Balancing on top of a ball

Sometimes, my financial life feels like I'm trying to keep my balance on top of a huge ball. I don't have great balance.

I get caught up in trying to make the "perfect" financial decision, and either end up making none, or spending so much time and energy wondering/regretting the "path not taken" that I can't tell if I made a good decision or not.

I'm faced with that right now. I have one month's emergency fund and a little breathing room in my budget. Today was pay day, and I had $400 in my bank account even *before* my automatic deposit. Considering that I usually have less than $50, I have to say that having $400 is nice.

Things aren't beyond wonderful, but they're good. And now I'm turning to things like my eyes. I wear contacts. I can't wear glasses, because they don't correct my vision enough for me to drive safely. I haven't had a new set of contacts in over 13 years. My eyes are starting to notice. I have to either get a new pair of contacts, or get the eye surgery I've been planning on for the last few years.

But I'm caught trying to make the perfect decision, and so I'm really not making one at all. What would be more cost effective? How much will the surgery cost? Can I afford it? How long will I have to save in order to get the surgery? I'm working against time here, because as you get older, doctors are less willing to do the surgery, so would it be better to get the surgery financed?

I think I've worked out a plan. First step is new contacts. These will be soft and means I'll have to go through less prep time w/o contacts before I do the surgery. Then I can do a consultation for the surgery, and find out what I'm looking at in terms of money. At that point I'll be able to make an informed decision about what I'll do about the surgery.

Wish me luck :)

College

My parents paid for my college. I dropped out half way through. Now, I'm in a job that is not my dream job, and no way to get my dream job without college.

My son is 13. He knows exactly what he wants to be. He even knows what college he wants to go to (CalTech).

I can't afford to pay for his college. I *hate* this. To me, part of being a parent is preparing your child for the world. Preparing them to support themselves. For my son, this means college. Because I can't afford to pay for his college, I think of myself as a bad parent.

Should parents pay for their kids college? I guess it depends on the kid and the parents. It probably depends on whether or not your parents paid for your college or not, and how that made you feel. It depends on whether or not you can afford it. It depends on your kid, and whether or not their dream means college or not.

Ok, given that I *can't* pay for his college, what can I do to support his dream of college? Because even if I can't help with money, I do support his dream, and I want very much for him to be able to go. How can I help? This is what I'll be working on for the next few years, as well as trying to save some money up for him.

promo codes

At the end of December, beginning of January, I started investing some birthday and Christmas money at Sharebuilder. I was able to avoid paying fees by using the "one month free trial" offer for the Standard version (six trades a month for free). I've also earned $100 dollars and should be getting another $50 this week.

I've invested about $300, and getting $150 in promo/reward money means for my first month of investing, I've had a 50% return. That sounds pretty good to me.

So, my advice right now is to go to Fat Wallet, look at one of the rewards for opening a Sharebuilder account, and have fun.

I also just (finally) signed up with Upromise.com I got a $5 promo code for that (BN5) so I've saved up $5 for my son's college, and haven't spent a cent.

Tomorrow, I'm going to talk about how the investing in the stock market is like buying gas for your car. Or maybe I'll talk about my college funding dilemma. Heck, maybe I'll do both!

not living paycheck to paycheck

All my life, I've lived paycheck to paycheck. I'm 43 years old, and this month and this year is the first time I won't be living paycheck to paycheck. And it's saving me money!

I shouldn't be surprised. Being poor costs money. I live in a middle class area, and work in a very well to do area. Gas is ten cents cheaper a gallon in the rich area. I'd have thought it would be more expensive in the richer area, because people there could afford to pay for it, and "charge what the market will bear" and all that.

What does surprise me is how small the amount in my checking account needed to be, in order to save me money. I got $2,363 back from the IRS. I immediately moved $2,000 over to my emergency fund. Out of sight, out of mind. It doesn't "exist" for me, except for me to sleep a little bit better at night. This left me with an extra (unbudgeted for) $363 in my checking account. $363 is a lot of money, but it's not an unattainable amount. I probably could have had that much in three or four months. What does that extra $363 do for me?

1. I can add $50 a month to my car loan payment. I couldn't do this before, because there were months (Feb, March, and April, to be precise) when paying that extra $50 would have caused me to be overdrawn at the bank. And even though $300 = six extra payments of $50, in actual fact I'll be able to make that extra payment for all of this year, and I don't see any reason why I won't be able to do it next year, too. Plus, I'll be saving money on interest over the life of this loan.

