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.