The little things

Yesterday was a major spending holiday for many couples. Whether for good or bad, my husband had to work, so I spent the evening at the gym (which was very quiet) and watching a library DVD at home. I enjoyed looking at the roses he bought me last week (knowing he worked the weekend, as well, he planned ahead) and we’ve already enjoyed our present to each other a couple times: we bought a board game. It’s our enjoyment of these ‘little things’ that help us go some days without spending one red cent. Then I got to thinking about our other inexpensive or even free hobbies…

At the beginning of this month, I got of books in the mail and am keeping up with ‘one book per week’ reading schedule. I volunteered to be a judge for a major local writing prize, so the books aren’t mine to keep, but it’s been nice to read fun fiction with a purpose. All it’s going to cost me: a tank of gas when I go to a meeting to decide the winner.

We had to renew our XBox Live subscription this month, but thanks to pre-paid cards that can be found on the cheap, this ends up costing us about $.10/day for the entire year. It seems we’re always streaming something, whether it’s Netflix, music, or playing a game. I suppose we also have to count our Netflix subscription and our internet connection into those costs, but we had those before we had the XBox, so it’s not an ‘added’ cost in our budget.

One thing we have yet to do this winter is bust out our cross-country skiing gear. We borrow skis from my parents and hit the park with our $35 annual park pass, which we also use for walks in the spring/summer/fall. We actually live very close to a [very small] lake, so we also walk the path around our nearby park pretty frequently in the warmer months.

Those are just a few things, but inexpensive interests definitely help us put more money toward debt each month.

Net worth

As I’ve mentioned before, I really like the online budgeting tool Mint.com for a variety of reasons. One of which is their ‘net worth’ calculation, which takes into account all savings/investments, checking account totals, and debt.

I’ve been watching our net worth slowly go from negative in the last year (quite a bit negative) toward positive. I think this month it will turn positive and, with good planning, never be negative again. Wahoo!

This doesn’t mean we’re out of debt, it just means that all of our assets will outweigh our debts. One thing that Mint cannot connect to is my pension at work, which grows very slowly but safely. Yes, I’m a 20-something with a pension plan. I did also manually add a few big-ticket assets to Mint, mainly our vehicles. If worse really came to worst, we could sell a car since we live within walking distance of our jobs.

I am hoping that our net worth reaches $1 million sooner rather than later, and not even really just hoping, but planning and then planning some more.

Ally.com customer service report

I opened an Ally account about a week ago and so far, have had to contact customer service twice. This is neither bad nor good. I’ll explain.

My last name consists of two names, my maiden name and my husband’s name, no hyphen, just a space. It’s like Elizabeth Barrett Browning or Ralph Vaughan Williams. However, in trying to verify an external account with my Ally account, the web form wanted me to enter my last name with no spaces or characters. I tried various permutations of my name but nothing worked. I tried an online chat with Ally customer service, but as helpful as they were, they couldn’t verify the account, either, due to the space in my last name. He took my number and said I’d receive a call.

I did get a call the next day, and when I called back, the customer service was also helpful but couldn’t verify the account. They tried two more test deposits with my external account and said to call if I had problems verifying with the new test deposits. Today, I logged in and verified the account with no problems. I got an entirely different web form this time which didn’t ask me to enter my name. I just logged in and clicked ‘Verify’ and it worked. I also got my signature card in the mail very quickly so should have a debit card in no time.

My husband shares the double-barrelled last name, and we are used to weird things happening with our name the way it is and I know that we chose for it to be this way, so I am generally good-natured when something like this happens.

My two interactions with Ally customer service were very pleasant, short conversations, and I never had to wait on hold. The problem was fixed in a few days, so thus far I feel neutral to positive about the account experience so far.

A better retirement calculator

Well, I think I’ve found something that sort of fills the need I expressed in my previous entry. This calculator from Bloomberg allows for expected salary increases and by playing around with the ‘current age’ and ‘current retirement savings’ numbers, you can get an idea of what your savings would look like if you didn’t add anything for a few years, but then added a larger percentage of income. It’s not perfect, but it’s fun to plug in numbers — well, maybe it’s only fun for me, but thinking about retirement should be fun for everyone, not just the math nerds!

