Thursday, December 28, 2006

Retirement Improvements

To me, its all about retirement. Retiring well, retiring earlier.
These are my two goals when it comes to money. And the only way I've
been able to work toward that goal is by working on both sides of the
expenses/income equation.

Reducing expenses comes in the form of paying off debts and scaling
back spending and avoiding -- and I mean avoiding like the plague --
any type of installment/interest-based debt.

Income generation is either finding ways to make more money in the
same amount of time or finding more jobs or income sources.

Staying in a budget is the best way to keep track of these changes and
ensure that the equation is balanced favorably. Ideally, I'd like to
see that I am spending only 75% of my income and saving 25%. That
would get me to retirement fast. I'm not sure if that will ever
happen; its a lofty goal.

Improving The System

The system for doing all of these things is my budgetting spreadsheet.
I am obsessed with it. That is not a joke or an understatement. I
balance it and look at it at least once per day. However, the main
point of all of the work is to make sure that I am achieving my
shorter term goals on the path toward a better retirement.

Shorter term goals include reducing debt, improving debt-to-income,
spending-to-income ratios, ensuring retirement projections are enough
to fund a nice retirement.

As a result, I've built little macros that handle some of the more menial tasks:

1. Retirement calculations
2. Savings to Income ratios
3. Expense Charting

All of these macros allow me to enter small bits of data and run and
rerun various scenarios and get calculations that allow me to see how
I am doing. So far, I am pleased.

Wednesday, December 27, 2006

Expenses That Come Back Like Bad Pennies

One of my major goals for this year was to take all of the information that I had gathered and get my budgetting spreadsheet updated with all of my personal information. The way that I keep myself in check with money is by using a budget. And the way I stick to the budget is by using a simple excel spreadsheet that I created that has my own personal layout that suits me. It also serves to make sure I get my bills paid on time and keep my accounts balanced.

New improvements for the 2007 spreadsheet include bill categorization. During 2006, I had all of the bills itemized which is fine and I will continue to do, but I found that I was really interested in keeping the money in categories -- but probably not the ones you are thinking of -- categories of expenses. For me, there are just three categories: recurring, debt, savings.

Recurring expenses or (inescapable expenses) as I like to call them refer to expenses that happen every month and generally cannot be avoided. The sum of these expenses is the money represents a large, large portion of the money that I will need each month to retire.

Debt represents those payments that go toward reducing overall debt and will eventually be paid off.

Savings represents savings for either short term items like a vacation in 6 months or long term items like retirement. Right now, recurring expenses are about 33% of the household net expenses. I'd like it to be closer to 20%. The plan to make this happen is to reduce the debt load and save more and to try to hold these expenses down despite raises and bonuses in the next year or two. If it can be done, this will mean much more for savings and retirement and a chance to retire a bit earlier.

In the next couple of posts I will talk about how I've integrated retirement planning into the spreadsheet and done some forecasting for 2007.

Thursday, December 21, 2006

Budget Review

As 2006 is coming to a close, I have decided to redo some of the work
that I have done on my budgetting spreadsheet. I feel like there is
quite a bit more that I would like to do with it so that I can better
track my expenses and income. With any luck, I will be able to get
these items done in time for the start of 2007.

The nice part about this year is that now I have been budgetting for a
full year and I really think that I have a good idea about what to
estimate for next year's expenses. And that is a big bonus in terms of
planning. Usually, it is fly-by-the-seat-of-my-pants for most of the
winter, which, in combination with the cold weather and dark days,
often leaves me tired and depressed.

But this year is different. I've managed to figure out exactly what I
think will be needed for those nasty miscellaneous expenses that
always seem to jump out from behind a tree and scare the daylights out
of me during the middle of the year. The nice thing about planning is
that it really mitigates the risk of being "underwater" with money
during the year.

Friday, December 15, 2006

Six Thousand Dollars!

Six thousand dollars. Unfortunately, that is just a small fraction of the student loan debt that I currently carry, but I am taking some great positive steps. One of the steps that I am taking is to work on getting these amounts paid off by figuring out (one bill at a time) where I can put them to reduce the amount of interest I am paying and therefore improve my overall progress toward paying them off in total as I make each monthly payment. Interest is a huge killer for me, especially on this one loan. It was up near 8.5% because of the variable interest rate. the problem, of course is that The Student Loan Corporation (STU) was moving my interest rate around. And I really wish that they (along with other student loan lenders) were more up front about the amount of money that I was wasting in interest and how long I would have to be paying off the loan.

Learning my lesson was not easy but I have learned it. Thankfully, I have nice credit and get offers from other credit card companies fairly frequently. However, recently, I got an offer from chase, where I currently already had a card with a large enough limit to cover the loan so I decided to transfer to the credit card at zero percent interest. Now I am in the process of paying off that loan (likely this weekend) and also paying down the new credit card debt. Even though the credit card debt will become regular debt after several months, I will likely have a significant sum paid off by then and if not, I can transfer to another zero percent offer at that time.

Not Charging Another Penny

To preserve my credit, I really wanted to keep this process to accounts that I am currently using so I don't open new accounts. However, if that is not possible, I will simply take the small hit and open a new card at zero percent. I think that is a totally reasonable thing to do. By the time I start the new year, I will have only a little more than 6000 dollars of debt on this loan and by the time it gets off the zero percent, I hope to have at least 1000 dollars more of the debt paid off.

Thursday, December 14, 2006

Im On Track

So I checked into my Fidelity 401k account this morning and I am noticing new tabs and things that I haven't really looked at before. Of course, one of my biggest regrets is that I didn't start saving for my retirement earlier and with a higher deduction from my check. But that's water under the bridge and all I can do now is try to catch up. So I was checking out the Fidelity site and just seeing what is there and available. And I noticed that one of the things that was there was a quick checkup type thing that you can do.

A Simple Calculator

The nice thing about the fidelity calculator for retirement is that it lets you see a "monte-carlo" type simulation so that you can figure out how much you will have on the upside and the downside, rather than just giving you a flat average like most plans do. Personally, I am on track to meet my own personal goals, but if I were to rely on fidelity, I would be in way over my head.

Inflation Runs Amok

Quite simply, inflation is going to be the spoiler for retirement. But personally, I think that the big key to being prepared in retirement is getting all debts paid off (including mortgage and cars). This is something that I plan on being able to do by sometime in my late 40s or perhaps early 50s. And with any luck I will be buying cars in cash by my early 40s. I feel like these items will save me tons of money over the final 15 years running up to retirement.

The Estimates are 85% Bunk

One of the ideas that fidelity has for people that don't know how to estimate their cash needs in retirement is to adjust salary by normal pay rate increase and then finally take 85% of the final salary needed at the end to figure out what the monthly cash flow needs are. For people who are paying attention to their finances like I am trying to do, are not spending 100% of their income. And they are also working to pay down debts so that they have to spend less and less each month, not more and more. That is why I think that 85% rule is bunk; I prefer my own estimates of what I will need. And with those estimates, I am in great shape!

Tuesday, December 12, 2006

Holiday Shoppers Remorse

So I am done with my shopping now, but I realize I spent about 100 dollars more than I wanted to. Some of it was on "incidentals" that were part of a fun day of shopping out with my mom. Other items were small, but somewhat pricey treats for myself that I couldn't pass up once I was in the mall. And finally, I just plain overspent on a couple of people. I am a soft-touch. What can I say?

The nice thing is that all of this money was "extra" that was earned from side income and therefore this didn't go on credit cards and also did not impact my normal bills/income cycle for the month. I generally regard the secondary income as "play" money that I either save, spend, or invest and don't worry about it too much.

However, it is difficult because I definitely sense that there is a bit of an issue with regard to emotions and shopping. I rationalized many of my purchases by reiterating that I was "making more so I could spend more". Or that person X "really deserved it" or I love person X so much that I "shouldn't think twice about spending this money on a gift". All of these emotional rationalizations are, of course, absurd. Money is no substitute for love.

The other major reason I didn't stick to my budget was that I wasn't keeping track. Does anyone ever get into trouble not because they overspent on gifts, but that they spent too much on "lunch" or "dinner" out while they were shopping or spent tons on decorations or food? I wonder how much overspending at the holidays happens because of that incidental stuff rather than gift giving.

Thursday, December 07, 2006

Get A Refund For Using Your Phone

I just finished reading about an interesting ruling with regard to a tax on telephone and cell phone usage. This ruling stated that a refund for tax will be available for the 2006 tax form. According to the IRS, "the telephone tax refund is a one-time payment available on your 2006 federal income tax return, designed to refund previously collected long-distance federal excise taxes. It is available to anyone who paid long-distance taxes on landline, cell phone or Voice over Internet Protocol (VoIP) service. "

Like many items on taxes, there is a standardized refund amount of between 30 and 60 dollars and a form that will help you calculate if you can get more back: Form 8913. Using this calculated method could get you easily over 100 dollars of savings provided that you have documentation (telephone bills) from the last several years.

Go to the IRS Site FAQ about this refund to learn more.,,id=161506,00.html

Personally, this is just another reason to get going on my taxes early this year.

Forbes Fictional Fifteen For Friday Fun

Forbes wrote this article that is a bit of a laugh if you have a spare minute. I especially got a kick out of the "Spam" entrepenuer. Here is the article in all its glory if you are interested in reading something fun.

