Wednesday, October 31, 2007

Death and taxes

From All Financial Matters, an excellent explanation of how taxes are calculated. His example is for married filing jointly, and my situation is a little different--for 2007, federal tax rates for a single person are as follows:

$0 $7,825 10% of the amount over $0
$7,825 $31,850 $782.50 plus 15% of the amount over 7,825
$31,850 $77,100 $4,386.25 plus 25% of the amount over 31,850
$77,100 $160,850 $15,698.75 plus 28% of the amount over 77,100
$160,850 $349,700 $39,148.75 plus 33% of the amount over 160,850
$349,700 no limit $101,469.25 plus 35% of the amount over 349,700

See for more information on your specific information.

My effective tax rate winds up being about 13.5%--and then there's New York State and City taxes to figure in. When I was at Starbucks, several employees realized that there was a per-week hourly limit after which it was pointless to work since we lost the extra income to taxes.

I also wondered the other day whether there is a problem with owing taxes each year as opposed to getting a refund. I aim to break even, but with my up and down side income, have had to pay for the last two years and expect to for 2007. I set money aside throughout the year in anticipation, although I do not file quarterly. As far as I can tell, as long as I pay by April 15, there's no problem at all.

I have some posts planned for the future regarding taxes as an interest-free loan (either way) and how to take advantage of what your tax dollars are buying you.

Tuesday, October 30, 2007

financial confidant

Making the rounds of the personal finance blogosphere today is the question “Do you have a financial confidant?” It’s an interesting question, because while I don’t really have one, I feel like I end up being one pretty frequently.

I’ve been pretty transparent about money in my own life for as long as I can remember. Part of that is probably because I’ve always been good with money and I’ve been working since I was 15, so I’ve been handling money for a long time. For example, many of my friends, including my roommate, know exactly how much money I make. My boyfriend also knows how much I have in savings and investments (and I know what he makes and his net worth). My parents know how I’m doing; I was so excited at my first job that I told my mom exactly how much I’d be making and she said it was more than her! I don’t know if we’ve discussed it since then, but I’m sure she knows it’s going up. My dad asked me point blank, and was shocked—he expected it to be double or more what it really is, which irritated me. Both of them know that I’ve been completely independent of them since college.

Almost everyone knows how much my rent is—it’s sort of a pastime in New York to talk about how much you’re paying, whether you got a good deal, if you had to pay a broker’s fee. My coworkers all likely know the range my salary is in, though I think I’m at the top end of theirs. Everyone knows that I also freelance on the side for extra money, and I’ve given explicit information for getting involved to some people. Most people know that I’m very interested in personal finance, though none of them know about this blog.

But to me, “confidant” implies someone whose advice I seek, who I go to with problems or goals, perhaps for accountability, or otherwise someone with whom I’m sharing information I keep from others. I don’t have that. And I don’t know that I’m terribly interested in finding someone to fill that role.

I gather a lot of information online, from books and radio shows, and from a meeting with an investment advisor at Fidelity when I rolled over a 401k, and then I compile it and try to make sense of it in my own life. I’ve developed systems for tracking my goals, my spending, and my budgeting success, and generally find that this process works very well for me. And I seem to be doing ok, for my age and station in life. I guess because of all that, people have started coming to me for advice, and while all I can give is the experience of “this worked for me” or “I’ve read that…”, people seem to find that sufficient.

My roommate, for example, has asked me for help with learning to budget and figure out how to live on her own (she moved out of her parents’ house into our apartment, and had never been on her own before, whereas I’d been on my own for about six years when we moved in together). She sees a personal finance coach as well. My boyfriend asked me for advice when negotiating his current job’s salary and in dealing with taxes and benefits. We have wildly different styles of managing money but the same basic philosophies—debt is bad, do what you love and the money will follow, be self-sufficient. My sister and I talk about money, in large part because our parents are still helping her out a little financially and she feels bad about this for a couple of reasons. My best friend and I talk about money, especially because in the last year our lives veered in such different directions that we now have different goals. I’m learning from her about money and parenting; things I never much cared about before I suddenly see the importance of (like affordable health care for pregnancy, birth and early childhood as well as buying a house). My ex-boyfriend would not take my advice (or anyone’s, for that matter) even when he asked for it and how his life is turning out is evidence of that.

Are financial confidants necessary? Maybe for some people, or maybe for some situations, or maybe for some specific issues. I certainly wouldn’t rule one out when contemplating a big purchase or dealing with a windfall or something like that. For now, I’m ok, and I don’t mind being the one people come to. It forces me to be more transparent about my own situation—I can’t very well give advice while cloaking my own choices.

Friday, October 26, 2007

Always Read The Fine Print

ALWAYS. A-L-W-A-Y-S. All the time, no excuses, no matter what.

Now, do I take my own advice? Yes and no. I admit to skipping past the terms and conditions of privacy policies when it comes to creating an online profile on a website. But if the item in question is at all related to my financial life, I will take the time to read the fine print. These are situations where it’s especially important to do so:

Contracts for cell phone service, home repairs, computer warranties—anytime you pay for something that includes a contract, you should read it before you sign. This is where your rights and responsibilities are spelled out as well as the rights and responsibilities of the company you’re doing business with. Make no mistake: those rights and responsibilities are ALWAYS in THEIR favor, not yours, so make sure you’re covering yourself by being aware. You can learn valuable things like:
  • Your cell phone company requires you to pay for their service for x number of years, and if you cancel before then you must pay x amount in an early termination fee (there is currently legislation underway that would require that fee to be pro-rated! Cross your fingers!).
  • Your cell phone contract also spells out the difference between regular SMS messages (which are included in a text messaging plan or for which each provider charges around $0.15) and premium messages, which are billed by a third party and not your provider (like voting for American Idol or getting a ringtone or joke sent to your phone). These charges are usually around $0.99 but some of them also sign you up for a weekly or monthly subscription service with little or no warning (but I guarantee you that there is fine print wherever you saw the short code to text to, be it an ad on TV or in a magazine). Knowing this difference would have really helped this guy.
  • Contracts for appliances and services like refrigerators, contractors, or the like spell out exactly the terms of the deal: how much you’re required to pay up front, delivery charges if applicable, when the work should be finished, etc. You need to read this up front so you know a) when things are supposed to be done, b) what remedy you have if they’re not, and c) what your responsibilities are. I’m not a homeowner and have not dealt with any of these contracts yet, but I will be reading every word of them and asking questions if necessary when it comes time.
Of course, there are lots of other situations where you would encounter a contract. READ IT before you sign. Ask questions about things you’re unclear on. If there’s something that doesn’t suit you, ask if you can change it (your success with this will vary). If the salesperson hassles you about taking the time to read the contract, do not do business with them. It’s a legal document which details your rights AND your responsibilities, and any company that wants uninformed customers is not one you want to give your money to.

Sweepstakes, Rebates and Promotions
Fine print abounds in this material, and it’s important to read and understand it to increase your chances of winning or getting your reward. You might discover you’re not eligible because of your age (most states require entrants to be at least 18 years of age) or your location (some states don’t allow certain types of sweepstakes). You might discover you need to do something to be qualified, like write an essay, fill out a form, or have your paperwork postmarked by a certain date. If you don’t take the time to read the fine print, all of it, you might spend your time and possibly money on something that ends up being worthless.

I recently got an email from my new bank, saying that if I signed up with their online billpay and used it for three new bills during the month of October, I’d get $50 deposited to my account. I know they’re good for it; I initially switched to this bank because they had a $100 promotion for opening a new checking account (the fine print: I have to keep the account open for at least six months, it’s for new customers only, the $100 is taxable income). However, I didn’t read all the fine print for this online billpay promotion, and as a result I’m not getting the $50. I’m not losing out on any money, but I did take the time to set up the online billpay and go through their system instead of going online to each vendor and paying them directly as I’ve always done. I don’t know whether I’ll continue to use the billpay feature (which would make it less of a waste of time) or go back to the way I used to do it, but the fact remains that it’s not something I would have done had there not been an offer on the table. My failure to read the fine print wasted my time.

You already know that the paper you sign when you rent a car has lots of important information on it, like whether you have unlimited mileage and how much it’s going to cost you if you return the car with less than a full tank of gas. But did you know that there’s fine print available when you buy an airline ticket? In addition to agreeing not to dress provocatively on some airlines, you’re given a few rights as well—while a Passenger Bill of Rights is still in the future, all airlines have a Rule 420 which details the circumstances under which they’re required to compensate you for delayed or cancelled flights and how.

