairs). My Groupon pedi lasted for more than two weeks (really almost three weeks) and I was very happy with the quality of the services. Even though I only had a classic pedi, the treatment and time almost reached spa level pedi in my mind. So, the Groupon worked, and I went back for another pedi this past weekend. The regular price for a classic pedicure is $40 ($50 with tip) so this spot falls in between the prices of the spa/salon where I get my hair cut and the convenient spot near work. But, I would say that this new location provides similar quality and level of service as the $55 pedi. The only down side is that this place is not open late so it has to be a Saturday stop for me and my Saturdays are always busy.
I've really found that paying a bit more for quality is saving me time (since I don't have to have a cheap pedi every week or so) and increasing my joy in that I really enjoy the experience.
Over the last year or so, having a regular pedicure has turned into a regular habit for me. While I strive to avoid lifestyle inflation, I have just worked this service into my regular expenses, as part of my allowance. Said another way, while I am spending more on my toes I am not spending more in general.
I pay quite a bit to have my hair cut, I've got long hair complicated hair and this is an expense that has been part of my regular budget since college. So the spa/salon where I get my hair cut offers a very nice pedicure service which I have used with some regularity over the last few years. Basically, when I get my hair cut, every six weeks, I often get my toes done. The cost at this location is $55 ($65 with tip). A pedicure at this spot is a luxury experience, super nice massage chairs and thorough and pampered experience. The pedicure lasts quite a long time, normally at least two and half weeks or so.
On the other end of the spectrum, there is a no-frills nail salon near my office which charges $22 for a pedicure ($27 with tip). This spot is very convenient and has later hours so it is an easy stop after work. But, there are no massage chairs and I don't find it to be a relaxing experience. The pedicure from this place lasts a week or so.
So recently, I bought a Groupon for a day spa located near my home (I had no idea it was there) and had a great pedi and mani for $30. It is a great spa, new and well appointed (meaning that it had great massage chairs). My Groupon pedi lasted for more than two weeks (really almost three weeks) and I was very happy with the quality of the services. Even though I only had a classic pedi, the treatment and time almost reached spa level pedi in my mind. So, the Groupon worked, and I went back for another pedi this past weekend. The regular price for a classic pedicure is $40 ($50 with tip) so this spot falls in between the prices of the spa/salon where I get my hair cut and the convenient spot near work. But, I would say that this new location provides similar quality and level of service as the $55 pedi. The only down side is that this place is not open late so it has to be a Saturday stop for me and my Saturdays are always busy.
I've really found that paying a bit more for quality is saving me time (since I don't have to have a cheap pedi every week or so) and increasing my joy in that I really enjoy the experience.
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