In holiday shopping news, I am going to try to finish up my shopping with Mom tomorrow. That will put me squarely on task to start planning the Christmas party I am throwing next Saturday. Wish me luck, bargains and good holiday budgeting! :)

Tuesday, December 05, 2006

Net Worth Update

So I've started using NetWorthIQ to track combined net worth. And I like the simplicity of the system but the problem is that there are these categories, that I really like, but it really creates a feeling of "keeping up with the joneses". I click on people who live near me, have the same level of income or type of job and then I find that I am painfully behind them. What does this do other than make me upset and feel "less-than"? Bollox.

Anyway, now I am in the process of figuring out what is going to work for me and keep me involved over the long haul. That is my main concern now. I've been able to keep track of the financial stuff via an excel spreadsheet and I think that it is really nice but I don't feel the need to get too much more involved than that. I think that I will never really get to the point that I really need to get into quicken or ms money. It just seems like more work than is necessary for me.

Bottom Line: total net worth increased about 4,000 this month. It would have been more except for the large payment on some home improvement work that was done.

Thursday, November 30, 2006

Holiday Budget

Unfortunately, this year I feel a little bit under-prepared for the upcoming holiday season. I am still managing to generate some extra income so I am not so concerned about spending a decent amount. However, the problem is that I cannot figure out exactly what is "decent". I need to buy presents for a fairly short list of people, but I would really like things to be nice and well-thought-out.

I generally try to make it easy for people to shop for me by creating/updating my amazon wish-list as my birthday and christmas roll-around. I encourage people to buy used items from reputable sellers because I have had very good experience with that before. For music, books, and dvds, it doesn't matter to me if they are used as long as they work. However, depending on the person, the might consider getting a "used" gift to be tacky. So I would check with people beforehand. I generally like it because that means I will get more of the stuff that I want rather than just one brand new item.

Next Friday will be the big test for me though; I have to buy most of the gifts at that point. My mom and I do a yearly shopping trip where I take the day off from work and we head out to a local mall. I like it because it is a great way to spend time with my mom and also for us to co-ordinate on bigger gifts for people in our family if we are doing a chip-in sort of thing. I wonder if my 300 dollars will be enough? How much do other people spend?

Tuesday, November 21, 2006

Estimating Taxes

As I get ready to wrap up another year, it seems there's always more financial work to do. Not long ago I went through my seasonal save-it, pitch-it fight with all the old bank statements, paperwork etc. However, I am realizing that the real interesting thing for me right now is getting ready for tax time and figuring out how much of a refund I will likely get.

I know that I am going to get some flack for this but I have extra tax taken out of my check each pay period. Mostly, I do this to make sure that I never underpay my taxes. The other nice feature about this is that it provides some built-in buffer against my side income so that I am not whacked with a large amount of money in tax at the end of the year. This little extra kick in each regular paycheck means that I can generally use the side income as I see fit throughout the year.

So now I am in the process of divvying up my expenses and such for the year into categories and getting ready to start filling out the forms once the W-2s come in January. Has anyone else started the tax season prep-work or am I the only one?

Friday, November 17, 2006

Changing Behavior Isn't Easy

A few weeks back, there was a short article on InvestorGeeks about "Why the Poor will Always Be With Us". I found the article thought-provoking, but the point made by <a href="">Jason</a> was particularly interesting.

Jason Commented:

<begin comments>

I'm thinking of my father, who in 2001 bought a brand new Jeep Grand Cherokee because he "needed something to make him happy". It didn't matter that a lot of what made him unhappy were financial problems, which the extra $20k he paid for that car vs. a comparable used car would have helped him out with.

I'm thinking of the guy you know who lives in assisted housing but has a more jewelry than you do and better stereo system than you do.

If either one of the people in the above scenarios had $30k in a "retirement account" they could gain access to, they would find a reason to spend it. The money feels idle and psychologically these people enjoy the scenarios and stories they get themselves into as "broke" people. They've been broke all their lives. They're used to it. They're comfortable with the idea in the same way a battered wife is comfortable. If they had money, they would feel bad for all of their broke friends. If they had money, they would have nothing to talk about anymore because a lot of their discussion revolve around their lack of money.

<end comments>

Personally, my personal experience in life has shown me that this is true for some people; often times with people I am very close to. I don't think that there is any magic wand that can be waved to change people's behavior.

Some people, in fact, when pressed about their lack of motivation to make positive changes in their lives will get very defensive. I find this to be upsetting and inevitably generates a rift between you and the other person.

Similar to other issues which can have psychological roots, our treatment of money can become addictive. We can become addicted to trading, or investing. We can become addicted to becoming apathetic and lazy about our money. Behavior is repeated over and over and over again for most people.

I've recently applied the idea that I cannot force anyone to change to financial matters. However, by blogging and being up-front about what I am doing in my own finances, I have become more confident. And naturally it has helped people around me to start investigating their own finances and ask questions and get advice.

I don't think its about being right or wrong. Rather, it is about taking control and being responsible for the outcome of your actions (or lack thereof). Once we make conscious choices, we can be confident that they were the right ones and become content and satisfied. It's when we don't focus on finances that problems start surfacing.

Do Something Nice, For Free and very little Effort

Does everyone remember any childhood trips away from home? I remember going away to camp and feeling a little bit sad and lonely when other campers would get mail to open and whatnot. The same is true for college when you feel like you are far from home and days on end go by without hearing from loved ones.
Xerox has captured this feeling/idea and put it to work to benefit soldiers in Iraq. Regardless of how you feel about the war, I think it is a great way to do a little something that doesn't cost anything but a moment of your time. It is a site where you can add your name, town, and message and Xerox will copy a card designed by a child and include your message and send it to a soldier in Iraq. And it is free.
Go to <a href="">lets say</a> to fill one out.

Thursday, November 16, 2006

1000 Dollars of Free Life Insurance

I just got a mailer from my bank that I was being offered 1000 dollars of free life insurance. The option, of course, is available for me to get more if I would like, all the way up to 300,000 dollars with no medical exam. Unfortunately, the costs are prohibitive so I do not want to do that at this time. Plus I am covered by my work policy and an additional add-on policy that gives me another 10000 dollars in coverage. The standard stuff applies to both policies in terms of accidental death and dismemberment. Quite a morbid clause really, but I guess it is better than being out of luck if you lose a limb.

So, after reading all of the paperwork, I feel comfortable that I can go ahead and send it in which is what I plan to do this weekend. I have to wonder though, did they get my name through the gold card that I recently got? Why all the sudden show of generosity from my bank?

Wednesday, November 15, 2006

Free AAA?

So, not too long ago, I was at the sporting goods store and I went up to pay for my purchases. Nothing terribly exciting really, except that when I got up to the counter and swiped my card it was denied. I of course tried again to no avail when I realized that my debit card was expired. I was not terribly happy about that because I it put me off and I had to use a different card. However, life went on and after a nice dinner and a beer, it didn't seem to matter much.

The next day, I called my bank to ask about getting a replacement card. They claimed they had already sent me one, which I never saw so they promptly offered to send another one, free of charge. Also, they would upgrade me to a "gold card". I thought, gold card? I don't want any credit junk here. They said it was still just an ATM card, but that it had additional services like AAA (Mastercard's version of roadside assistance). I thought that was great since it was free. However, I am now hard pressed to figure out how other people become eligible and exactly what services this includes. Some web searches seem to indicate that this is a service that provides basic AAA type assistance, but at a flat/reduced rate. Is that the case? Has anyone else ever used this who could provide some insight about how it works?

Sunday, November 12, 2006

IKEA was great! Christmas Shopping Has Begun!

On saturday, I went to IKEA in stoughton, MA and it was very different than I expected. It had a european feel, which is to be expected from the Swedish Home Furnishing's Store given their roots. However, I was also impressed with the prices. They were relatively affordable, even for someone who doesn't have tons of money. Unfortunately, though there was not much that was really ideal for my home because the stuff is definitely not at the same level of quality; but I wish that I had known about it when I first graduated college.

It is a great place to go if you want to decorate stylishly and then redecorate every 5 or so years....
Or you are on a budget and cannot afford to pay lots of money for furniture....
Or you know that you are going to have to setup house in a very small apartment or rooms (since much of their furniture is scaled down).

On the plus side, I bought several items that were only a dollar and it was fun because I got some christmas shopping done since I know that people in my family will not have gone there yet. Best part? The gift was inexpensive.

Friday, November 10, 2006

Wal Mart Acts Fast!

Well, I just recieved a comment from someone from walmart apparently which indicates that they are working to remove the articles from their stores that are offensive; refer to the previous post to get more information. However, I think that this is an excellent first step and I am glad that they appear to be taking this so seriously.

Walmart Selling Nazi Clothing?

I just came across this article and thought I would share. I think it is definitely worth reading and then doing some research on. I don't know enough to know if it is untrue or not. Clearly, I am not an expert on these matters, but the <a href="">implication that Wal-Mart is unknowingly selling clothing that perpetuates nazi thinking/neo-nazi stuff</a> is kind of scary from a stock-holder point of view. Again, just check out the article yourself and then make your own decision after you do some research. I'm glad I don't own any shares though. I would not want to have my money in a company that is getting this kind of negative publicity.

Transportation Costs Skyrocket

Personally, I spend just over 650 dollars per month just in transportation costs; this includes my car payment, insurance, fuel, and my commuter rail pass for taking the public transportation. However, yesterday it was announced that my commuter rail pass was going to increase by 22 percent and that there were likely more increases coming. For me, this puts my transportation costs at over 700 dollars per month. This is about a quarter of my entire net pay each month. This is absolutely insane!