I managed to successfully get a voucher from Northwest after they stranded me, nearly made me miss my sister’s wedding, and then tried to blame it on the weather—when the reason our flight was pushed back was because the plane was leaking oil. Clearly spelled out in their Rule 420 is that if the delay is caused by malfunction or maintenance issues of the plane, they are required to provide accommodation and meal vouchers for passengers stranded overnight, as I was. I took a voucher over direct reimbursement, since the value of the voucher was larger than what I’d paid out of pocket, though it probably wound up being the same cost to them.

Health care
Actually, most of the print in health care situations isn’t all that fine—it’s just so boring no one wants to bother with it. However, it’s important to be familiar enough with your health insurance to understand the premiums that you’re paying out of every check, the copays you’re responsible for when you go to the doctor, the difference in cost for brand name versus generic prescriptions, and limits like maximum out of pocket expenses or annual plan benefits.

Other situations
Fine print shows up on the bottom of your receipt, detailing return policies. You see it on websites, encouraging you to seek qualified legal, financial, or other professional advice instead of relying on the internet. It appears on sale tags in stores (sales are final, must buy two to get one free), products (cape does not enable user to fly), and commercials (professional driver, closed course. Do not attempt.) Fine print covers peoples’ asses, gives them instructions, and in some cases, details their rights. Ignore it at your own (financial and legal) peril.

Tuesday, October 23, 2007

I noticed this article about Health Savings Accounts on The Consumerist today and it reminded me that today begins open enrollment for my company’s benefits. I went ahead and took care of everything and noted the following:

1. My health care costs are going to go up.
My dental costs used to run me $2.86 per check and now will be $3.06 (a 7% increase, a little lower than the forecast of 8.7%). However, I used to pay $21.13 per paycheck for medical care and I will now be paying $28.05 (an increase of about 33%!). In addition, my maximum out of pocket costs will be increased to $1,000 from $750. As a concession of sorts, I guess, my company made a deal with the Mayo Clinic that if I took a health risk assessment, I would get 10% off my contributions. Still, the end result is that my medical costs will be about 20% higher even if there is no change in my frequency of doctor visits and my prescription costs do not go up.

2. My health care reimbursement account is about the most wonderful thing since sliced bread.
I have $10 a week put into an HCRA to lower my taxable income and get reimbursed for copays, deductibles, and some over-the-counter medicines. I debated about raising this for next year, but even though I’ve had about three times as many appointments as normal this year (thanks to a suspicious looking mole and a crown), I’m also still working through funds leftover from 2006* so I think leaving it at $240 per year works just fine. If your company offers and HCRA or you qualify for an HSA, you should definitely look into it—I’m all about lowering my tax liability and this is a very legitimate way to do so.

3. I am probably over-insured without even paying a penny.
Disability, accidental death and dismemberment, and basic life insurance are all company-paid to a certain baseline, and I choose not to pay extra to purchase more insurance. This is only because I am single and have no dependents. I have enough in savings to cover the costs of a funeral, god forbid, and I have no debt. If the total worst happened, my parents could afford to handle the costs. But if I were married or had a kid, I would completely change my tune and inspect all of this a lot closer. YMMV.

4. I will continue, for now, at my current rate of retirement contributions.
I’m contributing 9% of my measly paycheck to my 401k with a 6% company match. My goal is to contribute a full 15% on my own as Dave Ramsey recommends, so that the match is just pure gravy, but I’m not quite there yet. I won’t make any changes until I have my year-end review (and hopefully at least a small raise!), at which time I’ll see how much I can afford to sock away before I notice it (probably another 1-2% depending on how big the raise is).

5. I need to revisit my will.
Another perk my company offers is online will and estate-planning help, which I took advantage of when I started. I get a free review each year, and enough has changed in my life with moving and acquiring new things that I might want to make sure things are still all up to date. As I said, I have no dependents, so I’ve chosen two family members I’m very close to as my inheritors of what little I’ve got.

And that about sums up my position on life and money right now. Medical costs are going up but ultimately I probably won’t even notice the amount as it’s pretax. Death and dismemberment suck and I hope they don’t happen to me any time soon. I do not have enough money to do everything, so I’ve got to be smart about putting to work what I DO have.

*This is an extremely rare situation—federal law states that any funds not used by March of the following year are lost. However, when I started my job in mid-November of last year, some ambiguous paperwork caused an entire $240 to be drafted into my 2006 HCRA out of one paycheck, and I went scrambling throughout January and February to buy enough OTC stuff to use it up. I succeeded, but their formal review for those funds lasts until the end of SEPTEMBER, so I am just NOW getting to use the money that was taken out of my first paycheck here a year ago.

Monday, October 22, 2007

Money-free weekends

Trent over at The Simple Dollar frequently advocates money-free or at least low-cost weekends. While I typically don’t really look for things that are free to do, I do try to save money during the weekend by making smart choices.

1. I become Suzy Homemaker.
This definitely isn’t for everyone, but I find it satisfying to take care of things on the weekend that I can’t get to all week. My two biggest “chores” are cooking and cleaning.

My new goal (as of two weeks ago) is to cook one new recipe per week. My busy schedule means that this will only happen on the weekend. So far, however, it’s working out really well—I made baked burritos this weekend as well as a nachos bell grande that might cure me of my Taco Bell addiction (in favor of my own creations!). I’m learning new recipes and gaining knowledge in the kitchen, plus I’m saving money by not eating out (the first time I make something truly horrible, that might change). This past weekend, I went to the grocery store three times, so I definitely didn’t have a money-free weekend—but the money I spent will keep me in lunches to take to work every day and that’s money well spent.

Cleaning is, to some extent, relaxing to me, and I think it’s a decent investment of both my time and money. Clutter has mental and financial costs, so decluttering my excess possessions is a great way to save money down the road, and maybe make money today (by selling things or donating them for a tax writeoff). Having everything organized so you don’t have to buy a second one of something you can’t find makes things less frustrating. I’m looking ahead to moving within the year, and I’m so irritated that I paid to move all these things I don’t want. A clean place is inviting and makes me want to stay in rather than spending my money on outside entertainment. I have a slightly higher standard of “clean” than any roommate I’ve ever lived with, and I don’t mind doing the extra work to keep things at my level, although I prefer not to do them with my roommate home (I don’t want to make anyone feel guilty, and I also don’t really want the help). My roommate is usually gone at least one day out of the weekend, so I’m free to crank up the radio and scrub away, both of which are FREE!

2. I take advantage of things I’m already paying for.
As a rule, I don’t watch much television. I’m not hooked on any shows and I don’t like to leave it on for background noise. However, I’m paying for cable and it’s not really negotiable (I live with a roommate, and this was a compromise I had to make). Since I’m paying for it, I might as well get my money’s worth, but preferably not during the week when I need to be doing other things. This past weekend I got a lot of money’s worth, as there was a marathon of the second season of So You Think You Can Dance, which I was pretty much glued to. This is a debatable Good Thing—if I’m watching television, I’m not reading a book, out in the fresh air, or otherwise doing something good for my body—but I definitely don’t spend every weekend glued to the set like that. In addition, our On Demand channels offer several workout options which I’m learning to take advantage of, and I also recently discovered the music On Demand channels—like radio without the commercials. Watching TV and tootling around on the Internet, both of which I’m already paying for, are definitely preferable to going to a movie and forking over $10+ just for a single ticket or otherwise paying for entertainment when I’ve got lots going on in my own living room.

3. I go exploring.
Sadly, I don’t do this as much as I used to, but probably 95% of the dates my boyfriend and I had during our first year together were exploring different neighborhoods of New York City. We had a set of cards with walking tours printed on them as well as a couple guidebooks, and we’d take the train to whatever stop we felt like and then go exploring. The only money we spent was on a meal and maybe a bottle of water, and we learned a lot about our new city and also each other (it’s a learning experience to see another person in a stressful situation like being lost, or tired and cranky, or in an area where they don’t feel safe). We found several of our favorite restaurants this way. We both look back very fondly on those times and still occasionally go exploring. Our real world jobs are now more demanding of us and we’ve gotten lazy on our weekends, but it’s definitely an option we still have and take advantage of every now and then. Anyone who lives in or near a big city should try this a few times.

4. I read.
I’m a library power-user and I’m a member of two book clubs, in addition to having to do a lot of reading for work. I read every day of the week, on the train, at lunch and before bed, but I can also knock out one full book or at least finish a couple I’ve already started in one weekend. I don’t buy books as a matter of principle—it’s a slippery slope for me, and my paycheck will not cover the addiction once it starts. Also, I’m still moving a lot, and books are HEAVY.

There are probably lots of other free or cheap things to do in my area: street fairs, shows, clubs and meetings. Of late, I’ve been more of a homebody, but I’ll probably try some of those things out at some point. This past weekend feels like a pretty successful low-cost weekend and I’m aiming to repeat that at the end of this busy week.

Friday, October 19, 2007

Poor stretching their paychecks to the breaking point

See the story at CNN.