Best of all, this calculator factors in inflation (I always assume 4%) and percentage of current income needed at retirement. If you house is paid off and that’s where you’ll be staying, your cost of living will be far lower in retirement than it is when you’re starting out.

I also really like the option in that calculator to include social security or not. I’m not placing my bets on social security being there when I retire. I’d like to think that it will, but it’s better to assume that it won’t, and possibly have more income than expected in retirement. I’d be pretty upset if I counted on that money, and then find out I won’t be getting it, or only a percentage of it, but I’d be just fine not counting on it and then having the checks show up anyway.

I’ve also learned from my father’s experience with his own social security that it’s better to have an alternative plan when it comes to retirement income. My father retired from his government job not too long ago, and has started his own business as a contractor of sorts. His income from this second career is erratic, but it’s been enough this year that he’s not getting any social security payments right now. He was also caught in a policy that prevented him from starting his business after retirement, so he was basically forced to work another year in his government job. How’s that for a surprise–oh, hey! You have to work another year before you can retire! Fun, right?

If you plan to work in retirement, even if it will only be part time or inconsistent income from month to month, look into the details of social security sooner rather than later. It’s not some magic check that shows up at age 65 no matter what–there are income restrictions and age requirements, among other things, to think about.

Ally money market: Post #1

Last night, I opened a new money market account with Ally. I hope to report on how it goes, how easy it is to use, etc. The sign up process was fairly easy, though for some reason, I was not able to auto-link my Ally and ING accounts. That just means I’ll have to wait a couple days to verify the account with some mini transactions. It was easy to connect with Mint, probably since Mint advertises for Ally.

This account will be used as our emergency fund, so the checkbook and debit card attached to it will be kept at home in a drawer, instead of in my (or my husband’s) wallet. Having the ING savings account has worked well for longer-term savings goals, but in a true emergency, it will be nice to have quicker access than the time it takes for ING to transfer funds to checking.

Completed: The Millionaire Next Door

I finished reading “The Millionaire Next Door” earlier this week, and let the ideas set in for a few days before I started writing about it.

First, let me say that, yes, the ideas in the book are not really anything new, and the book was published in 1996.

I liked understanding the difference between being a high-income earner and being financially secure. Being a high-income earner often means that you have to put on a show of sorts and display your status in life. Not having a high-status job can actually be to your benefit, especially if you can save and invest well.

I appreciated being reminded of this, because my profession and my husband’s are not what anyone would consider high-status. Nobody will ever expect us to have a huge house or drive expensive cars. We don’t make enough to be taxed all that much. We are both happy to have jobs and work hard at them, and we are thankful we don’t live paycheck to paycheck.

I also liked understanding that someone can be an under-accumulator of wealth (UAW) or a prodigious accumulator of wealth (PAW), and that there is not a set dollar amount to be considered a PAW, but rather, it’s a formula. Right now, I am definitely a UAW, but I also spent seven years earning two degrees in order to do my job. I know that this investment of time and money was worth it because I am not an entrepreneurial type, and not a business person by far. I am more like the professor than the contractor. By age 40, I hope to have this turned around and be a PAW.

The reminder that goals in life do not have to be attached to owning material goods is a healthy one. I place a high value on time spent with family, education, seeing and learning new things when I travel, and none of these can ever be taken away from me if I file bankruptcy and my assets are liquidated. Though, I think I’d probably miss my XBox.

Overall, I’d say this book is worth a read. You can skim a lot of it, but I think the abundance of examples help drive home the authors’ many points about financial stability vs. appearances of wealth.

Cursed

I am cursed with a love for the finer things in life. Don’t ask me why, but even as a child, when the Christmas catalogs started rolling in, I always managed to want the most expensive thing in the entire catalog. On every page of the catalog, too, for that matter.

I still love more expensive things, including, but not limited to, jewelry, electronics, craft beer, and the PRECOR AMT 100i machine at my gym. Okay, so the beer and the machine don’t cost a lot, but added up, it’s much like someone else’s costly daily Starbucks run. Also, buying my own 100i machine would run about $8K, which makes the $45/month gym fee seem like small potatoes. The cost of the machine is roughly 14 years of membership fees, so I’m calling it good.