I am looking forward to eventually being done with my car payment and I am going to now look into reducing my car insurance bill to try to offset the increase. However, as much as I am concerned about my own wallet, I am also concerned about the social implications. This change will result in approximately 11.9 million fewer riders of the mass transit system which will mean more pollution and increased emissions contributing to global warming. This is a real concern. Furthermore, the poorer you are, the more this level of increase hurts you. It pinches my wallet and I am making ok money. I cannot even imagine how the poorest people feel when this happens to them. How do you survive?

By letting people keep less and less money that they work for, we are increasingly encouraging people to be lazy in society. It is not a good trend. Furthermore, I genuinely feel that the increase is too much. Some of this money should be handled by better negotiations and/or better management. Not to mention the fact that there should be some taxes contributing to the system. The convenience of having transportation makes business possible for the economy and nearly everyone benefits. The complete burden should not be put on those who are riding the system. I barely use the roads, but I still have to pay my full share of tax dollars to keep them up. The same standard should apply to mass transit.

Thursday, November 09, 2006

Robbing Peter to Pay Paul

There's an expression "Robbing Peter to Pay Paul" that we have in the english language. One of my majors in college was Spanish and my favorite part of the language is the fun idioms that there are. Its no different in English. In fact, I think that some of them are even funnier in your native tongue because you can really get all of the implications.

Anyway, I have a loan that I've successfully paid down to about 6500 bucks; it was a student loan from college but it doesn't fall into that nice stafford loan category. So, instead, I am stuck paying on it monthly and there's no tax deduction for the interest being paid. Recently, the interest rate (which is variable - don't ask me why) shot up to 8.5%. That was the final straw for me; I knew that I could get a 0% interest credit card offer and save myself gobs of cash, albeit by taking a small ding on my credit score.

However, after a month or two of contemplating, I finally got an offer from the Credit Card I just paid off; 0% for 6 months. So I bit and now I am saving myself a ton of interest, but I know that I will have to do a balance transfer again since there is no way to get all of that paid off in time, but in the next 6 months or so, I will save myself a few hundred bucks in interest, even with the balance transfer fee. Score!

Sunday, November 05, 2006

I had "The Talk" with my Mom

Whenever you think of the talk, you think of safe sex right? The birds and the bees? Well, when it comes to personal finance and talking to your parents, the talk is when you talk about how they plan to handle the difficult stuff like what to do when they retire and all of that.

Yesterday, I gave my mom a call and she was not busy and thought it would be a good idea for me to come over and we would talk about "money stuff". So, when I got over there I was totally impressed.

Without even asking, she had written out exactly what her income and expenses were. She had a paystub to show me what she is currently contributing to savings and retirement accounts and was quite at-ease about the whole thing. This made me very happy and comfortable because I know that despite some of the debt hurdles and other issues she is facing, there is a reasonable plan to deal with them.

We talked about how she would handle her debt and also discussed a couple of small steps for her to do. Next time when I visit her to discuss this stuff in a couple of months, we are going to start working on getting her setup to pay bills online and such. I love online bill pay and I think that now that she realizes how much of a pain it can be to write out checks, she is more interested in doing that.

It matters to you. If there is anything that you can do for yourself it is this: discuss these issues with the people you care about. If they are older, especially if you might end up being some kind of caregiver, it is extremely important. Bills and expenses for a parent or loved one can be difficult to absorb if you haven't planned for them. Having "the talk" can help you remove any surprises way before they become a factor.

Saturday, November 04, 2006

100 dollar bonus

Well, a big project just wrapped up at work and I was super busy doing all of the work for close to a month. So, on friday, my boss came by with a small bonus giftcheque. It was a really nice touch and made me feel good that all of my hard work hadn't gone unnoticed.

After a little bit of thinking I decided that it would be mad money. I have been doing really well lately and I'm continuing to save and pay down debts etc, but once in a while, I think it is really good to keep some perspective and really enjoy yourself. This little unexpected bonus was just the right way to do it.

So, I went to see my cousin later that day and we splurged at Starbucks. It was a fun time and a nice way to spend some of it and a nice way to start the weekend.

Friday, November 03, 2006

Fixing the Produce Supply Chain is Big Business for Supermarkets

Most of us remember last month's ban on spinach due to E coli, one of those nasty intestinal bugs that can easily cost you significant cash by putting you out of work, into the hospital, and for some who are really unfortunate, even kill you.

The situation is not much better for those who drank contaminated carrot juice made by bolthouse farms, the producers of one of my favorite drinks - a strawberry/banana blend of juices which are quite tasty.

In the end, there is not much to say about the ideas of prevention because in these circumstances, there is not much that can be done at the consumer level with regard to prevention. So, as was done by many, these products are simply avoided or banned by federal agencies to ensure that people don't get sick.

<b>What does this mean to your Investments?</b>

It does not take much imagination, however, to recognize that this is going to have a significant impact on your investment portfolio if you hold stocks of these companies or if you hold mutual funds that specialize in these businesses. The bottom line is that the trust that these companies had can be destroyed by a scandal of this nature and it can even effect the bottom lines of the retailers.

In my case, stop and shop and walmart are the places where I usually purchase bolthouse products. But, sure enough, after the news, the products were pulled from shelves, presumably costing these stores significant amounts in terms of wasted inventory and even more when you consider the lost profits. It is not easily seen exactly how much, but as time moves forward, it would be nice to think that these types of losses are both preventable and unnecessary.

<b>Nature Fights Back</b>

As time goes on, these "bugs" mutate. They change and become more and more resistant. And they are more potent than thought originally. So what does this mean? In simple terms, it may not be as easy as we would like to believe. Previously, using fertalizers that were non-manure seemed to significantly reduce risks, but with more resilient strains and more transmission methods, this basic safeguard doesn't seem to get the job done anymore.

Voting With Your Wallet

With no clear solution in sight, despite the O.K. signal from the government, my instinct still tells me to avoid some of these products. After all, what has really changed in terms of the screening process for these produce products? And are those changes enough to combat the resilient strains? Personally, I am not sure that the risk is worth it. I'd like to see retailers and produce farmers create a better screening and a more concrete plan to cope with this problem. That would make me comfortable as a consumer.


Monday, October 30, 2006

Healthy and Cheap Too!

So its been about two months; I've started exercising regularly and I have to say that I am pleased with how it is going. I feel much better about myself and I am noticing that I am not quite as out of shape as I used to be. Of course, there is a long way to go still, but I think that I am on the right track.

Figuring out why I didnt like exercising was pretty much three reasons:
 - I didn't have a good time to go. Before work was too early, and going to work out after work was stressful when all I wanted to do was chill out and eat something after work.
 - The idea of paying for a gym membership also drove me nuts because I never used it. I really didn't need my gym membership.

So, recently, I rescued a weight bench from someone's basement and I've started exercising. Slowly but surely it is working. I can do it when I am in the mood or if I am bored. It cost me nothing. And best of all, it is convenient and impossible to ignore since I walk by it on my way to the garage and when doing laundry. One of the keys to dedicating time to something is to have it appear in your field of vision each day. Now lets just hope I can stick with it.

Friday, October 27, 2006

ING Referrals Up

Well, I used to put the ING referrals up by hand, but now I have put up a box on the right hand side of my layout so you can just enter your email and ask for a referral link. This is much more efficient instead of having to repost them when/if they expire. So, let me know if you want a link.
In other news, I've switched to a blogger beta&trade; account which I like much better since the tagging available and I like my non-standard layout now too. Maybe I will get around to creating a banner for myself soon too. That would be good.

Wednesday, October 25, 2006

Man With A Plan

Well, I have figured out a plan to start tackling the next debt. It calls for about 340 dollars per month going toward this debt. The difficult thing will be sticking to it through the long haul. If the income side of things continues as I am forecasting, and I am being conservative here, then I will be doing this routine for about 19 months. That assumes no major changes or shifts in the meantime.

Of course, there is always a chance that more work could come in faster, but I dont want to plan on that. So, for right now, the plan is to have this student loan paid by the end of June 2008. I'll work like heck to get it paid off before then, but I am curious if I will be able to make it or not :)

The one thing that I havent figured out yet is whether or not a 0% interest credit card transfer is something I should try for or not. By my calculations, in less than 6 months I will be down to something like $25 dollars or less in monthly interest. I just wonder if the potential ding to my credit score and balance transfer fee makes it worth it. I'm also concerned that by doing a transfer I will force myself into a higher payment which reduces cashflow for emergencies.

Tuesday, October 24, 2006

Time To Refocus

Well, the unbelievable has happened; the absolute final credit card payment was sent and now I am wondering what is next. For the past several months I have been saying that we are working toward the credit card debt getting paid off but now I am looking at our other debt and it would be great to get that paid off too. So the question is, what is next?

I currently have three student loans but one of them is a very high interest rate (it might as well be a credit card; its a variable rate that currently is squatting at 8.5%) whereas one of the others has no interest and the third loan is tax deductible and I get the full benefit of that deduction every year. So, that makes the next target my student loan. I just wish the balance wasnt so much. Right now it hovers somewhere around 6500 dollars, but that seems like it will take forever to payoff.