The thing that irks me most about this article is that someone I'm close to would literally say (of the Greenpoint, Brooklyn, family whose check used to last four days and now lasts two): "Well, if it's so tough for them, they should just leave. Move away from the city and go somewhere else."

As if it were that easy.

As if people can afford to just pack up and move somewhere cheaper when their entire familial support system is right here. When they have no car. When the parents are going hungry so the kids can eat, so where are they supposed to save any money?

And this same person would then complain that there were no taxi drivers, or mechanics, or others in a service profession. And this same person is in her late twenties and is STILL not financially independent. While she probably could make it on her paycheck (she'd have to, she makes substantially more than I do!), she doesn't. She gets help with small luxuries (like a cell phone) as well as more than $20,000 in schooling paid for each year just because she breathes air. And she has the nerve to think of someone struggling to make ends meet and say, "Hmph. Let 'em get out of the city then."

It just burns me up.

Another set of classes, another set of books


I think I've mentioned, I'm planning to go back to school in January for a Master's in degree in my field (publishing). I got my official acceptance letter in the mail two days ago, and all my course registration paperwork yesterday...but still have not seen anything about financial aid.

I nearly tore my hair out early this summer studying for the GRE in order to qualify for a departmental scholarship and I made the cutoff with a couple questions to spare (or if you look at it another way, I missed the highest scholarship cutoff by one question--but you have to attend full time for that, and I can't handle that with work and everything else I've got going on. A part-time scholarship is fine with me, thank you!). I am desperately waiting on news of that scholarship so I can figure out how much I'm going to have to take out in loans.

This is something I'm really torn about. I've never had any debt at all. If I get this scholarship, I could probably afford to pay the difference up front out of my emergency fund...but school is not an emergency. I think the albatross of future payments will weigh less heavily on my neck than the knowledge that if something were to happen, I wouldn't have six months of expenses in the bank, especially considering that I'll be reimbursed everything I pay at the end of the semester depending on a B- grade average through tuition reimbursement at my job. Which is another argument both for and against loans vs. using my emergency fund: if I'm going to be paid back in four months and I'm reasonably certain of making the GPA required for the reimbursement, why not just pay it and not end up paying the interest?

Well, the same argument applies: If I pay up front with my emergency fund, I will be losing the financial security (in terms of interest) and the mental security (of six months of expenses in the bank) in favor of not incurring interest (which I'll have to pay back because the reimbursement will only cover the actual tuition cost).

So really the question boils down to which is greater: the loss of interest and mental security or the incurred cost of interest by taking out loans and paying them back at the end of each semester?

Until I meet with a financial aid advisor, I really won't know specifics, but here are a couple of guesses:

1. It will depend on what kind of loan I take out.
If I qualify for and take out only subsidized loans (the yearly maximum is higher than what I need, so it's a possibility), then it's entirely likely I won't even end up paying interest--the federal government pays the interest on the loans while I'm in school, and I'll pay them off before I graduate. If I only take out unsubsidized loans, the interest will be accruing during the months I'm in classes and I will have to pay that out of pocket when paying off the loan using the tuition reimbursement money at the end of the semester. It's also possible I might wind up with a mix of subsidized and unsubsidized loans.

2. It will depend on the tax consequences of everything else.
The scholarship might wind up being a tax liability for me, as I'd have to claim it as income. Same with the tuition reimbursement. But aren't taxes paid on student loans deductible? How would taking the loan in 2007 vs. 2008 affect the overall tax picture?

3. It will depend on whether what I'm planning is even possible.
I don't even know if the student loan system is set up to handle things the way I'd like them done. They'd probably prefer me to hang on to the loan until I graduate, incurring interest that will need to be paid then. I know with car loans, early payment penalties are written into the contract--could something like this bar me from my plan?

4. If I pay out of my emergency fund, would the cost of paying for the second semester while waiting on the first semester's reimbursement put me in a financial black hole? I'm not sure what my total cost per semester is going to be until I hear about this scholarship, and it's entirely possible that my responsibility will be less than $2,000 per semester (in a most perfect world). In that situation, yes, I can afford to be without the four grand for a few weeks. I won't like it, but I'd still be able to handle most emergencies, like hospital copays, rent, or groceries. If it's going to be more like $5,000 per semester, however, while I can afford to pay for one semester up front and wait for the reimbursement, I canNOT afford to be without $10k for even a few weeks and expect to pull through any emergencies. I'll need to figure out where my baseline cutoff is, and preferably before I find out what the cost is going to be.

Clearly, I have some research to do. I'm very antsy to get things taken care of, although I'm just going to have to wait. Once I get the financial aid information in the mail, I can set up an appointment with their office to get some answers to my questions. On November 8, I can apply for the tuition reimbursement (I have to apply before registering for classes but after I know what the cost is going to be, and I also have to wait until I've officially been employed here for 12 months, which is November 7). Once I'm assured of reimbursement and the cost of what I need, I can arrange for the loan and then register for classes.

And the only loophole in this whole process is that registration starts in three weeks, and there's no way on earth everything's going to fall into place for me in that span of time. I risk not getting the classes I really want. There are five or six that are applicable to my specialization, although one of the classroom courses is on Mondays (when I'm not available) and the three are online. So if I don't get my first choice classes, I'm stuck giving up dance classes FAR earlier than I wanted or taking one or both of my classes online.

I guess there's no point worrying about it right now--I've got my plans made as best I can, and now I just have to wait on the mail before jumping right into action. I guess it's a good thing at least that I'm excited about all this!

Thursday, October 18, 2007

My personal finance success story

This post is inspired by a great way to give kudos to my parents for getting me where I am today, and is also a contest entry over at Get Rich Slowly.

I think my personal finance success story is really my mother’s success story—because I wouldn’t be where I am today without her. This is not to say I’m a trust-fund baby—far from it—but she gave me an intellectual foundation for handling money and then a fantastic start into adult life. I managed not to screw it up, but I probably wouldn’t be where I am now without those two crucial things.

My mother’s association between me and money began about a year before I was born. My parents were in their mid-twenties, married for a few years, and felt well enough established that my father suggested they start trying for a baby. My mom thought it over and then said no—she wanted to buy a piano first, so that her future progeny could grow up to be musical (I was the first person in my family to play an instrument). They began saving, and a few months before I was born, brought home a very nice piano which sits in my mother’s home to this day.

Later as a single mother, she managed to send me and my sister to private elementary school by working midnights. We were poor, but I never knew it—the woman can squeeze three dollars worth of purchases out of a single dollar bill. Not only did she take us to summer camp each year, but she took at least two of my cousins along as well, footing the bill for all of us kids. She sent our gently used clothing and other goodies to distant and very poor relatives in eastern Europe. My earliest financial lessons were of spending money only where there is value—be it in experiences or at the grocery store, make sure you’re getting something important back—and to help those who need it.

When my mother remarried and became a stay-at-home mom again, things were easier on us financially. We’d moved to a part of the country with a much cheaper cost of living, and her new husband was a doctor. There was no private school for us to attend, so we didn’t have the cost of that to deal with either. Despite the “prominence” of being an M.D. family, we lived simply. My parents both drove used, paid-for cars, carried no credit card debt, shopped at consignment shops or Walmart for clothing (which about killed me in the popularity department), took only one vacation a year (to see family in Florida), and saved, saved, saved. During this time, my mother started listening to a new radio show called The Money Game with a host named Dave Ramsey. We were forced to hear his corny jokes and rants against credit card companies during our afternoon commute to pick all the kids up from their various schools or to and from ballet classes. I hated it, but as my later life showed, something sure sunk in.

When I was 16, I went to boarding school. One of my class requirements was a job which applied at least part of my earnings against my school bill. My mother allowed me to put the smallest percentage to my bill with the stipulation that I was now 100% responsible for makeup, toiletries, clothing, entertainment and any food I wanted that didn’t come from the dorm cafeteria. I bought a camera, ate a lot of Ramen while my roommate ordered pizza, and then learned the value of a budget.

In my senior year of high school, my parents gave me the worst blow I could imagine—they offered to pay my way to college, provided it was a college associated with their church…and if I went to a state university or any other school, I was completely on my own. Their deal covered tuition, room and board—as before, I would be on my own for personal expenses, now I would also have to buy my own books, and no, they wouldn’t give me a car. Grumbling about blackmail, I went to the church-affiliated school closest to our home which ended up being a fine school as far as education is concerned (although too religious for my taste), and graduated without a dime of debt.

During college, I didn’t get a credit card. I built an emergency fund and bought a dirt cheap, ugly used car that I fixed up myself. At one point I worked four jobs to save money for my trip to England. I never went a semester without working, and always had at least one job (usually two) during the summer as well. I had a written budget and planned what to do with any money I received.