[And I know that if I skipped the craft beer entirely, the whole gym thing would be less necessary, but that's another issue that has nothing to do with finances.]

All of this to say that I’m going to try a new way of handling my desire for nice things. I opened a few more ING savings accounts (easy with ING!) and labeled them with my savings goals. So now I’ve got a gym membership fund, a travel fund, and a bling fund. I don’t think I’ll be able to add to the latter two accounts every month, but if I don’t spend my portion of fun money each month, I’ll put it into savings instead, and have my husband also add any of his leftover fun money to the travel account, too.

I’m also going to add the gym fee, which we paid up front last year, to our monthly budget and just save that amount each month to go toward the renewal come this fall. I also think seeing that dollar amount in the budget will goad me into going more often, since right now mentally it seems ‘free’ since all I do is show my card at the front desk and I’m in. Not so. I already manage to get there 2-3 times a week, but I’d like to make it more like 4-5, since it pays dividends in the form of stress busting and caloric burn… and I want awesome muscles, which doesn’t come easily or cheaply.

Saving, or, pay yourself first

One thing that it seems few Americans do is put aside some money each month for a rainy day, or what Dave Ramsey would call “an emergency fund.” It’s hard to do when living paycheck to paycheck. The first step is probably the toughest, which is to live on less than a full month’s pay. A monthly spending plan can help with this immensely.

Once you see everything, I mean absolutely everything, laid out like that, you can see where you can cut back. Or, you can see that you need a part-time job to be able to save that emergency fund. Dave Ramsey recommends pizza delivery, but I also know people who write book reviews or do secret shopping in order to make a few extra bucks a month.

All our saving is done with ING savings accounts labeled for their various needs (like when we were saving for a new vehicle, we had “New Car” and “Emergency Fund” accounts). ING makes it easy to set up recurring deposits, and since there’s a delay when transferring money back to a checking account, it makes you think twice about spending money that isn’t immediately available.

Interest rates on traditional savings accounts right now are poor, but taking that money out of an account where it’s easy to spend and moving it to an account where it’s more difficult to spend sets up a psychological barrier to blowing all our hard-earned money. Also, since I still get to see that money via our Mint.com account, I get to enjoy seeing one category (regular spending) be in the positive instead of the negative (student loans).

High-yield savings accounts or money market accounts are another option for a better rate of return, as are CDs (though CD rates are also low right now). The high-yield accounts usually have a minimum deposit, like $5K, so right now, that’s not an option for us while we aggressively–and I mean, really aggressively–pay off debt.

But here’s where I disagree with Dave Ramsey a bit. He says to take all your savings (if you’ve got any beyond $1,000) and throw that toward debt. I’m not comfortable only having a $1K emergency fund, especially with higher medical insurance deductibles and the likelihood of us moving within the next year (damage deposit and paying rent on two places in one month in order to move slowly is a big ouch!). I think the amount in the emergency fund should be comfortable for the individual family; for most, I’d guess that’s going to be 3 months income/expenses, which could be over $10K for some families, and less than $3K for others.

What do you think? Do you have an emergency fund? Do you feel, like Dave Ramsey does, that having a fund wards off Murphy?

Marriage and money

The National Marriage Project at the University of Virginia took a look into marriage and money with their report on “The State of Our Unions, Marriage in America 2009: Money & Marriage.”

Things I found most interesting are in Jeffrey Dew’s piece, “Bank On It: Thrifty Couples are the Happiest” (pg. 23 of the full report):

When individuals feel that their spouse does not handle
money well, they report lower levels of marital happiness.

Couples who reported disagreeing about finances once a week were over 30 percent more likely to divorce over time than couples who reported disagreeing about finances a few times per month.

In particular, couples who are wise enough to steer clear of materialism and consumer debt are much more likely to enjoy connubial bliss.

Seems that financial disagreements are the major predictor of marriage success or failure, so agreeing on finances and also having more assets than debt is actually critical to marital happiness. Probably something many people knew intuitively, but nice to have research to back up that hunch.