Currently I am taking extra money that I earn on the side and throwing gobs of it at this debt, but it still seems like it will take a long time to be free of it. But in reality, when I look at others like Tricia at Blogging Away Debt, it doesn't seem like that much debt at all.

Wednesday, October 18, 2006

Busted! Why you should check your Bank Statements, promptly

This past week I was getting ready for the year end madness with my taxes by reviewing my business checking account and figuring out what was deductible and so forth. The bad news, I discovered was that last winter in Janaury, I went out to eat at a bar in Boston. However, the amount that the bar charged me seems too high. Given that the account did not have much activity on it for several months during this time of year, I got lazy and wasn't keeping track of it.

Figuring out if there was an error should be easy, I thought. I will check with my bank and try to get a receipt. Well, it turns out that any charges on my bank statement must be disputed or questioned within 60 days or there is nothing that can be done. So, the nice customer service rep at my local branch explained the situation to me and now I believe I might be out 40 bucks. Again, not the end of the world, and I've learned one valuable lesson about keeping up on my account statements. At 40 dollars, maybe that is getting off cheap.

Wednesday, October 11, 2006

Free 3.00 Starbucks Card

So, my plan is working perfectly.
Some of the highlights this month include:

1. Started a ROTH IRA
2. Opened a separate investment account at an online brokerage
3. Finishing up the last credit card payment this month.

I will continue to work extra and save money in this way for retirement and I will be grateful for the compound interest when I am fifty and have a nice nest egg.

In other news, this morning outside of South Station Bank of America was giving away free $3.00 Starbucks cards to promote $0 equity trades given certain conditions/qualifiers.

I won't be trading there, but I'll take the free gift!

Friday, September 29, 2006

PayPal Does Pay Interest

Over the past few weeks I was wondering about this. Recently, I opened a paypal account so that I could receive income as I did some work on the internet. This account is currently just receiving money since I don't purchase anything using it.

While at first I was a little anxious to get the money into my "real" bank account as soon as possible, I soon found that the money that I was getting in the account could be setup to compound at a nice interest rate by setting up a money market option. So far I haven't even earned a dollar on the money, but it is far better than having no interest at all. The trick to the interest seems to be waiting more than a month since the interest is not paid out all that often on these high-yield/online accounts etc.

For household savings, we have an ING account as well which pays interest and including the account bonus that was earned, that account has earned over 40 dollars in interest. This is totally free money because it took no additional effort for me to get it.

Both accounts have been easy to setup and manage online and I am quite pleased with both so far. On one hand, I am interested in setting up an emigrant direct account because the interest rate is a little higher (close to a whole percent), but at the moment, I am not really jumping on that because I have so many accounts that I am in the process of setting up.

I want even Easier Change!

The title of my blog here is easy change but recently I might have bit off more than I could chew. I stopped playing World Of Warcraft. Although it was a bit of a difficult decision, I think that it is for the best over the long run. It will save me money, close to two hundred dollars a year, in fact. And what's more, I am spending more time taking care of the chores, working, and exercising.

This brings me back to one of my original wants when I started this blog not long ago though, which is a new bike. Since walmart has them at prices under 100 dollars, and I've been doing really well lately with money, working, and might be the perfect little purchase.

I will say this though. I do hope that I can keep this up and not get too overwhelmed. I think that the key to this is to make sure that I am still enjoying myself doing what I am doing. And the nice thing is that I've replaced WOW with not just one activity (work), but also some different extra activities that I wasn't doing very much of before (like exercise).

Saturday, September 23, 2006

Only Eat Half of the Pizza

It sounds really silly, but very often I am ordering pizza out. However, there was often a desire to buy a full large pizza for each person, even though it was probably more than was needed.

Recently in our house, we've gotten better at this and we split one pizza. It controls the amount of the food that we eat so that we dont go overboard in terms of calories etc AND it saves money since one pizza is not being bought. After we eat our portion, we are often satisfied but not overstuffed and it was just the right amount.

So, when purchasing any kind of take-out food, really consider whether or not the amount you are ordering is realistic. No one cares if you split something when you are eating at home.

What's more, some people can really take this advice to the bank when New Years rolls around. There's always too much leftover chinese food!

Friday, September 22, 2006

3 Ways Improving Your Skills Can Increase Your Income

Not long ago, I read an interesting article where Steve Pavlina explains how to improve technical skills. This got me to thinking about the opposite side of the cashflow equation: the income side.

Most people in the personal finance community seem to focus on saving money, and being frugal, and minimizing expenses. All of these are items that are generally about the expense side of things. But the income side should not be forgotten, just because it is often more difficult.

Getting a higher-paying job is often the most straightforward ways to improve your income. However, most people often stick in their current position or field when taking the next position. However, this is not always where the most money is made.

After taking Steve's tips and a strong work-ethic, it is possible to perhaps branch off into other related fields, or at the very least become proficient in these skills.

3 Reasons it matters:

1. Learning more skills may change your ways of thinking. Often, problem-solving is a matter of changing your ways of thinking, not working harder. New skills provide new ways to think about and work on solving a problem.

2. More experiences give you things to talk about in an interview. Often, interviews are just a way for hiring managers to size you up in terms of your experiences and how you handle yourself in a job. Going after new skills is a sure-fire way to show your drive and aptitude for learning new things.

3. Side-Jobs abound for people with multiple skills. If you have multiple skills and use them successfully, you may find yourself doing work on the side in the form of a second job, or a small business. Combining your different skills together might actually be an excellent way to gain a competitive advantage over your competition.

Personally, I've combined my skills in fixing computers with my skills as a programmer to start a small business that I've been running since college on the side. It has allowed me to learn more, grow my skillset, and also provides me with plenty of opportunities to learn above and beyond my regular positions.

Thursday, September 21, 2006

Progress Report

I figured since I've been doing this blog for a few months, it would be worth taking a look at what we've accomplished:

1. First credit card completely paid off (over 1500 balance)
2. Second credit card almost paid off (only 435 dollars left after this month's payments)
3. Working more side jobs to generate additional income
4. Opened up a few accounts to start investing and building assets.
5. Opened up an ING Savings account and have already earned close to 50 dollars in interest.

In the next six months I would like to
1. Get financial paperwork organized and ready to execute (will/trust? and power of attorney etc)
2. Finish paying off credit cards
3. Rebuild savings accounts to have at least 4000 dollars in savings + money for goals.
4. Save enough to go on vacation without putting anything on a credit card or any kind of pay-over-time.
5. Pay for christmas on a 500 dollar budget and pay cash for everything.

Friday, September 08, 2006

Are Too Much Of My Savings At Home?

Home is where the heart is, but not necessarily your money.

"The value of my home has more than tripled over the past five years, so I'm considering selling it and renting a house or condo to lock in the profit. Then I'd invest most of the proceeds in dividend-paying stocks. I just feel the housing market is going to keep weakening in the near term, and I don't want to lose these gains. My plan for early retirement would be shot if the price of my home fell significantly. What do you think?"

This was a quote from a letter that was in a financial article I was reading recently. And upon reading that, I realized that this was something that I had often considered myself. Currently, the equity of the condo where I live is nearly 1.5x the current value of my 401k. This is amazing, but at the same time a little absurd. If I was strictly concerned about keeping my assets diversified, I'd have to come up with a few thousand to put in my 401k (assuming a 50/50 split) or sell the condo to regain parity in my diversification.

Common sense and historical reality, however, dictate otherwise. When investing, you are trying to get as much return for your initial investment as you can. This is common sense. That is why flipping became so popular during the boom of real estate (which many people call a bubble). People were buying a property and nearly doubling their money in some cases in less than a year. This kind of 100% return was far and away better than anything that the stock market could offer. And although it wasn't a sure thing, it certainly was much less risky than a stock.

Now we are back to a more normal market in terms of real estate though. And over the long haul, real estate generally only seems to go up in value about 2% over inflation each year. That is not much of an increase, really. So, in terms of investing in your home with the idea that you will sell it and make a bundle, its really not that great of an idea. So, this seems to indicate even more that I should get my money out of my house as soon as possible and invest it to get a better return right? Not really.

My grandfather and I often discussed people with big houses who flipped for quick cash. "Sure they can do it, but now where are they going to live?" And he was right. The author of this letter I quoted at the start of this article really needs to look at what average middle class people are living in where he is. If he is living in one of these McMansions (as I so affectionately hear these houses called), it is probably adventageous to consider downsizing and putting the excess capital into something with a more stable to become more diversified.

But, if he is like most people (who are living in average-sized homes) I think that this type of thinking can be dangerous. Obviously, the real estate markets are different everywhere. And there are people that are able to make tons of money by doing flip and buying large, expensive pieces of real estate. However, for me, and most average people, the condo or smaller home is not so much an "investment" or an "asset" as it is a place to live. I expect it will increase in value, provided that I care for it, but it is not where I am putting large amounts of money to invest for my retirement. Rather, getting it paid off is insurance against the ever increasing price of rent.

If I wanted to invest in real estate, I would invest in real estate. I would not get myself a 1 million dollar mcmansion and hope it improves in value. This just seems silly and risky. If the economy goes sour and you need cash to live on, these homes will become a source of cash for some people. In a really bad economy, there could become a glut of such homes (such as many parts of the country are seeing now) and in the end, someone who *really* has money will come and swoop in and steal these houses right out from under people who will lose thousands.

Thursday, September 07, 2006

If I could save a dollar like that every day, I'd be rich!