Two weeks after I graduated, I moved to New York City with an internship and a few thousand dollars in the bank. I managed to survive for nearly a year working at Starbucks, internships and an independent bookstore before getting a “real job”. I’ve been completely financially independent since I was 22. I don’t make a whole lot of money, but I have a swanky apartment. I have money in the bank—money for emergencies, money for retirement, money for planned expenditures throughout the year. I have everything I need and much that I want. I have a credit card, which is paid off in full every month. I have a fantastic job in my dream industry.

All of this is possible because of my mother’s piano. Before I was even conceived, she was setting herself up to lead a life of example—a life of saving for what you want, prioritizing your goals, and working hard, even at crummy jobs, to make sure that you have the money for the things that are really important to you. The radio program she played when I was in the car taught me how to budget and live within my means. Her commitment to giving me a debt-free start to adult life and teaching me independence in small steps allowed me to follow my dreams much earlier than anyone else I know.

Her example underscores how important it is to raise kids to understand personal finance. While I don’t know exactly how much my parents make and I never have, I knew that they budgeted and paid off their credit cards in full every month and that they actively talked about money. My mom took steps to make me independent, from opening up my first bank account and showing me how to balance my checkbook to encouraging me to shop around for car insurance to get the best deal (I also think it’s an excellent thing that they never gave me a car, but don’t tell my 17-year-old self I said that). She’s never given me cause to associate money with friendship or a person’s worth, and has repeatedly helped those in need, with no expectation of repayment.

I’ve had to work at sticking with this fantastic foundation I was given—I did look into financing a car while I was in college, and my first year in New York involved a lot of walking since I had no money for the bus and a lot of days-old Starbucks sandwiches saved from the trash can since I was really, really tired of Ramen by this point in my life. I probably would have gotten a credit card at that point if I could have qualified and I wouldn’t have had much self-control. Working four jobs while going to school full time was exhausting and my grades probably suffered a bit. I’ve wasted lots of money here and there, mainly on cigarettes, dr.pepper, and an old boyfriend. But the fact remains that I am the most financially stable of anyone my age that I know, and I don’t see how I could have done it without both the example and knowledge my mother imparted, and also the great debt-free start she planned and saved for.

Wednesday, October 17, 2007

Saw these on my aggregator today

Some great, thought-provoking articles over at two of my favorite blogs.

J.D. over at GetRichSlowly talks about recurring monthly costs and whether they are worth it. Recurring monthly costs are something that I try to avoid as much as possible. Pretty much the only ones I have right now are my cell phone bill, which has been a static (but higher after I got my Treo) cost for years, and a subscription to Blockbuster’s cheapest online movie plan.

My cell phone is my only phone as well as now being my calendar, on-the-go email, address book, and main form of entertainment (via Monopoly!), so although I pay about 5% of my monthly income to the mighty Cingular/AT&T, I really don’t begrudge it.

The Blockbuster subscription started as a mystery shop requirement and I was reimbursed for the cost. When the shops were discontinued, I kept the subscription-—it’s $6.49 per month for two online rentals and two instore swaps making it only about $1 more than renting just one movie in the store. There’s a Blockbuster only a few blocks away from my apartment, and for the time being, this is a cheap treat for myself.

Both of these charges are auto-billed to my credit card, which is paid off each month in full.

And Trent at The Simple Dollar has been reviewing one of my favorite books, Your Money or Your Life, for the past two weeks or so, and today’s post focuses on ways to save money. These ideas are so unbelievably simple, so basic, I can’t believe everyone doesn’t automatically follow them. Alas, I’ve seen with my own eyes that many people don’t. In short order, my experiences with some of YMOYL's 10 sure ways to save money:

Live within your means.
How is it possible to spend more than you have? There's just some kind of mental block in my brain that requires me to pay off my credit card in full every month, just as if it were any other kind of bill. I don't know what my APR is and I don't care, because I don't use it. I only have so much coming in; therefore, I must have that or less going out each month.

Take care of what you have & wear it out.
This, also, is plain old-fashioned common sense. My parents took great care of a Dodge minivan that lasted for nearly 300,000 miles and was the starter car for me and my three younger siblings. That car could get banged up (as it inevitably did) as we all learned to drive. It sure was ugly, but under the hood it ran great. By the time it died (after probably 16 years), it was puffing out black smoke if you went past 45 mph and had only one windshield wiper. It had been in at least two minor wrecks, and the front passenger door no longer opened. When we graduated to our own cars, we knew how to drive carefully--and also how to maintain a car so that it would last a long time as well.

I'm getting some boots reheeled this week--they're perfectly good boots, but the heels are worn down. This could be a case of, "They're worn out, I should toss them"--OR it could be a "Take care of what you have" opportunity. I really like these boots and they're already broken in, so the $10 to get them reheeled is a better investment to me than $50+ for a new pair that I might not like quite as well.

The difficulty with both of these commitments is to make sure that we're not putting our effort in the wrong place. Quality clothes are worth taking care of and will take much longer to wear out--but their upfront cost is more expensive than a more cheaply-made item. Don't try to truly wear out a cheap shirt that is pilling or otherwise looks bad, and be willing to give up things that you'll never, ever wear out because you hate them. Go ahead and pass them on to someone else, because the costs (mental and physical) of clutter shouldn't be underestimated.

Anticipate your needs.
This is actually the only way a budget really works. If you're only budgetting for bills that regularly come up, like food, electricity, and cell phone, that's great, but an unexpected medical bill or even Christmas will completely throw you for a loop (and as with dieting, each time you "fall off the wagon" makes it harder to get back on again). This is where an emergency fund (for true emergencies) and sinking funds (for expected but somewhat irregular expenses) come in so handy.

For an emergency fund, figure what you'd need to survive for a month if you lost your job or got very sick or otherwise lost your main source of income. Then save six times that. Note that it's your EXPENSES for a month, not your current income--this can actually cut the amount you're saving almost in half, depending on how much you already save per month (and I guess in some sad cases, it might be MORE than your monthly income, depending on whether you're actually living within your means).

Sinking funds are also very easy--you can start by figuring either what you can afford to set aside (as in for gifts) or what the cost is going to be (like a once-a-year premium for renter's insurance) then divide that by the number of paychecks you get and start setting money aside. Failure to do either of these will be very, very ugly.

Rising up in the world!

As this is a new blog, traffic here is still quite light, so I was delighted to receive two comments this week on my spam text messages post.

Thinking that was a little unusual, I googled "spam text messages" and discovered I'm on the first page! A small victory for me, and a reminder that I need to continue working hard to have enough content to keep people interested and coming back.

Tuesday, October 16, 2007

A cheap mark

Have you ever been taken advantage of financially?

I guess this could run the gamut of a freeloading friend to being mugged. There are a lot of gray areas in between, and I’ve experienced quite a few. I think these actions informed my financial philosophy quite a bit, so I’m going to dig into them a little bit.

The first incident I recall happened when I was probably around 9 years old. I decided to have a lemonade stand. As I was sitting out front, two teenage girls stopped by and convinced me to take some Canadian coins because they were worth more than American money. When I happily told my mom about my bounty, she gently explained that in America, Canadian money was perfectly worthless. I remember being heartbroken that two pretty teenagers could be so mean as to lie to a little girl and essentially steal lemonade from her. The lesson I learned was not to be so trusting of someone who tried to convince me of something without going to other sources first.

In junior high, I was taken advantage of for most of the year. I had just entered the seventh grade and one of my classmates was pregnant (she may have actually been an eighth grader in remedial classes, and I know for a fact she was a few years older than me). This girl started asking me for my lunch money, whatever I could spare, for doctor visits for the baby. She was clearly poor and I felt so sorry for her. I’d usually give her $2 of the three my mom gave me for a hot lunch, or whatever extra I could spare. I just couldn’t say no. I kept this a secret for about half the year, until a teacher confronted me (I still don’t know how they knew she’d been coming to me for money) and told me not to give her any more because she was using it for drugs. I was angry about being lied to, but this girl never came to me for money again and I never confronted her about it. Her baby was born more than a month premature but survived. All I took away from this lesson were horrific eating habits—the $1 I kept of my lunch money would buy me a pack of knockoff oreos and a chocolate milk, and I literally lived off that or other vending machine food until my junior year of high school. Luckily, I have an excellent metabolism, but just because I look healthy doesn’t mean I am, and I’m still combating a massive sugar addiction in adulthood.

I’ve had several friends who’ve borrowed money from me and never paid me back, or “non-smoking” friends who’d rather bum off me than buy their own packs and admit their dirty secret. I was in a relationship for many years where my boyfriend couldn’t hold down a job or manage money, where I ended up paying for almost everything and in a few rare cases loaning him money.