2. I can save money when shopping. I like to do my sundries shopping on line. Drugstore.com is the one I use, but I also use cvs.com. I'm sure there are plenty of others. Having that extra little cushion in my account means when I order through the website, I can order enough to qualify for free shipping. This saves me the cost of gas, my time, and gives me bonus dollars to spend the next time I go shopping at that website. I can save a minimum of $60 a year, by shopping at drugstore.com. That's not even counting sale prices. Because I am buying enough to qualify for free shipping, I'm ordering more than what I need for just "right now". Which means I can stock up on something when there is a sale, or put off ordering something because it's not on sale.

3. I can apply more money towards savings, which also gets me interest.

I'm saving a ton of money this year, just by having a $300 cushion in the bank. Wow, if I'd known it was that simple, I would have done it years ago.

car loan pay down

I've decided to increase my car payment by $50 a month. It looks like this means I'd be paying it off a year early, but I'm not totally confident in my math.

Which reminds me, can someone give me the math formula for calculating simple interest? It's not amount times interest rate, and it's not (amount times interest rate)/12 (though that's closer). My Google fu isn't up to finding the formula, probably because I'm tired and not using precise enough search terms.

Basically, I'm just trying to update my spreadsheet to include a way to forecast how my savings will grow over at ING.

Update: D'oh! I just had to add "excel" to my search terms to find a lot of good stuff.

Savings goals

I think I was a little in conservative in my estimate about how long it would take for me to reach my 2007 goals. It's not even the end of January, and I've paid off my credit cards, and I've saved up one month's income for my emergency fund. (Ok, I didn't actually save it, it was my tax refund from Uncle Sam, but it was my money and I have a one month emergency fund now.)

So, maybe I should add a couple of more goals and see if I can meet those. First is to increase my emergency fund to two month's income. Second, I'd love to see if I could max out my Roth Ira contributions for this year. $333 a month. I don't think I can do it, but it would be interesting to see how close I can get.

Or maybe I should concentrate on getting rid of my car loan debt. *That* would be nice. I wonder how long it would take?

Panic point

Whenever my checking account falls below a certain dollar figure, I start to feel panicky. The solution seems easy enough, just never let my checking account fall below that point. The problem is that the point changes.

Right now, I have $61 in my checking account. This makes me feel panicky. It helps that my spreadsheet and my bank account match, to the penny. It helps to know that payday is day after tomorrow. It helps to know that I don't have any budgeted expenses between now and payday. It helps to know that I have an emergency fund in case some unbudgeted expense comes up between now and pay day.

But in the meantime, I can see that $61 is my panic point. When I had $200 in the checking account, that was close to my panic point. I feel most relaxed when I have $1,000 in my checking account.

Since that state of peace is important to me, I think my next goal will be to make sure that I always have $1,000 in my checking account. I think it's more likely to happen this year, than ever before in my life.

Cool. I like that. I have a sneaking suspicion though, that my "panic point" will reset. I'll need more in my checking account to have that relaxed feeling. Maybe I should put a new page in my spreadsheet that tracks my savings, not just my expenses. Teach myself to see the whole picture, and let that help me.

But I'm still going to keep $1,000 in my checking account. Ok. Maybe $500.

Roth IRA search... for my son

I want to open a Roth IRA for my son. He's 13. We've talked about the advantages, and he's all for it. (He's good at math, and good at savings, and has more money than I do.)

I'd like some place where he can visually see his money growing over time, hopefully with a graph (though this isn't necessary, because I can graph it for him). It would be nice if they sent paper statements, because he loves getting mail. But the really big thing is that it would have to have no annual fee, or else a very small one, because I don't want his money to be eaten up by fees, so I'd be paying the annual fee for him.

Does anyone know of a Roth IRA with very low or no annual fees, even if you're not a regular contributer? (He earns money doing odd jobs around the house, and gets a weekly allowance.)

blog fan "Get Rich Slowly"

I've been reading "Get Rich Slowly" since before it was "Get Rich Slowly", only I didn't know it. Back in 2005, I first heard of the "debt snowball" when reading a blog with an article about eliminating debt. I was so fascinated with the idea, that I saved the article. (Of course, I didn't *do* anything about until over a year later.) It turns out the author of that article was none other than JD, the author of Get Rich Slowly.

I look at his blog every day, and dig through his archives regularly. Even though his was the first article that I'd ever read about personal finance, I didn't rediscover his blog until 2006, when it had split off from his personal blog and and gained a new name, based on the title of that article.

I love his practical philosophy. He delivers great articles on getting rid of debt, (though some of his most popular posts deal with money and food), and my personal recent favorite was how to deal with financial trolls. I highly recommend checking him out, if you aren't already. There's lots of cool stuff there.