Its not that amazing really, but this morning when I went to get my morning coffee at Dunkin' Donuts™, the clerk sold it to me for .51 cents. I was amazed and I wanted to throw it out there to anyone else in the Boston/Dowtown Crossing Area. It was the Dunkin' Donuts next to the Capital Crossing Bank. The guy actually rang it in to the register, so he might have miskeyed, or they might have mispriced it for .51 instead of say 1.51. Either way, it was good stuff.

Monday, September 04, 2006

Personal Finance Blogs Are Getting Their Due: What it Might Mean

Not long ago, I read this article about personal finance bloggers.

One item that I have been noticing lately is that there are more and more financial bloggers. The fact that there was this article is an indication that I was not imagining this phenomena. I think that this is quite exciting because it indicates that there has actually become a very useful function of the internet and blogging. That is, to provide information about money in a person-to-person manner so that people can become more educated and handle some of these more complicated financial issues themselves.

This got me thinking though. What does all of this mean though? What are some of the ideas that might come out as a result?

Here's what I think could happen

I think that we will begin, probably by Generation Z, to start seeing most kids graduate from high school and college with a thorough understanding of their own finances. This implies that they will understand how to save money, why they should, how to plan for retirement and other long-term goals, all at a very young age.

I think that investing will change as a result and that returns will actually grow significantly. The returns on this money will actually be phenomenal and I think that the stock market (for this period) will actually have higher-than-average returns by a few percent.

I will admit, I have no scientific backing for this - it is simply a prediction, an idea if you will, of where this trend might lead us.

The downside that I can see though is that there will be people who either cannot or do not save and invest and manage their money properly. This might spell disaster. Similar to the mcmansion race that many in the baby boom and generation X are currently having with ever larger homes, I can foresee an arms race of investments and 401ks as we get older and the current generation passes into the major segment of retirees and Generation Y and Z are actually providing a majority of Social Security funds.

It seems a little early to get too worked up about it yet; there's tons of time between now and then. But if I said that I wasn't concerned about the potential impact on society when these generations start retiring (if nothing is changed before then), I'd be lying.

Thursday, August 31, 2006

Get Music On The Cheap - Just In Time For Christmas

Here's a neat idea. If you are a bit low on cash for Christmas shopping, something that some family members might really enjoy is a mix cd of music. Here's the idea - if these friends and family are really into music, then it is likely that this will be something that they would enjoy.

Up until now, most music had to be purchased in the store on a CD or downloaded using a napster-like subscription-based service or a pay-per-song method like the ITunes website. SpiralFrog is changing all of that. It appears that all of the Universal Music catalog will be available for free, advertising-supported, download via their site starting in December of this year.

This would provide a great way to try-before-you-buy and perhaps even use the music to create gift CDs for friends and family in time for christmas. What a nice way to give something personal, but without spending money. And it is all done without stealing music through some shady website or peer-to-peer file trading system or ever even stepping foot inside a store!

As for how it works exactly, we will have to wait and see, but this looks like something to look forward to come December!

Tuesday, August 29, 2006

Get More Out Of Your Paycheck - Escape Your Expenses

Over the past several weeks I have been separating out my expenses into two categories: escapable v.s. inescapable. The concept that I had in my brain in the beginning was rather abstract. But after reading the book "Rich Dad, Poor Dad", the concept became much clearer.

My thinking is simple: in life there are expenses. There is no way around it. You have to eat. You need to have someplace to live. These are two examples of expenses that you will be incurring no matter what your lifestyle is. And you will be paying for some things until you die. Taxes are another expense like this. It never occurred to me how often people overlook this one. But, like the adage advises us, there's no escaping death or taxes.

So this train of thought brings me to the question. If I have to eat, live somewhere, and pay taxes, What are the other kinds of expenses? The escapable ones! So, after a bit of thought, I was able to make a list of escapable expenses:

Credit Card
Student Loans
Car Loan

I think of these as escapable expenses because my goal is to eventually escape them. That is, pay off the obligation and not incur it again. How do I do that? There is a strategy for each one:

Credit Card - Pay it off and use cash for purchases
Student Loans - Pay it off
Car Loan - Pay it off and make good deals to have much smaller loans (and pay them off faster) each time until I build enough "roll-forward" equity and savings so as to afford a car outright.
Mortgage - Pay off additional principal/Get PMI removed to pay off mortgage

I've listed them in order of how we will tackle these. And obviously, some of them are easier than others. But my goal is to free up cashflow. If we succeed in paying off these debts - even with no additional income or raises - about 75% of the household's net monthly income is freed up. Just imagine what we could do with that money.

The key of course is to ensure that no additional consumer debt is taken.

But even if we do not accelerate any plans to pay off our debt, we will be completed with our mortgage by the time I am 55 just by sticking with our standard 30-year mortgage. That is a huge achievement; and it's likely to get paid off sooner.

Thursday, August 24, 2006

Update on my Brother

If you follow my blog, you will know that I was expecting that there would be some kind of settlement in my father's divorce whereby I might become the custodian of some money to be set aside for my now four-year-old brother when he gets older.

It has been interesting so far in trying to determine what the next step is going to be if that money comes in. However, the point might be moot since it is unlikely that there is going to be any money that actually comes out of the divorce settlement for him anyways.

But, in my world, better safe than sorry when it comes to stuff like this so I went on the net and found out a couple of interesting things. One of the key items when it comes to managing money for a minor is the age of majority. This is different in every state, but in this case, in massachusetts, it seems to be eighteen from what I've read.

Assuming that this is the case, whatever I do with the money, whether it be invested or placed in another kind of account, it would become his on his eighteenth birthday. However, I am nervous about this kind of situation. Right now, it would seem that my brother may end up having some issues with money as he grows up since the financial situation of both his parents seems dire. The prospects of investing cash to give a big chunk of money to my brother at 18 makes me really nervous.

I personally would like to see the money set aside for some kind of retirement. It sounds a bit absurd, but at this point there is no knowing if he will ever go to college and he may not want or need to. And I think that his parents and family will likely help him with other small expenses (perhaps even helping him get his first car) as he gets older. So what is left?

I've gone on websites that talk about investing for the long term and how small amounts of money can add up to hundreds of thousands of dollars if left for periods of 40, 50, or 60 years in the market with an average annual compounding interest rate of 10%. So that was really what I was hoping to setup.

The Fly In The Ointment

One major issue with this plan is that this money needs to be earned income in order to go into a retirement account. In general, it is taxed at the parent's marginal tax rate. However, it seems rather silly to have him earning money at age 4.

A Possible Solution

One idea that I've had that I need to find out about is the idea that the money could be put into a trust that has my brother as the trustee, but myself as the person who is in charge of it. And the trust could be setup such that he has no control over the money except for small increments as he grows older, and perhaps when/if I die, the full control goes to him. But for this type of arrangement, I would have to consult a lawyer.

A Plan for Now

While I wait for this to get sorted out, one option that I've become involved in recently is the idea of Upromise. I created an account and have sent links to my friends and family members that do not have kids etc. The account will generate money in a tax free account for educational expenses. Since it is free money, I think that it is likely that this money will go to my brother's college, since I hope he goes. But if not, I could use it to take courses or give it to a niece or nephew. The bottom line for me here is, its free money! It doesn't really matter so much who uses it, as long as someone gets some benefit!

Friday, August 18, 2006

Inflation and Why the Rich Don't Worry About It

If you follow financial news, you are noticing that there is tremendous focus lately on inflation and the potential impact on our economy. The fact is, with gas prices increasing and other items' prices increasing, real inflation is higher now than it has been in recent years. And (almost) everyone is starting to feel the pinch.

What many people are not considering with regard to inflation is the fact that the rich are not getting hurt by it nearly as much as the average person. Most of us have under 500K in total assets. People with fewer assets are accumulating less wealth than the people who have more substantial sums.

In simple terms, rich people can afford the inflation. If inflation increases from 3% to 4%, the power of the assets that are accumulated by everyone does decreases. However, the rich don't worry about it. If they have 1 million dollars, each year, if it were invested in the stock market, these people have approximately 100k in income. This 1% increase means that the 100K of income can only buy 1k less of the stuff that it would have been able to purchase otherwise.

For the average person working to live and unable to live without working, the 1% increase might be more like taking 500 dollars of purchasing power away from someone who makes 50000 per year. On the surface it might not sound like much, but generally, people who have to work for a living in order to cover bills are people who are either in a negative-net-worth position or are in a situation where they are barely positive.

This means that the people who are able to live without working, might only lose twice as much as the person who has to work hard every day, but that person who works is working usually because they need that money to pay for expenses. The person is running on the hamster wheel just to stay in place. Obviously, this can be painful.

And in a good situation, when a person is able to pay extra on their debts, this inflation will reduce the amount of money that is available for such paydowns, keeping the person in debt longer, and paying more interest, and making asset accumulation even harder.

The rich on the other hand, do not need to work. Their money will continue to grow, and with compound interest working in their favor, the rich are able to continue their lifestyle, mostly without interruption.

What to Do?

That is the natural question right? What should I do if the situation is better for the rich? Get rich! If you are in the situation with many other people who are stuck in large piles of debt, there are some good resources available for you if you are willing to look at them and make some changes to improve your life. Nothing will come quickly, but slowly but surely, you will see a change, and that change can be an amazing thing as years go by. You too, may not care about inflation someday. I know that is what I'm hoping for.