In college, I got suckered into PrePaid Legal, an MLM scheme which is probably for the most part harmless EXCEPT that the girl who brought me in ended up breaking into my apartment and living there for a week while I was on vacation, and then joyriding in my car. When I began legal proceedings against her, not only did PrePaid Legal’s pre-paid legal assistance NOT help me out, but they wouldn’t move me to a different chain without my having to repay the initiation fees. From this, I learned to tune out anyone talking about a “great new opportunity” faster than a monkey on a banana split.

I also got most of the way through one of those “complete 10 offers and get a free $500 gift card” before losing half the required paperwork during a move. Those things aren’t scams if you can keep on top of them; I know several people who got gift cards, a large screen TV and a laptop from doing them. It’s not *free* but it’s a good deal for the uber-organized and anal-retentive. I typically am just such a person, but the move threw me off my game. No real lesson here, I guess—I’d be willing to go through this again in a year when I’m eligible if the prize was good enough. I guess the lesson would be to keep all these papers somewhere super safe instead of moving them between boroughs in the middle of it.

I was robbed on Christmas night in 2003 while moving to New York. Almost everything I owned was stolen out of the back of my mother’s van in a guarded hotel garage, including my passport and social security card, 90% of my clothes, and my entire CD collection. I’ve never heard anything from the police, although someone found my passport in a trash can two years later and mailed it back to me. I hassled with the insurance company to be reimbursed for at least part of the cost of replacing everything, and the experience taught me to always have renter’s insurance here in New York.

My identity was stolen earlier this summer, literally the day after I moved. Someone hacked into my ebay, paypal and gmail accounts. Ebay caught it before they were able to do any damage and I was able to get all three accounts back to normal fairly quickly. But then two weeks later, bogus charges started showing up on one of my debit cards, to the ultimate tune of $1,200. Again, I caught this quick enough to only be temporarily out $25 until the investigation was done and I was credited the money. Both of these lessons taught me to be super careful—I’m already quite skeptical of phishing emails but apparently fell for one of them. I have no idea how my debit card number was taken or if the two instances were related, but the timing seems suspicious. For once, I was glad of my compulsive email checking and constant monitoring of my checking account, for without these habits, I wouldn’t have caught the situations in time to mitigate as much of the damage as I did.

My point in this exercise is to show why I am as diligent about checking my financial picture as I am, and also why I can be perceived as a little stingy with money. I don’t loan money anymore, to anyone. Occasionally, I will make a gift of money to a friend who needs it, but I do it not expecting to be paid back. If I give a gift, I am hardly being taken advantage of. I’m suspicious of anyone asking for money on the train or on the street, although when I worked at Starbucks I knew several of the homeless regulars, and I have given them money when my own situation improved. I think my overall outlook is once burned, twice shy, and a couple of bad situations early on left me very wary of being taken advantage of again. Perhaps I am too jaded and hold my wallet too close to the vest—but it’s a risk I’m willing to take for now.

Monday, October 15, 2007

My financial routine

I took a poll last week about my financial routine and whether it was kick-ass or not. As I was answering the poll, I realized that while it definitely works for me (I’ve been using some version of this routine for about seven years now), it IS a little complex and there might be some ways I can refine it.

Day job paycheck and budgeting
First, I use a written budget. When I first wrote it up, I figured out how much money gets assigned where, and then each payday I just go through and transfer things.

I divide my share of the rent payment, electric bill, and cable/internet bill in two and take that out (well, technically it stays in my checking account until the first of the month). I also leave my cell phone money in the checking account.

Then I figured out what goes into savings for my various sinking funds and transfer that via electronic transfer at my bank into my savings account and/or ING account. As I make transfers, I update two sinking fund trackers in Excel, one for ING and one for my bank’s savings account. These show both the total balance of the account as well as the individual balance for each fund. I found this easier than having a separate bank account for each fund, especially because some (like prescriptions) are rather small.

Then I write a check out to myself for a set amount of “envelope money” per pay period. I keep my envelope money in a coupon folder and I stick to a cash-only budget for my daily spending.

Another way to look at it would be:
Direct Deposit amount xxxxx
Stays in checking account xxxxx (rent, bills to come)
Transfer to ING xxxx (long term sinking funds)
Transfer to savings account xxxxx (short term sinking funds)
Cash for envelopes xxxxx (daily spending money)

Now, those other income sources.
I have a few sideline “businesses”, which is a funny way to put it but that’s what the IRS calls it. I’m not self-employed by any means, nor do I hope that someday these other jobs will become my full time work. I love my day job…I just wish it paid me a little more so I could save more. I’m making ends meet just fine, but it’s daunting to not have much to plow into savings and investing.

These side jobs include mystery shopping (as detailed in an earlier post) which brings in anywhere between $10-$150 per month, performances with my dance company (I aim to do 1-2 per month at $100+ per job, which covers the cost of all my classes), and the rare and sought-after focus group (which pays $75-$200 a pop for voicing my opinions, although it’s sort of just luck trying to get them).

The tax implications
Each of these side jobs is income that is or could be reported to the IRS, and taxes are not withheld. Mystery shopping and dance jobs both incur costs that are tax deductible; focus groups are just a tax liability.

I estimate what I’m going to owe at the end of the year by keeping a running log and putting aside 30% of the income (this is not to say that I automatically put aside 30% of each check or cash payment, which would make things much easier than it is. I keep track of it and then try to remember to add to the taxes sinking fund sometimes with whole checks later on). This system has worked for me because I do keep good records of my expenses (travel, supplies like costumes and makeup, meals on the road because of the work) and I deduct them as allowed when doing my taxes. I’ve had to pay taxes for the last two years instead of getting a refund, but I expect to and that’s fine with me.

Budgeting the income from these side jobs
The income from these jobs goes several different places. For the most part, I treat it as unbudgeted mad money, but I still always plan what I’m going to spend it on before I do.

Some mystery shopping companies pay only by Paypal. This money usually just sits in Paypal until it reaches $300 or so, when I transfer most of it into a sinking fund or use it for some other planned thing (like clothes shopping, which I don’t budget for out of my main paycheck). Or I’ll leave it in there and go a little crazy on Ebay or Silver Jewelry Club a few times a year.

Other mystery shopping companies pay me by direct deposit, which is usually funneled right into my separate mystery shopping checking account. I keep a minimum balance of $50 to $100 in here, and use it for mystery shops which require purchase by debit card so I don’t use my main account’s debit card. I tend to use any balance above $100 as mad money towards the end of a pay period, which is probably a little detrimental to my self-control. I try to make myself transfer it in to sinking funds that could use the help, like gifts or travel around Christmas time, or the ever-hungry moving fund.

Dance and focus group income goes to beefing up the tax sinking fund and other sinking funds. Other times the money will go for Spa Week or seasonal clothes shopping. These payments are often cash, so sometimes I end up spending part of it out of pocket before depositing the rest.

Wrap up
Yet another way to look at my financial routine. This has actually been quite helpful in helping me figure out a few things I want to start doing, and other ways to make the process more routine. I transfer the same amount per month or pay period (depending) to some of my sinking funds. Would it make sense to make it automatic? I still need to update the sinking fund trackers, which I think is the only reason I’ve not done this, but I should look into it.

Update spending tracker with all income/outgo

Daily As Needed
Balance checkbook (when I know something is outstanding)
Update mystery shopping and dance job log when payments come in or when shops are performed
Update tax log when payments come in
(*I keep all three of the above logs in my Palm Treo, which gets synched to my computer about three times a week, so I can make these updates on the run)

Balance checkbook (payday)
Transfer money to sinking funds in bank savings account and ING account
Update sinking fund trackers
Cash check to fund envelopes
File receipts for tax deductions (mystery shopping, dance jobs)

Pay rent
Pay electric and cable bills (one half of each, online, when they come in)
Pay credit card bill (cell phone and Blockbuster are auto-billed to credit card. Not much else usually shows up on it)
If applicable, send in medical bills for reimbursement
Reconcile all sinking fund trackers with actual account balances (including interest payments)
Want to start: tracking net worth

Pull credit report (I’m going to start using to pull my report from one bureau every quarter, instead of all three once a year)

Taxes—this is a weekend-long event that I try to complete by Valentine’s Day. I usually have to pay, but not much since I aim to even things out through deductions.
Move. Well, not really, but it’s been almost yearly for a few years now!

I could do several things that would make the whole process a little less time consuming—but really, I don’t mind putting in the time. I’m interested in personal finance, particularly MY personal finance, and the effort to keep on top of everything really seems to be paying off.

Friday, October 12, 2007

Lazy taxes

What's wrong with people?