Backsliding

I was caught up in the heady rush of getting my taxes done early, getting a tax return big enough to almost singlehandedly meet my "build up an emergency fund of one month's pay" goal for 2007, getting my credit cards paid off, and having hundreds (as in more than one but less than three) dollars in my savings account. In short, I was feeling like super finance woman! Able to deal with debt in a single bound! Faster than an electronic payment, more powerful than an online banking's interest rate! Look! Up in the sky! Is that a bird, a plane? No. I think it was my pride.

Oops.

I stopped looking at my spreadsheet every day. I realized this morning, I didn't know how much was in bank account, only that it was "enough". As in "enough to last me until next pay day". I didn't know what my next bill was, or how much it was going to be. In less than a week, I feel like I'd lost every advance I'd made in the last six months.

Of course, this isn't exactly true, because I still have a savings account that I didn't have six months ago. And my spreadsheet still matches my bank statement (I just checked). But I realized that, for me, it's vital to look at my spreadsheet every day. It keeps me in tune with what's going on in my financial life. So, less learned. Hopefully :)

Myers Briggs financial types?

The Myers Briggs temperament sorter is a test that sorts people on four different spectrums for 16 different types. It's a "sliding scale" and (theoretically at least) you don't change types over your life time. The four spectrum are Introvert to Extrovert (I or E), iNtuitive to Sensing (N or S), Thinking to Feeling (T or F), Judging to Perceiving (J or P). (Disclaimer. I am an INFP.)

The way you think is supposed to affect the kind of jobs you'd enjoy, the way you interact with other people, etc. And I'd imagine that it affects the way you deal with money. So here's my totally unscientific guesses as to how different personality types deal with money.

E - I'd guess Extroverts would rather deal with money in a social situation. Prefer face to face banking rather than on line, for example. Pictures of the stock market traders that I've seen on TV seem like prime examples of Extroverts (and an Introvert's worst nightmare).

I - Introverts need down time away from people in order to recharge. This doesn't mean that we don't like people, so I'd bet Introverts deal with most of their money stuff online. Wesabe and blogging are both good examples of how Introverts can interact with other people, and still get their down time.

N - iNtuitive people probably play the stock market, where their inclination to find patterns for the future can get a work out.

While S - Sensing types are probably more into automatic deposits into a 401k, IRA, or other high yield but predictable returns. (I'm also guessing more Sensing types end up with a sizeable retirement nest egg.)

T - Thinking types probably make the best math based financial decisions. When they do a debt snowball, they work on the one with the highest interest rate first, and then work their way down.

F - Feeling types, however, probably a) buy stocks on feelings rather than research, and b) use the debt snowball by working on the smallest debt first, and then working their way up to larger balances, regardless of interest rates.

J - Judging types have a plan. They have a budget, and have mapped out how much to save, spend, and invest for their goals. I think Judging types would do the math to see how much money they would save (or lose) by taking out a cash advance on a very low interest card, and putting the money in a savings account, making only minimum payments until it's due.

P - Perceiving types probably keep their receipts and important papers on the desk, on the floor, in a box, in a pocket, and in a drawer. At tax time, it's fun to watch us run around and try to find all those papers and keep them in one spot long enough to actually do our taxes.

The Myers Briggs is a huge test that is supposed to be given by a trained professional. However, if you're curious and don't have access to that trained professional you can find many versions and variations on line. One that I like is MBTI Personality Test

the vote is in

I've decided to leave my current 401k at 5% and put at least 5% in my Roth IRA, as well as anything extra that comes my way.

The reason I decided to do this, is because I'm saving to buy a house. It would be easier to use money from my Roth IRA for a down payment than it would to use my 401k money for the down payment, mostly because anything I put into my Roth is something I've already paid taxes on *and* a first time home purchase is one of the very few things you can use your Roth for, without incurring a penalty.

What percentage to save in 401k vs Roth?

I can't afford to max out either my 401k or my Roth. I'm applying money towards both of them, and I'm trying to figure out which one makes more financial sense. Unfortunately, I can't figure it out, so I'm trying to find some online calculator to help me out.

What I really want is a calculator that will show me what me take home pay would be, depending on how I adjusted my 401k contributions. I guess I'll be trying my Google fu today.

6 months of fighting financial ignorance (part 1)

6 months ago (almost to the day) I knew absolutely *nothing* about money. I couldn't have told you how much money I have in my bank account, what bill was due next, or how much it would be. I'd joined my 401k program at work, but didn't even know who it was managed by.