Tuesday, August 15, 2006

Don't Fight Your Mind

Almost everyone wishes at one point or another that they could get more done, or feels that there is not enough time in the day. Perhaps this is more of a sentiment in the Northeast part of the US or closer to major cities, but I think that it is still a topic worthy of consideration.

Write It Down

One of the major items that I have started doing over the past year is not procrastinating about developing my ideas. In some ways, I often find that my brain is somewhat of a wanderer. That is, when I am trying to work on a particular project, my brain will often consider other ideas. It is this "creative" energy and thought that is often the inspiration for most of my great work.

The problem, for me at least, is that my left brain wants to stay on task. So, instead of taking that energy and capturing it and the ideas with it, I often lost it by staying focused on the task at hand.

Focus on What's Interesting

Since my mind was clearly more interested in the creative idea I was having, I stopped fighting it. I encourage it. When I have these thoughts, even if it is something as mundane as needing to do laundry, I write it down. If I don't have a pad and pen handy, I will type it into a simple notepad file.

This technique forces me to purge all of the ideas and interest in the topic from my mind. This causes me to focus on the topic for as long as it is interesting to me. Usually this is a longer time in the beginning of practicing this technique, but I have gotten much better at it and it now only takes a few minutes until I am back on track.

Reaping the Benefits

At the end of a typical day, week, or whenever I have downtime, I review the notes on this pad of paper. In my mind, I think of this as my "money pad". The ideas I think up are often ways to improve a process, get more done, make money or do some other improvement. These inevitably will result in money or some other benefit. Even if it is not profit or money, it may be experience and learning.

Separate the Wheat from the Chaff

Sometimes, the idea turns out to be a dud or not interesting once I've written about it and considered it in my head a day or two later. However, the process is important; not just because I am getting these ideas written down, but because it keeps me on task better than any other technique I've been able to figure out. And getting back on task quickly is a key to productivity. It is this type of mental wandering or phasing out, along with socializing, that removes more than 2 hours of productivity from the average 8 hour work day.

Using Your Ipod

Music and soothing sounds I find are actually quite helpful for me in terms of this process. And it means that I love listening to different music on my Ipod. When I hear fast music or no music at all, I find that I get through monotonous, mindless tasks faster. The bottom line is, that your brain works best when considering only one idea or perhaps two at a time. It can dedicate all of its energy and synapses toward that single issue. When you daydream and are creative, you are sapping energy away from the other things you might be doing.

Driving Your Productivity

Listening to music in the car can be a huge help also. However, you may or may not be able to safely drive and write any notes down while in the car. So, for me, I find that memorizing short phrases in the car when I think of an idea is the best method. Another option you might try is a cheap, but reliable voice-activated recorder. Just speak into the voice-activated microphone while driving and your idea is recorded for future use. These devices are quite cheap now at most chain electronics stores.

Getting Results

There are tons of other productivity tips that I've learned as well, but this one seems somewhat basic, but also quite unique. This concept really takes the To-Do list to the next level, because each item is not necessarily 'actionable' the way each todo is. But, in the end, some of the ideas may really improve your life either by enriching your time or generating or saving money. And who doesn't want that? As with any technique, the key is to practice.

Friday, August 11, 2006

Drastic Minimum Wage Increases and Why They Matter To Everyone

Minimum wages were recently increased in Massachusetts. The increase was passed by a democratic majority legislature. And yet again, in my opinion, this will decrease the amounts of money available for the middle class but not actually help the poor.

Read the article from the Boston Globe about it here

Often times, people think that more money is the solution. In fact, there is even a federal movement linking a reduction in Estate Tax to minimum wage increases. Linda Basch writes an interesting opinion article on this topic for those interested.

But since this is my blog, I am worried about myself first. And what I can see is the following:

As those with a lower wage get a hike of anywhere from 15-20% over the next two years, I will likely only get a total of about 6%. Granted, my salary is not close to minimum wage, but the strict size of the increase isn't all that worries me. It is the impact on prices.

Prices are already in sky-high. Some say this is due to oil prices. And some of it is. Some say it is due to price gouging. And some of it is. But, more than anything, it is the standard supply-demand system at work. There is not an infinite supply of resources and as a result, when demand is constant and in some cases increasing while supply is also constant and/or shrinking, prices will naturally rise. However, I don't think that it will be a slow or easy adjustment. That is why people who are struggling to live on minimum wage jobs are outraged and demanding wage increases. However, there is a real problem with that solution.

Inflation is also going to rear its ugly head. The reason is, nothing has changed in the fundamental way in which prices are determined. All that you have done by raising the minimum wage is effectively printed more money, albeit indirectly. Higher minimum wages mean that companies need to make even more money to stay in business and return good returns for their shareholders. In turn, there are usually layoffs and/or increased prices in order to accommodate that need for increased profits. These increased prices trickle throughout the economy (sometimes ahead of the real need) and in the end, we all end up paying even more than the genuine justified pay increase. And this increase hurts everyone, including me.

Lots of people think of inflation as hurting people with large sums of money who are trying to live off them. And it does, a little. But the people who really get whacked when inflation is too high are poor people - the very people who are getting the wage increase in the first place. Doesn't make sense does it? Let me explain:

If you take as fact that the price of a good will go up when the cost of the production of the good goes up (increased minimum wages), then it makes sense that the amount of money needed for other things will increase as well. Big ticket items like cars, homes, and appliances and electronics will also increase. However, for the average person making minimum wage, a 5% increase to the price of buying their first home hurts a lot more than increasing their minimum wage by 5% will help.

I'm not a professional economist. But I did take several classes in Economics. And I know that there are lots of invisible hand type forces at play. But inflation happens naturally. Please note, I am FOR increasing the minimum wage - increasing minimum wages slowly, over time, makes sense. Small changes are best because it gives the economy time to play them out without throwing things off balance. But doing drastic increases over periods of less than two years does nothing but artificially manipulate the economy. And manipulations like this ultimately hurt people because prices are often higher than they need to be in certain cases as a result, and this means that the optimum distribution of goods for the cheapest possible price is not met. The end result, more people will become unhappy than if you had done nothing.

Wednesday, August 09, 2006

Why that Tax-Deductible Student Loan Interest is Wasting Money!

You might love the debt you have on your student loans. Financial Planners generally like it too. It's for a good cause. It's cheap. And it's usually tax deductible. Now here's the kicker: many students don't actually get to deduct their student loan interest. Now you are probably screaming at the computer! What am I talking about? When many people file taxes, they are not actually taking advantage of the student loan interest deduction.

What do I mean? Well in many cases, people pay their student loans on-time frequently and are not able to deduct them as part of their taxes. This is because when deductions are calculated for tax purposes, many people (especially young, recent graduates) do not itemize their deductions. And this is smart; here's why:

In general, each year there is a generic amount of money as a standard set by the government in order to make life easier on taxpayers. So, instead of tracking deductible expenses throughout the year, most people simply choose to take the standard deduction. Sometimes, even people who track expenses end up taking the standard deduction because it works out better for them. H+R Block tends to allow you to do a nice comparison between the standard and itemized deductions.

People who do not have enough deductible expenses often do not have any of the common expenses that can be deducted on taxes like a home mortgage, a deductible set of moving expenses, business expenses, a child etc. And therefore, the standard deduction is best. In fact, in the case of people who are not able to deduct these additional expenses, the standard deduction is usually higher than the only deduction they have: their student loan interest.

What this means, is that for calculation purposes, often-times, unless you really itemize your deductions at tax-time, you must consider that student loan interest to be no different than other interest in terms of evaluating how and when to pay it off. Therefore, much like a mortgage or other debt with 'tax-deductible' interest. When deciding which debt matters more in terms of paying-it-off first, don't be too quick to rule out your student loan. If you aren't getting a genuine benefit from the tax-deductible interest, it might actually be worth considering it for early and/or additional payments, just like any other debt you might have.

Monday, August 07, 2006

Making Good Choices: Understanding the choice/wealth cycle

It seems pretty basic, but I'm surprised at how few people really think about it. In fact when I was in college, these ideas were not real to me at all. My grandfather tried to teach me the concept, but I never really grasped it. He said, "life is about managing risks." But I don't think that quite captures it. (Sorry, Papa.) Rather it isn't really just risk, its choices. Choices and wealth are directly and constantly related.

Some fake examples relating choices to wealth

1. Parents choose to spend large amounts of money on their kid's education. As a result, the kid, Jeff, takes better classes and lands a better job and makes more money than would have been made otherwise. [Good Choice = more wealth]

2. While the Jeff is at college, he decided to skip out of some key activities and therefore had less exposure to important ideas from his classes. This lost knowledge kept him behind a co-worker (Jane) and he did not get a promotion and raise as fast as his co-worker. [Bad choice = less wealth]

3. Since Jeff did not get a promotion, during a recent trip to the store, there was less money available to buy a new television set for the new apartment and he had to settle for something inferior. [Less wealth = fewer choices]

4. After just a few months with the television, a bonus 2000 dollar comes in for Jeff. Even though his new television still works great, Jeff really wanted the nicer one to begin with. So, Jeff decides to buy a new television of the more expensive model that he wanted to begin with. [Bad choice = less wealth]

5. Since Jane took the same bonus and invested it in her retirement account and let it sit for 30 years at 10% average annual interest and has 35000 extra in her account at retirement and is able to take 5 more vacations than Jeff. [more wealth = more choices later]

All of these examples are easy to understand and follow and the concept is simple. Each choice you make has an impact on your wealth. And the more wealth you have, the more choices you get to make. As you can also see, some choices are more expensive or 'risky' than others.