Taxpayers take a pass on the phone tax refund

I totally took advantage of that. It wound up being a good deal for me, since I'm not sure I actually paid $30 of the tax between 2003 and 2006. I might have, but I never noticed it on my cell phone bill, which is the only phone bill that was in my name. Technically I also had access to a house phone in my apartment, but I very rarely used it despite paying for it. I know we were assessed the tax on that phone, but I didn't have the bills.

I'm all about getting every tax credit and deduction I can. Which reminds me, I need to go find out whether my GRE fee or application fee for grad school are tax deductible....

Thursday, October 11, 2007

payday please!

My financial life is a little wonky right now.

My Treo is not working properly and keeps deleting the spending tracker that I keep on it. I lost three months' worth of data last week and now can't enter anything in except on my home computer. I guess this will teach me to back up my Treo more regularly, but it's irritating. The data loss was not that important in the long run--I don't usually go back and check what I spent money on every month or anything like that (though I've been wanting to start) so it' more an annoyance than a genuine problem.

I went out to eat last night, and spent my last cash money for the pay period on the meal. I probably shouldn't have, but work has been beating me up lately and I just couldn't face cooking.

I'm going to drop a hefty bit of cash tonight on a massage for Spa Week. I try to treat myself twice a year to a massage and facial or other beauty treatment. Spa Week's specials are $50 per treatment, which can be a hefty savings--a $50 hour long massage would normally run more than $110, so it's a great deal. I always flinch when I pay for these things, but in the long run it's totally worth it. Actually, I should amend that to say that the massage is always, always worth it, and usually the facial is too (although I'm not actually a huge fan of facials). Starting this year, however, I'm trying to branch out and get one different type of treatment done each time. Six months ago it was teeth whitening, which proved to be somewhat painful, horrid-tasting, and with minimally noticeable results. This time it's laser hair removal. Mr. Boyfriend has had it done, and although I'll be going for a more sensitive area, I'm pretty sure I can handle the process. It made a noticeable difference on him, so I'm hoping it does the same for me. If it works, I'll try to go to a session each spa week, so it will take me years to get the complete results (they recommend six to eight sessions total). If not, I'll switch to a pedicure for April's Spa Week--while I get manicures from time to time (and I mean like three times a year!) I've never had a pedi.

My checking account and money folder are completely wonky. I was out of town at the beginning of the month and my system completely fell apart. I also mixed up my account numbers a few times when making deposits and withdrawals (new bank!) so I'm not totally sure what money belongs where, but I'm not in danger of overdrafts or anything. It's just not as by-the-spreadsheet as I typically like. One payday should take care of that, though.

Tuesday, October 9, 2007

Spam text messages

I got a spam text message today. This is rather unusual--the last one I received was at least before I got my Palm, so more than six months ago. At that time, I was still paying per text, and Cingular would refund me the $.10 for the initial message and $.10 to respond with "STOP" or "QUIT" (which legally require the sender to cease and desist...although since they're breaking the law sending you a message in the first place, the helpfulness of this is dubious. As with spam emails, it lets them know you're a "live one"). It doesn't matter quite so much to me now as I pay for a text messaging plan that can cover this, but as a principle, I do try to report spam (ebay, paypal and bank spam emails in particular). This for some reason feels even more invasive than email spam...this is my phone number!

Unsolicited text messages violate the FCC's CAN-SPAM act and mainly just gets on my nerves. The reason spam text messages are on the rise is that the spammers are not being investigated and punished, probably in large part because the carriers aren't being pushed to do something about it by their customers. As yet, carriers do not allow you to block certain senders while letting others get through--it's either all or nothing. I've heard rumors that T-Mobile at least will allow you to block all messages originating from an email address while allowing those sent from a wireless number, but I've not been able to verify that.

Don't just put up with it! If you receive a spam text message, these are the steps you should take:

  • Respond to the message with STOP, END, or QUIT (or all three, as I usually do).
  • Complain to the FCC (note that the link to their complaint form is incorrect--you'll need to copy and paste. Even then, their checkboxes do not include an option for text message, only voice calls or faxes). I emailed them following the instructions on the main link.
  • Follow up with your cell phone carrier, in order to both file a complaint against the originating phone number and recoup your costs, if any, for the initial message and your response message.

  • Carrier specifics are as follows:

  • Cingular/AT&T doesn't seem to know what their policy is. I used their live online tech support and was told to call Customer Care at 800-331-0500 and ask them to create an IT Self Service Case. The customer service rep I spoke with tried to direct me to a page on which is exactly what I'm looking for--a place for customers to file official complaints with AT&T regarding one-time or repeat spam text messages and block phone numbers and email addresses. Unfortunately, perhaps due to the rebranding (he said) no one can find that page any more but they're going to keep looking and get back to me.

  • Verizon offers refunds for spam text messages. All text message complaints must be submitted through their customer care number, (800) 922-0204 or *611 from your Verizon wireless phone. Given Verizon's recent problems with deciding whether or not to block text messages, good luck with that.

  • T-Mobile, as mentioned above, will allow you to block text messages originating from email addresses sent to your mobile number, while letting through all text messages sent from another mobile number, but this seems dependent on the type of phone you have as well. You can set up this preference on their website. They offer refunds for spam text messages. Call them at 1-800-937-8997 or 611 on your T-Mobile phone.

  • Sprint doesn't have a lot of information on the web that I could find (through a quick Google search) regarding reporting text message spam. Their customer service number is 800-SPRINT1 or *2 from your Sprint phone.

  • Good luck fighting spammers!

    1/31/08 update: Hey, all you T-Mobile customers--check this out!

    6/18/08 update: The New York Times (via Consumerist) has recommendations on how to prevent spam text messages--listed by provider! This is a great resource.

    That Other Big Question

    This past weekend, Mr. Boyfriend officially asked me the Other Big Question—no, not that big question, but a step in that direction—“Will you move in with me?”

    We’ve talked about it a little in the past. We’ve been together for just over three years now, and amazingly, things get better with each month. This is the most secure and deeply caring relationship I’ve ever been in. This is also the first relationship in years that my family hasn’t tried to stage an intervention because they hate the guy. Both my mother and my sister (the two most important votes to me) have approved him for the longterm with my mom saying verbatim, “He treats you like a princess”.

    So, yay! There are a lot of details to get out of the way.

    First, we need to figure out when we’re going to do this. I moved only five months ago to where I am now, and it was quite expensive. My rent is the highest it’s ever been, I paid a broker’s fee which I won’t recoup, there’s a possibility I won’t get my security deposit back (do not live in a private home where standard tenant laws don’t apply!), and I bought a lot of furniture jointly with my roommate (note: this is a very bad idea, even if you’re good friends!). I am starting to earmark any spare cash I have towards this potential move and Mr. Boyfriend is too—but he has things that need to get taken care of first. He just started a job with benefits after several years without insurance, so needs to take care of dentist and doctor visits, and he also needs a new computer. Once those things are taken care of, we can figure out when this might be possible, but it looks like I might be in my current place until close to my originally scheduled departure date of next summer.

    Second, we’ll be finding a new place together rather than one of us moving in with the other. There are lots of reasons for this (including that, actually, neither of us even have the option to move in with the other because of our lease/roommate situations), and I’m glad because I think it’s better to start such a step in a neutral location. I just went through finding a new place with another person in March, and it was difficult. I think Mr. Boyfriend and I will not have as hard a time compromising our needs and wants, as we are not coming from such different perspectives as Roommate and I did. However, this makes the entire prospect more than doubly expensive than it would be otherwise, as we’ll have to put money down up front for security deposit and first months’ rent, potentially another broker’s fee, moving costs, and decorating/furnishing a new place.

    Third, we’ll be having some frank discussions about money in the coming months. We’ve been very open with each other regarding our finances throughout our relationship—we know how much the other makes, saves, and has in debt (which for both of us is a big fat ZERO!). Our philosophies about money are somewhat similar—we’re both savers, though I’m stingier than he is, we don’t believe in taking on debt unless absolutely necessary (and neither of us have found anything necessary yet), we both save a portion of our income. We do have some differences, though, including the fact that as of a few weeks ago, he’s making nearly twice what I do. I keep a written budget, balance my checkbook daily, and track all my spending, he’s more of the “this is how much I have to spend for the next two weeks but I can spend it on whatever I want—food, clothes, guitars, cab rides, doesn’t matter”. I’m not entirely sure what his planning for retirement consists of, though I know he has a few accounts left over from previous jobs. We have a great foundation--he trusts my judgment and asks my advice on many financial matters, and supports my decisions as well—but we need to ask some more questions and make sure this isn’t something we’ll be fighting about.

    We’ll have to decide how to split rent and bills considering the difference in our income. We’ll have to decide whether to combine any of our money or act like roommates and pay our share of the bills separately online. We’ll have to decide whether to sign the living-in-sin equivalent of a pre-nup. We’ll have to decide who buys what for the apartment, and who gets to keep it if things don’t work out. I’m going to have to convince him to get a cat eventually (this is incredibly important to me), and might have to agree to take on all the expenses myself.