At work we recently had mandatory 401k meetings. It seems our 401k plan is changing. (You have to opt out, now, instead of signing up. And the company puts in a contribution equal to 3% of your pay even if you don't put in one cent. And they're going to start doing profit sharing.)

I was amazed at how many questions I was able to answer about finances at the meeting. The biggest one that I remember is that I knew a Roth IRA was an after tax retirement plan and the 401k plan is a pre-tax retirement plan. This means when you retire and take money from your retirement plans, you'll have to pay income tax on money you take from your 401k plan but not from your Roth IRA, because you already paid income tax on that.

Wow. It's strange to see how far I've come in only 6 months. I have a *savings account*. This is the first one I've had in over 30 years. I actually have *money* in my savings account. (Not as much as my son has in his, but still.) I'm teaching my son about the importance of money and the benefits of investing early for his retirement (he's 13). I have a 401k plan, and a Roth IRA. My credit cards are paid off (for the moment, any way.) I'm saving for a house.

The biggest change? I did my taxes today. Today. As in *January*! This blows me away. Traditionally, I do my taxes on April 15th. I almost always had to drive to the midnight post office to drop off my taxes. Last year, for the first time ever, I did them a day or two before they were due. All this, even though I was always getting refunds on my taxes.

This year, I did them as soon as I could, because I wanted the money in my pocket as soon as possible, so I could start earning interest on it. (I made $600 in 2006 because I had invested in my 401k plan. Evidently, the IRS gives you a tax credit for doing that. Who knew? Not me.) Because I have a child, and some other things that the software program was able to find, I'm getting a $2,000 refund. Very, very cool.

It looks like I'll have my one month emergency fund saved up much sooner than I expected :)

Fico score

As part of my financial education and (let's face it) recovery, I want to improve my FICO score. I didn't know what it was, though I was guessing between 400 and 500. On my really down days, I was guessing more like 200.

I wasn't willing to pay the $7.50 to find out, when I do my yearly credit check. But I got a WaMu card offer in the mail, and one of their inducements was for me to have access to my FICO score.

Cool!

So, I found out my FICO score yesterday, and decided to add it to my "side bar of things I'm tracking".

Oh, and my FICO score (through Trans Union) is 649, which isn't good, but was a heck of a lot better than I was expecting. Over the next year, I'm going to try to raise that score, and see what happens.

the pain of the budget

When I first created my budget, it was so painful that for the first three months I considered (very strongly) just dumping my budget and going back to my previous lifestyle.

Having a budget meant that I had to think about money *every* day. Before, I just spent what I had, and then only worried about money when a bill came up. I can't even tell you how many late fees I ended up paying, because I couldn't pay a bill when it was due, I had to wait for the next pay day. And there's nothing like that worried feeling in the pit of your stomach when you know you're not going to have enough money to last until pay day and you have to figure out what you're going to pay and what you're going to "let slide".

Those feelings sucked. But living with a budget was like thinking about how to make the money last till payday *every single day*. That sucked too. Whenever I feel broke, I want to spend money. And having a budget and giving myself a set allowance every pay period made me feel really broke. I wanted to spend money. I was cranky and bitter about the state of my finances.

That lasted about three months. But it did change gradually. I started seeing living within my weekly budget as a challenge, a game. I loved looking at my spreadsheet, tweaking it, making it better. On days when I had a terrible craving to spend money, I could make that feeling go away by playing with my spreadsheet.

I *love* looking at my spreadsheet and being able to compare it my bank statement, and they match, down the penny. That's a really great feeling. I love being able to look into the future, and see how my money is going to grow over the year. I really, really love not worrying about money. Not having that sick feeling in my stomach.

I feel like I've broken an addiction. It wasn't easy, but things are much better now. And it may be that like any addiction, I may go through spirals, but if there's one thing I know, it's that spirals get bigger. I like this. I want this feeling in my life. I want my son to have this feeling, and never have to worry about money the way I did.

That's my real goal for 2007. One I didn't even realize until now.

financial decisions made with math or emotions

I'm having trouble with a financial decision that should be a no brainer.

I have a credit card with 0% interest until July of this year.

I have a monthly car insurance payment that charges me interest.

I could charge the rest of the car insurance payment to the credit card, and save myself some money by applying my monthly insurance payments to the 0% credit card, instead of paying the monthly insurance payment plus the finance charges. If I do the math, this is the way to go.

However, emotionally, I'm not sure it's a good idea. First of all, I'd have to carry the credit card debt for 5 months. One of my goals for 2007 was to pay off my credit cards and keep them that way. The reason behind this goal is that I want to stop losing money to finance charges, so using my 0% credit card would be ok, because another one of my 2007 goals is to avoid paying fees in 2007. Secondly, and most importantly, I'm not sure that I'm financially responsible enough yet to trust myself to do this. I hope I am. I think I am. I'm just not sure.