Each choice has a cost and a risk associated with it. I like to think that I really understand this cycle now and I am making better choices with my money than I was, even 2 years ago. All of this is not about risk. Note, there's nothing wrong with buying things you like or want. But curbing those impulses, especially the need for "the latest and greatest" might significantly improve available cashflow for investments.

But what about the little things?

There's very little risk in buying or not buying my morning coffee. Instead, its a choice: a choice to go without a small luxury now, with the understanding that I will enjoy either better or just more luxuries later. The risk of course is that if you invest the money, it could be lost, or you could die before you get to use it. Neither of those really bother me that much. If I die, it will go to people I love. I'm ok with that. And if I choose my investments carefully, I will likely not lose much if any of it and there's a much bigger chance that I will gain significant wealth.

More choices is Better

So, for me, more choices is usually better. I live a pretty good life now. But by putting off certain expenses for a few years now, I hope to give myself decades of excellent living later - in a relaxed, enjoyable environment without pressure, when I know that my body will be tired and may not have the energy that it has today.

This is a concept that I've always liked and I think it might make more sense as I evaluate my past and future choices in later posts. Especially as the retirement age grows and grows. I can't speak for everyone, but I don't think that I will want to work 40 or 50 hours a week once I am 65. And the thought of having to do that in order to pay my medical expenses makes me very comfortable about making small choices to sacrifice now.

Most choices have an economic impact

I've bought in to this concept: choices have consequences. And these consequences are often related to your wealth and therefore the next choices that you can make in life. It's a cycle. It is a simple concept, but once you acknowledge it, it becomes easier to consider the impacts before the next choice. I like the idea, but like anything, practicing it is the tough part.

Tuesday, August 01, 2006

Changing my habits to save hundreds of dollars

Not too long ago, I realized that the strategy was fairly simple for getting a handle on saving and cashflow. While earning extra income is not always easy, I realized that lowering my debt was the easier of the two to do. So, the key is to lower my standard of living and become accustomed to it. I've changed the following and it has made a big difference:

- I eat at home more frequently.
- I use my TiVo to record as much T.V. as I want to watch.
- I bring lunch to work more. (Lean Cuisines at 3-3.50 each is about 1/2 the price of a take-out lunch at most places.)
- I drive less and take public transit more. This has really cut down on gas costs.
- I spend less on throwaway entertainment (trips to amusement parks, movies) and opt for permanent, reusable entertainment options (computer games, dvds, an Ipod, a TiVo (subscription paid up-front)) and healthy activities (like tennis or walking outside).
- I buy a morning coffee far less, opting to make coffee at work. Instant coffee is awful, so instead I've opted for Folgers Coffee Singles. Its not the candy that is Dunkin' Donuts or Starbucks, but it is still pretty good, especially when considering that it costs only about 12 cents per cup.

I still go out to eat, I still go to see a movie occasionally if I am dying to see it. The difference is that I think about it, and I try to do these things with other people as a social event not just something because I am alone and bored.

The money saved goes toward paying off debt and no new purchases are done using credit cards. New items are bought with saved money. There's still got a long way to go - but this is definitely a step in the right direction.

Monday, July 31, 2006

People still getting a charge out of Credit Cards.

Even though we hear over and over in the media, we, as Americans are still charging up a storm. According to a recent Federal Reserve survey, the median balance on Credit Cards in 2004 was 2400 dollars. This does not bode well. This means that many people are losing 240 dollars or more annually, just on credit card interest payments.

There are some bright sides to the survey though. Only 3% of all debt is Credit Card debt. This means that what is often termed good debt: mortgages and college, are much larger amounts. This is important because mortgages are debts that have an a tangible asset associated with them: real estate. In the event that these debts cannot be repaid, at least there is an asset that is available.

Although the increase is somewhat concerning, it is not quite so large when you consider inflation and the fact that over 20% of credit card users pay off their bill each month. This means that many people are using their cards responsibly. The key to keeping our national economy in good shape will be making sure that a few bad apples don't spoil the bunch.


Friday, July 28, 2006

Decisions about my Savings Account

Recently, I've discovered that there are even more high-yield savings accounts than I had imagined. However, for me, more important than the exact high-yield account that is used, I feel like these need to be my goals and guidelines with regard to my mid-to-long-term savings:

Use it instead of Credit Cards for unexpected expenses but only when necessary.

Covering 6 months of expenses is unrealistic for most people including myself. I will try 2-3 months as part of a contingency plan in the event of an accident, health problem, or unexpected Job loss. I know people don't think it will happen to them, but I worked with someone who had been laid off. So you should consider what you would do if you lost your job, if your roof caved in, if your car got wrecked. These are not crazy situations and it is important to be realistic about your plans if something like this happened.

I think that cash or some other non-volatile holding is a good protection for at least some of their wealth as an insurance against stock market volatility. How much? Perhaps just enough for my emergency fund (See above).

Somewhere between 50-75% of savings should be in that type of account to ensure that you are making interest on this money. Even just 1000 dollars can make over 5% annually in a high-yield account. Since my history shows that most will be left alone, I'm also considering a CD. However, I like the liquidity of a savings account so that the money can be easily accessed if an emergency or opportunity arises.

Tuesday, July 25, 2006

Why thinking about Retirement now is important

Paying off my debt is the first step though. I work hard. I think that most people would say the same thing about themselves. However, in this hustle and bustle of 403Bs, Roth IRAs, defunct pension funds and Medicare worries, we often lose sight of what retirement is all about and why these financial issues are so important.

Recently, I had a nice, long vacation. Eleven days to be exact. And during that time I did some relaxing, some chores, and overall just enjoyed myself. This was what I would expect out of my retirement and what I am saving for.

But I realized that many people are not in that position in their retirement. They are having to choose between their heart medicine and a decent dinner. This is not meant to scare anyone. However, the simple fact is that in our retirement we will likely be earning less than we do now. The worst shock of retirement for many people is realizing that the day they retire they will only have about 1/3 or 1/2 of the monthly income that they used to live on.

Some people are able to adjust, but many aren't. They end up broke because they spend too much, sad because they can't work anymore and aren't living the way they used to, and finally having to make choices that are not easy or fair for a person who 'worked hard' for 40 years.

Seeing this as a phenomenon has made me want to reclaim those retirement years. Even in the next several decades we are going to see people live easily into their late eighties. If I retire at 65 or even 70, I could still have close to 20 more years of my life. Although my generation is being retrained to think about retirement at 70, I'd still like the idea of a semi-retirement at 55 or 60. What does that mean then? I mean, retiring but not being able to eat because I am so poor is not terribly exciting.

So, I think the key is to lower my current standards of living to be a little closer to what I think that my retirement could be like. This saved money is then applied to debt and retirement savings. You know the drill from here. As each debt is paid, apply the full monthly payment to the next debt in line until all are paid off. Then take that monthly amount and invest it for retirement and shorter term goals to ensure adequate income as I grow older.

So that's my plan and I'm stickin' to it!

Thursday, July 20, 2006

Paying Off Your Credit Card Could Cost You Hundreds of Dollars

Most people follow the standard advice of financial planners and other advisors when deciding what debt to tackle first. This advice is usually fairly basic: pay off the highest interest debt first (usually credit cards) and continue to take that same monthly payment and apply to the next debt etc down the line until all the debt is paid off. But recently I considered this I am getting ready to start paying down principal on my student loans and last credit card.

I discovered that this advice is not true for everyone, especially not in the case of a windfall. The reason that this is not true is because of the doom that compounding interest can bring. Here's a simple example to show you why time, not just your interest rate, should be a big factor in deciding your lump-sum payoff targets.


There are two loans: one at 17.5% (a credit card with a 2000 balance) and a personal loan at 7% that has a 10000 balance. Each debt has a normal payment - the credit card is 125/month and will be paid in 19 months. The loan payment is 150/month and will be paid in 85 months.

All of a sudden, a 500 windfall (taxes, lottery, gift) comes in and you decide to pay debt doing a lump-sum paydown. For most people, the choice is a no brainer - the credit card. It has a higher rate. However, in this situation, some calculations show that even though the interest rate is higher, the actual monthly amount of interest accruing on the credit card is LOWER than the loan.

And in this case, it is a dramatic difference since the loan has an average of 31.78/month and the credit card has an average of 15.42/month. This means that the amount of accrued interest is close to twice as much on the loan as on the credit card.

Since this is a windfall (a one time extra), the rule of being able to "snowball" doesn't really apply. The idea of snowballing is that each paid off bill provides more extra income to pay down the next debt. However, this is a windfall that will not come in again so there is not any "extra" income that will be realized next month unless this lump-sum paydown will end your obligation.

So, instead of the instant payoff, you simply consider how much money that this will save over the life of the remainder of the debt repayment. In the case of the loan, you would save about 286 dollars whereas only about 108 dollars would be saved on the credit card.

Even the hybrid scenario doesn't work out better. That is, in theory, if you put the money on the card and took the "extra" 108 dollars from the savings on the card and put it on the loan right away, you would still save only about 58 extra dollars for a total of 166, which is still less than the 286 that could be saved by tacking it onto the loan directly.