    Of course, moving in together will focus on more than financial issues, like who has to take out the garbage and who will turn out whose socks before doing laundry, but I think our relationship is pretty settled in those areas just based on who we are (he already takes my trash out, and he doesn’t live with me yet!). It’s going to be an exciting, bumpy couple of months, I think, and I can’t wait!

    Friday, October 5, 2007

    A history of me and money

    Third grade, roughly: I went on a field trip with five dollars to spend in the gift store. I was wearing Osh Kosh B’Gosh overalls with a pocket in the front, and at some point, I lost my five dollars. I felt sick to my stomach and so sad that I couldn’t buy anything in the gift shop. I think this feeling may have influenced my later aversion to risk.

    Ten years old: My first savings account is established with $100. My mother hit a $10,000 jackpot on her first trip to Las Vegas. Most of the money went towards paying bills and everyday expenses, but she took $200 to teach my sister and I how a bank account worked. I prized my little savings account register.

    Sixth grade: I had a little white leather coin purse that I took with me to school so I could buy juice at recess. For some reason, I had lots and lots of coins in there, and my friend started calling me Little Miss Moneybags. I was offended at first, but clearly, have grown accustomed to it.

    Junior High: Around this time, my mother began listening to The Money Game (now The Dave Ramsey Show) while picking all us kids up from school. We hated it, but had to listen anyway, and many of his teachings really sunk in.

    Age 16: My first paying job! I have been working at least one job continuously since then, and at times as many as three. This was also my first experience with being mostly on my own for necessities like toiletries, clothing, and snacks. I went to boarding school for the first time at 16, and I consider this my official “leaving the nest” experience.

    Age 18: Now I was seriously on my own. My parents’ deal for college was this: if I went to a Christian university associated with their church, they would pay all tuition and room and board costs. I would be on my own for anything else, and I also had to buy all my own school books. But if I went to a public university or even a private school not associated with their church, they would not help me at all. I really didn’t want to go to this college since I’d planned to major in theater, and they didn’t offer a theater class, much less a major. But even at 18, I could see the smart decision: go to that school (which wasn’t bad) for FREE, or go to a state school and figure out some way to pay for it all on my own at a minimum wage job.

    I also developed my first written budget during my freshman or sophomore year, and even though I made some really, really bad budgeting choices through my college years (I wasted thousands—maybe tens of thousands—of dollars traveling to visit a boyfriend I shouldn’t have been dating in the first place), I succeeded at socking some money away and staying out of debt. I also managed to take a ten-day trip to Europe to see my sister, and various spring break trips, mainly to Colorado.

    Age 19: My first trip to the casino! It’s sort of a rite of passage in my family, and my grandfather took me to Canada (where the gambling age is 19) to celebrate. I wound up being the only grandchild he ever took, and it meant a lot to me. I hit a $750 jackpot on that trip, which is still the highest I’ve ever hit. I also developed my “save half” rule, which means despite multiple trips to Canada and a trip to Vegas, I’m still ahead. I don’t play to win, I purchase an experience.

    Age 20: I bought my first car. I put $1200 in cash on the hood, spent another hundred fixing it up, and then probably three times as much in bumper stickers all over it.

    Age 22: Despite my reservations about the school (and my total lack of achieving my parents’ real goal, which was to have me safely married off to a nice Christian doctor boy) I graduated with some fantastic experiences I wouldn’t have had at a larger school (I was editor in chief of the paper—and I was asked to do it by the university officials, for example). I moved to New York City two weeks later with about $3,000 in savings to work at a job which didn’t pay anything more than part of my rent.

    Later that same year: I was working at Starbucks and a bookstore, mystery shopping for extra cash but still scrounging for bus change and eating day-old Starbucks sandwiches because I couldn’t afford groceries. I did laundry in the bathtub with shampoo because I didn’t have quarters for the machines. Part of the problem was that I’d blown through most of my savings on a three-week trip to Europe. I hadn’t been planning to stay in New York much longer and had a once in a lifetime chance to travel with my best friend and my sister—so I didn’t see any reason to keep saving the money. Then, of course, I realized I just couldn’t bear going back to live with my parents AND I met someone I was fairly interested in getting to know better, so I started hardcore job hunting. I landed my first “real” job about two weeks before I completely ran out of money and would have had to call my mom asking her to buy me a plane ticket so I could move back home. My first paycheck was dismal and I was thrilled.

    Age 23: Got my first credit card—secured because all the companies think it’s bizarre that I’m this old and don’t have debt. I also began dance classes and later was asked to join a troupe and perform…for money!

    Age 24: Replaced crappy college desktop computer with laptop, which cost more than my car did. I ended up donating my car (which I’d left behind and my parents never got around to selling) to Habitat for Humanity, where they sold it for so little I couldn’t even get a tax write-off.

    Age 25: I moved into the first apartment where my name was on the lease (I’d been in illegal sublets previously). I bought my first piece of adult furniture. I changed industries into my dream job and managed to raise my income a little bit. All this time, I’d been mystery shopping for spare cash, and I cut back dramatically at this point. I also got my first “real” credit card (which I continue to pay off in full every month) and got rid of the secured one, and doubled my cell phone cost when I bought my Palm. The biggest news of all: I fully funded my emergency fund of six months’ worth of expenses. The feeling of security inherent in this is unbelievable (and no, that money will NOT be used for a trip to Europe this time!).

    Age 26: Moved again, into a tremendously lovely and expensive apartment. My first experience with a broker’s fee and renting a moving truck. Right after moving in, I realized that for what I was spending to live there with my roommate, I could have my own crappy studio somewhere. The whole point of sharing an apartment is to save money, and we really aren’t. I had my first experience with identity theft, when my mystery shopping debit card number was stolen and used to purchase all sorts of bizarre things on the internet. Two days later, my ebay, paypal, and email accounts were hacked.

    And here we are. I continue to use a written budget every month. I have sinking funds in immediate-access and interest-bearing checking accounts, several retirement accounts, and I’ve been tracking my spending since reading Your Money or Your Life a few years ago. (My biggest revelation was that I spend too much money on Dr. Pepper.) I don’t yet have a net worth tracker, but I’m fairly sure I’m worth around $10,000 (so please don’t kill me). I will probably be moving again before the end of the year, or at least before I turn 27 (and hopefully this time decreasing my living costs instead of almost doubling them). I feel quite financially secure, although I don’t have enough “extra” money as I’d like (who does?). For the first time in my life, I will be incurring loan debt this year, as I go back to grad school in January 2008. It looks like I’ll be able to pay the loans off almost immediately or at least by the end of the semester due to my company’s tuition reimbursement plan, but it’s still a very nerve-wracking experience for me. I had also wanted to get Lasik surgery this year, but that’s been pushed off for the indefinite future. Education I will go into debt for, eye sight I won’t (especially as my glasses/contact lens needs are cheap and Mr. Boyfriend thinks my glasses are sexy).

    My boyfriend asked me once why I was so interested in money. I couldn’t really give him an answer, and I thought this post my help me come up with one. I think it’s only partly done that—it lists the facts but doesn’t detail the attitudes I grew up with that informed my own understanding of money. I was surprised that my feelings about money began at such a young age, and also to find that a deep interest in personal finance began when I was in my mid teens. I’m quite sure that this is one reason I’ve been able to be financially independent from as young as I was, and that I’m not part of the boomerang generation like so many of my friends are. I grew up around and experienced some extremes relating to money, and I think that makes up a greater portion of my financial ‘philosophy’, for lack of a better term. That, however, is a different post.

    Thursday, October 4, 2007

    Mystery Shopping: A Field Guide

    I’ve been a mystery shopper for four years consistently and probably eight years peripherally.

    It started out as a way to make money. A friend of mine got into it when we were in high school and I thought it was really neat, but didn’t have the opportunity until I’d moved to New York. By then, I was working at an internship which paid a small stipend, and also at Starbucks, and I was still so poor I was scrounging for bus change. So I started mystery shopping stores around my apartment to make ends meet, and it’s just sort of stuck, even though I could definitely get by without the money.

    I enjoy the challenge of not getting “caught” as a shopper. I also enjoy the feedback. As a former customer service worker, I have a good grasp of what’s appropriate service, and I like to reward services and reps who do a good job (I will purposely try to find a store where I have been mistreated, but more often I will try to shop stores that are already doing a good job). The money isn’t fantastic, but it keeps me in ebay purchases, Silver Jewelry Club stuff and free Dr. Peppers.