I guess the only way to find out is to try it and see.

paycheck to paycheck

For most of my life, I've lived paycheck to paycheck. Strike that. My whole life, I've lived paycheck to paycheck. I'm still living paycheck to paycheck, but now I don't feel like it. That's when I realized there are two components to living paycheck to paycheck.

The first part, the biggest part, the part that everyone thinks of, is the physical part. The actual living paycheck to paycheck part, where you spend everything you make (or almost everything you make) before you get your next paycheck.

The second part, which is more important, is the mental part. This part is why I no longer consider myself to be living paycheck to paycheck, even though I am. In August, I created my budget. My budget didn't just show me what I had spent, it helped me plan for my future spending. By mid December, I'd forecast how I was going to spend my money for all of 2007. I had a savings plan built in. I could see that I'll have one paycheck's worth of income saved up by the end of 2007.

This simple plan has totally changed my mindset. I no longer consider myself living paycheck to paycheck, because I'm putting money in savings. I can deal with unexpected expenses (as long as they're not *too* big, yet). I'm not being blind sided by bills. I expect them, and I know how much they'll be (roughly), and my budget is built to take it.

I really like this feeling. It's much less stressful, and that's worth a lot.

New look at *emergency* funds

I live in earthquake country. I was born and raised here, so that fact doesn't really bother me, though I understand that earthquakes can terrify some people. I'd say that I don't think about it at all, except that's not true. I don't have my bed under a window. I don't even have a picture at the head of my bed. My bookcases are fastened to the wall. I have slip on shoes near the bed (because nothing sucks like having to walk barefoot through broken glass to get to your scared/injured child). I don't really think about the ways my space is earthquake prepped. It's just the way I live my life.

Today is the 150 year anniversary of "The Big One". A really big earthquake hits this part of the world every 150 years (on average). A new website premiered today, called "Dare to Prepare" (also known as "Shake happens"). And that made me think about the many different aspects of an emergency fund.

Because, let's face it, any money that I can only access electronically after "The Big One" might as well not exist, at least for a while after it happens. The rule of thumb used to be that it would take three days for emergency services to gear up and be able to rescue you, and/or turn on the electricity and get the water running again. Katrina changed that rule of thumb. We now know that it could be much longer before we have running water and electricity again.

So, an emergency fund in earthquake country means also having a certain amount of cash on hand. No atms, no internet money transfers, etc. Just plain cash.

And even if you're able to access power in some places, you may not be able to have any at home. Any vital records that you have in your computer may not be accessible for a long time. (Note to self, find that emergency financial record site, and make sure I have a copy that's kept up to date.)

What if you're at work, and your kids are at school? Do you have an emergency plan for everyone to get in touch with each other? (This means an out of state contact, with the number pre-programmed in your cell phone.)

It means always having enough meds on hand to get you through. (I'm really guilty of falling down on this part. I have an email reminder sent to me every Sunday, to remind me to check if I have enough meds for the coming week. But as I said, a week isn't going to be good enough. I need to start making sure I have enough meds for two weeks.)

Of course, it isn't just earthquakes, is it? Your emergency fund needs to be ready for the classics of fire, flood, riot, hurricane, twister, etc. (Don't laugh at the idea of a riot, we had one of those out here not too long ago, either.)

And it means having an emergency fund at home, as well as a smaller one in my car. Of course, the smaller one could be as small as enough money to buy some gas to get home. Better would to be keep my tank filled with enough to get home all the time.

I guess I'm going to the gas station tomorrow :)

investing classes

According to LifeHacker, Morningstar is offering free investing classes. Since one of my goals to become more knowledgeable about finances, this is something I'll be looking into.

Emergency fund report

Well, it's a good thing I've decided to focus my energies on building my emergency fund this year. I've built it up to $250 some odd dollars. Unfortunately, I've had two emergencies at $100 each that will pretty much wipe it out and set back to zero.

My first emergency was, of course, my trip to the emergency room. I have a $100 co pay for emergency room visits.

My second emergency was my cat. He'll be 20 years old next month, and he is suddenly barely able to walk. He can walk two or three steps, and then he falls down. I took him to the vets, got him tested for diabetes (he's clear) and they gave him a shot for inflammation. That was $118.

BB (Before Budget) these two expenses would have broken me. Now, I'm able to absorb them and move on. And since I have seen two too many examples of the benefit of an emergency fund, I'm even *more* dedicated to building it up.