The reason that this is important is not just the time (years) it will take to repay the loan, but it is also the large balance. A two thousand dollar credit card is nothing compared to a 10000 dollar student loan.

The bottom line: Total Loan amount and Time to repay the loan are often more important in determining savings (from lower interest payments as a result of a lump-sum paydown) than the interest rate on your loan.

To determine the rate and lumpsum payment on your debts, try using Young Money's Calculator. I use it frequently for the nice reporting feature that shows the amount of interest per payment over the life of a loan using various scenarios.

Wednesday, July 19, 2006

The Debt/Income Equation - Six Ideas for Getting Out of Debt

There is no avoiding it, the debt-income equation is the key to everyone's financial future. It is a key factor for everyone's fico score. If your monthly debt exceeds your monthly income, you are in trouble. It is that simple. And many people are in the same boat. The average credit card debt in the United States However, if you are in debt, how can you hope to repay it? Often times, interest rates for credit cards are the culprit. If you have a good credit score (check it at, you may be able to do a balance transfer or negotiate with your current lender to reduce your rate. But what do you do when there is no way to get the rate reduced?

Here are some options:

1. If you have an emergency fund, consider using that savings (either some or all) to pay off your credit card debt. It is likely that in this case you can mitigate your risk by paying it off in chunks over time to save money in interest and make sure you can handle any new expenses with existing savings. These payments may, over time, give you some wiggle room to renegotiate the interest rate later and if a real emergency happens, you can suspend the paydown.

2. Consider an outside loan. If your credit is good, you might be able to apply for a loan at your local bank to pay off your card at a lower interest rate. If the bank does not turn out to be a good option, consider online lenders like for either the full amount or a just a portion, if you don't think you can pay off the loan in three years.

3. Borrow from family. Be aware that this could have personal/family implications, but if there is a family member (whom you trust and who trusts you) that could help, you might consider borrowing the money this way, and even include some kind of interest in the payments back. However, if you have had a bad history with money in the past, you might want to avoid the damage to your relationship that this option may cause you if you feel you may not be able to repay it. Before you undertake this option, write up an agreement regarding the amount, the interest, and the payment schedule that is signed by both parties. This 'mini-contract' will likely not be used, but it can provide some sense of security about the arrangement for both of you.

Additional Tips:

1. Cut as many non-essential expenses as possible while paying down these debts to make sure your repayment period is as short as possible. See my article about gym memberships as an idea of how to start looking at your expenses objectively.

2. Do not attempt a lump-sum paydown until you have mastered your finances by not using the card or debt in question for at least 6 months. This will ensure that you have your finances in order and are able to pay your monthly bills without issue using your current monthly income.

3. Never use it again, but don't cancel the account right away. Canceling the account can hurt your credit score. It is probably best to just stop using it.

Tuesday, July 18, 2006

Six Tips for Planning for life with a home and mortgage.

Recently there was an article on InvestorGeeks about whether or not you should buy or rent. I am a proponent (for the most part for many people) that renting is the way to go. If you a renter and you have decided to embark on that quest to buy a home or condo, there are a few things that I would advise you to do and consider during the process that might save you tons of time and sanity (and that I wish I knew before I started!).

Before the Purchase:

1. Consider the type of Real Estate broker you are getting. If it is someone you know and trust, that is great. However, be aware that there are two types of brokers - a buyer's broker and a seller's broker. Even if you walk into a real estate office and get an agent on your own, they might not be acting completely on just your behalf. It is possible to have two 'sellers' agents that is - each one advocates for the seller, even though one works with you to close the deal. Consider this before you commit to an agent.

2. Take some time on your offer:
- Consider the advice of your home inspector carefully. Your home inspector will likely give you several things to consider (especially for an older property). Even if you like the price, consider asking for a few things in your negotiation. Negotiation is an art and if you don't ask for items (and be very specific in your offer), you will likely 'leave money on the table'.
- If you buy a condo, make sure that the condo agreement is up to date and you are certain of any portions of the new property which you may be responsible for. Be direct, and up front, and consider talking to the president of the condo association to get those items straight and to get a feel for the community you are moving in to.

3. Be prepared to walk away. Even if you feel like this is "the one", sometimes something about the deal just doesn't seem right. Until you make the offer, you have the power to walk away. Make sure that you think about the process a while and what it will be like, emotionally, logistically, and even financially to live in this new home. Consider expenses, driving more or less, visiting family, new furniture or fix-ups that might be needed.

After the Closing:

4. Resist the temptation to 'redo' everything right away because you 'cant stand it'. There are often reasons for the way things are in a home. If you live in a home for a while, you sometimes discover that the shortcomings are charming and don't need to be fixed. Or sometimes a room that might have seemed great at first with a new coat of a dark color paint is actually already dark enough. Funny observations about your new home will make you appreciate and enjoy it and ensure that changes you make are ones that you will be happy with in the long run.

5. Start an emergency fund or contribute more to the one you have now. If you don't have an emergency soon, you are lucky. Repairs on a home or condo (or assessments if you have a condo association) are a big expense that people forget about. Even stashing a small amount away in a savings account for these incidentals (although new water heaters/roofs/air conditioners that cost upwards of a couple thousand bucks don't seem incidental) can really help defray these unexpected costs.

6. We've all heard that the three factors that contribute to the value of a property are location, location, and location. Don't think that property tax is any different. Be prepared for the tax bill that is coming. Check out the tax rates in the area you are considering. And it realize that it will go up, oh yes, it will go up. Although that mortgage is nice and fixed (you DID get a fixed mortgage right), expect a small increase in your tax bill for your property each year, in addition to other town services that might now be an expense. Plan for these up front to avoid unexpected surprises or consider getting them included in your mortgage if you want to avoid the process of paying separate bills. Most advisors consider that you should be putting about 1% of your sale price away for home repairs each year.

Saturday, July 15, 2006

What Happened to the Emergency Fund?

One of the first things that I learned about personal finance from my grandfather is to have an emergency fund of six months worth of expenses. This still seems absurd to me in this day and age and given my income to debt ratio. Even though I think an emergency fund cannot be underestimated, according to a Federal Reserve survey, 8% less people even have savings accounts since 2001. The savings mentality is drifting away. Instead large percentages of people's net worth is in retirement accounts.

This is a key mistake for most people. They confuse 401k loans and home equity lines of credit with emergency funds. In my opinion, neither 401ks or home equity should be touched until you are approaching retirement. Instead, a separate account (either savings or money market) should be set up and used for emergencies.

That is the perfect self-insurance plan. It is for just what it sounds like - emergencies. Working at my first job out of college was great, but there were lay offs. Luckily I was not one of those who lost their job, but it made me realize that anything can happen. Even if you are smart and talented you can still lose your job, get into an accident or have some other emergency really throw you for a loop.

Even still, I think that 6 months is too much for most people, but 3 months is reasonable. Together my partner and I have been saving for several years now and the fund is still not quite there. Some of it was depleted recently to pay off a credit card that will save me several hundred dollars in interest over the next year.

Even small amounts contributed regularly (right after payday but before bills) is best. These will add up over time and make sure that once it is a sizeable amount that you get it into a high-yield account so that you will get substantial interest.


Thursday, July 13, 2006

Beating the minimum to invest rule - and why kids (and their families) should do it.

Double Your Money Fast
When I was in middle school and high school, I would talk to my grandfather about investing. He would talk to me and teach me neat tricks like the Rule of 72. Being interested in math and money, I was quickly interested. However, I found that the most difficult issue for me was that investing was so expensive. Even through college I was never able to get enough cash together for the minimum that was required for an initial investment in a mutual fund. My grandfather would simply say that the solution would be to save the money in a savings account until I had enough.

This was difficult and it was not until I was able to start working at a job after college and had a 401k that I was able to do this, mostly because the money was gone before I even noticed it. This brings me to the main idea here. Although many of the nicer funds that I would like to get into today have high initial minimum investments like Vanguard, I don't feel pressured or upset by that anymore. The reasons are simple: e-trade and ETFs.

Its Easier to Invest Now than it used to be
With tools like E-Trade and Sharebuilder, virtually anyone can get into the investing game. All you need is a bank account and a computer with an Internet connection. ETFs are Exchange Traded Funds. These are quite similar to mutual funds in the sense that they are not a single stock but rather a basket of stocks which means that your investments are automatically diversified.

So, with even a small amount like 250 dollars, you can reasonably start investing and building an account. Most services charge between 8-15 dollars per trade though, so it is best to choose only one particular mutual fund or etf at a time to reduce the costs. However, with even a small amount invested regularly and arranging for the dividends to be reinvested, it is simple to start building wealth.

Building a retirement account when kids are young
And since time is the biggest factor in any kind of investing, the sooner you start the better. If when you are 14, you are able to sock away 250 dollars every 3 months in this manner, that is 1000 per year, yielding an estimated 3785 dollars by the end of 3 years assuming a quarterly rate of return of 2.5%. This money at age 18 could be left alone until retirement at age 68 (with NO additional contributions) and the same kind of interest averaged at 10% yearly, to provide a retirement fund of 445,000 dollars. This is very little money for a huge retirement return.
(To be fair, the idea for these calculations came from an article on MSN Money, but I think my version is more realistic.)

Given the unstable state of Social Security, a small amount of money from relatives and odd jobs could add up to a hefty chunk of a great retirement for little grandchildren or nephews when they get old....