    About a year and a half ago, I noticed that all my hobbies seemed to revolve around money. In addition to mystery shopping, I participate in focus groups (which pay much, much better, by the way) and am part of a professional dance troupe in which I get paid to perform. None of these hobbies make the month—in other words, I don’t depend on the income from these jobs to pay my bills or even to save. It’s almost mad money, in that I’m a lot looser with it than I am with my day job’s paycheck.

    But it bothered me when I realized that all my hobbies involved work of some sort, and especially when my boyfriend started complaining that I would always have to stop off and do a shop on my way out with him. He is of the opinion that there is much more to life than money, and he won’t take the time or extra effort to get a free Dr. Pepper and $8 in return for doing a 10 minute online report and faxing in a receipt.

    After he pointed this out to me, I realized that I was going out of my way quite a bit to do mystery shops. I’d have to get off my train, walk a few blocks, do the shop, walk to the next station, continue home, upload the report within the deadline and fax in the receipt. Or sometimes I’d line up four or five shops around the city and spend a Saturday morning running around completing them. It didn’t seem unreasonable to me at the time, but when I cut back to only doing shops that were immediately convenient to me (directly on my home or across the street from my job, for example), I didn’t notice the drop in income—but I did notice the increase in my free time and the lower stress levels I was experiencing. I do still mystery shop from time to time (maybe once a week instead of two per day) and I recently stumbled across this guide I’d written for people who have asked me how to get into mystery shopping. As I’m constrained by confidentiality agreements, I’ll only go over some of the main points.

    First, I am not MSPA-certified. I have not found that I need it, although it’s certainly possible I’m getting denied for jobs because of it. I’m not big enough into this as a hobby to go to conventions or anything like that, so I don’t see the need. I also don’t pay for jobs. EVER. If you’re paying for jobs, you’re getting scammed, so don’t fall for it. There are plenty of legitimate companies out there (I know of more than 50 personally) that will not charge you for anything. I find reputable companies through and sign up with the individual company, which then begins offering me shops. I don’t answer internet ads about being a mystery shopper and I won’t sign up with any company I haven’t seen recommended on Volition.

    There are a lot of scam companies out there that will turn up through a simple Google search. You do NOT need to be certified or pay to take courses in order to be a mystery shopper. You should not need to pay to receive shop leads or to join a company. For some shops you have to make a purchase--you should be reimbursed in full for these purchases, unless there is an exception posted in the shop instructions (like reimbursement up to $1.50 or something like that).

    Second, mystery shopping is not quick easy money. At best, I’ve made between $200-$300 in one month, but my average is less than $100. The shop fees are not large (usually $7-$12 for 20 minutes of work plus time to enter the results on their website). You’re limited on the number of shops you can complete per day per company in most cases. Most companies take six weeks to two months to pay you for the shop and/or reimburse you. It works best if you do it steadily and regularly, so after a couple months you're receiving a steady stream of income for jobs completed the month or two previous. Many companies pay only through Paypal, so make sure you have a paypal account with the same email address you use to sign up (consider using a separate email account for all mystery shopping activities...I get many emails per day offering shops). Also, they don't take taxes out but will send a form to the IRS if they pay you over a certain amount per year--so you have to set aside money for taxes if you think you'll reach that limit (it's $500 or 600, I think). I set aside money for taxes on ALL mystery shopping income, which is technically what you’re supposed to do. I paid no taxes on my mystery shopping income the first year because I didn’t know and didn’t make enough to get caught. I wouldn’t risk it again.

    Aside from the low pay, it’s not always easy finding jobs. Many companies impose a limit on the number of shops you can do for them in a day, the frequency with which you can do a particular type of shop, and the number of times you can visit a particular location within a given time period (usually once per six months). While things might be fast and furious for a while, eventually you’ll run up against these requirements. There might also not be a whole lot in your area--mystery shopping is much easier if you’re in a large city, or at least close to one. I tried shopping in my smaller Southern college town, and never got a single offer. But when you’re in a large city, competition for good shops (either good in pay or location or perks) is fierce. I don’t take shops that are not immediately convenient to me (across the street from work, directly on my way home) but I get dozens of offers a day, so I can afford to be picky. If you’re running around to places you wouldn’t normally go, especially if you’re driving, it’s simply not worth it.

    Third, mystery shopping is not for everyone. It requires being largely self-motivated, very organized, able to express oneself clearly and objectively, some acting ability (what do you do if you’re caught?!), and discretion. Mystery shopping requires close attention to detail, punctuality (shops need to be reported within 8-12 hours of being done, or you don't get paid), and quick thinking. It helps to have retail experience, but that's not necessary.

    You also need to keep very good notes for your own records to make sure you get paid properly. I have a whole spreadsheet for keeping track of upcoming, completed, and paid shops, and I keep all the paperwork for each shop for six months after I'm paid for it, in case they come back to me with questions about it. This also helps me for tax purposes, and lets me know if I did a shop at a particular location too frequently to shop it again

    I have shopped the following types of stores: national and regional chain drugstores, national chain coffee and pastry shops, national vitamin stores, national casual dining restaurants, local and national grocery stores, chain pet supply stores, chain office supply stores, national cell phone carriers (local stores, chain stores, and service), chain fast food stores, national video rental stores and services, tourist destinations, national and chain clothing stores and boutiques, national candy stores, national banks, and others. I prefer some types of shops over others, but mostly my preferences involve the level of pay and difficulty of the report as opposed to the specific type of shop I am doing. Although I do have to say that I am holding out for fine dining, spa and destination hotel shops for sure!

    Part 2: What You Need to Get Started

    Man Kicked Out of Mall...for living there

    One of my favorite blogs, The Consumerist, has a story about a man who was kicked out of a Providence, Rhode Island, mall after living in an unused utility space on and off for four years.

    This is awesome to me. Well, not that he got arrested but that he did it in the first place. This truly was a childhood fantasy of mine, to live in a mall or grocery store or some other commercial place, just to see what it was like at night. I think Today's Special may have influenced me a wee bit too much!

    Wednesday, October 3, 2007

    Lives well with others

    I’ve lived with roommates I wasn’t related to since I was sixteen years old. I went to a boarding high school and lived in a dorm then and throughout college, so I’ve been accustomed to living with others for more than a decade. When I moved to New York, I immediately moved in with roommates—there’s no other way to afford it, especially when you’re working a stipend-only internship.

    As I’ve moved in the city (I’m in my third apartment in four years), I’ve downsized the number of roommates I have, from four other people to three to two to one. My current roommate and I moved in together with the goal of being indefinite. We don’t have a lease so we are free to move at any time. We didn’t plan a specific date to “break up” aside from guessing that we’d probably split after about 15 months—enough time to enjoy our amazing balcony for two summers and then hopefully we’d have super fantastic powerful jobs and be able to afford our own places.

    The sad thing is, for the amount of rent and other expenses I’m paying right now, I could already have my own place. We absolutely fell in love with our apartment and so agreed to a price that was $100 per month over our budgeted amount. Then I had to compromise with her on window air conditioners (which I never had before), a bigger cable package (I probably wouldn’t have cable at all) and things like that. When you factor in everything that I’m paying for above rent, I could have a decent studio in an outer borough, or even up in Washington Heights. I wouldn’t have cable, and maybe not even internet, and certainly not air conditioners, but it would be mine, all mine!

    Once I realized this, it soured a little of the experience of living with someone else, even though she’s a friend. My previous apartment was dirt cheap split three ways so I was able to save a lot of money—and that’s why you live with people, right? If I’m not actually saving money at this place, what am I waiting for? If I can already afford my own place, even though it wouldn’t be nearly as nice as this apartment, why go through the…well, hassle of living with another person, even if I happen to like said person?

    Really, the only thing that is keeping me from moving anytime soon is money. It’s expensive to move! We spent a pretty penny on this place, paying a broker’s fee and buying paint for it and furniture that we’re going to have to split up (note to readers: do NOT jointly purchase furniture with someone you’re not sleeping with. It can’t end well, and I’m not sure yet how we’re going to handle it). I just finally got my security deposit back from the last place I lived, and frankly I’m not entirely sure we’ll get a deposit back from this place at all. They’re so paranoid about every little bit of possible damage I can see them blaming us for things that were there before, despite my careful documentation of the place before we moved in. Since it’s a private home, we have much fewer rights than if we were living in a building.

    I think, in the long run, that I will end up moving out before the end of next summer—possibly as soon as this spring or maybe even the holidays. All of my spare money right now is being saved with that in mind. I’m not actually sure that I’ll move into my own place—a recent conversation with my boyfriend has both of us thinking we might be ready to take a big step in our relationship—but that would be ok. It wouldn’t be about living with someone to save money and then not actually saving any money by living with that someone, but about living with someone you don’t want to live apart from (and probably saving money in the process!).