Friday, December 29, 2006

The Third Financial New Year's Resolution

The Financial New Year's Resolutions So Far:
1. Give 5% of my salary.
2. Open a Roth IRA and automate contributions.

To those two, I'll add this one:

Earn the full employer match in my 401(k).

My employer offers a dollar-for-dollar match up to $1,500. That means that there are two ways for me to earn the full match: I can either contribute at least $57.70 per paycheck for the full year, or I can front-load my contributions and earn the full match early on. The benefits of the first plan are, I think, pretty obvious: it means that I can set up contribution levels for my various savings vehicles and minimize the thought they require. The benefits of the second plan are subtler: if I leave this job before the end of next year (a possibility, given the combination of my grad school and travel plans), I'll already have grabbed all the "free money" available.

Both have genuine advantages and disadvantages, but I think what I'm going to do is a compromise. If I contribute $80 per paycheck to my 401(k) (that's 7% of my gross and 9% of my net), I earn the full match in 19 paychecks (that is, towards the end of October). That cuts my losses if I leave early but also allows me to automate contributions to my Roth and my ING travel and mini-emergency funds. If I do stay the whole year, my 401(k) will contain $3,580 (without growth) at the end of the year.

So the final formulation of my third financial New Year's resolution is: Earn the full employer match in my 401(k) by signing up and automating contributions of $80 per paycheck.


Thursday, December 28, 2006

Paying For Branding

If you have any interest in the roles of branding and status in consumer culture, you absolutely must read this article, "What's Noka Worth?" The author of the Dallas Food blog takes on a gourmet chocolate brand, and argues convincingly that with a supreme act of branding, the accountants-turned-chocolatiers behind Noka Chocolates have been rebranding a good-but-not-outstanding base chocolate for markups between 2,592% and 6,956% (depending on the quantity in which one purchases). They sell the most expensive chocolate in the world, with none of the skill of lifetime chocolatiers. It is remarkable.

What this means is that when you pay $40 for .3 oz. of chocolate (let me write that out: that is three-tenths of an ounce of chocolate, or approximately one-fifth of a Hershey bar by volume), what you are paying for is not the quality of the chocolatiers' ingredients, which do not differ in quality level from the ingredients of other top-flight national-market chocolatiers (Vosges, La Maison du Chocolat, Jacques Torres, &c.), and it is not the work of the chocolatiers (which is, according to this report, below average). What you are paying for is branding, pure and simple. What you are paying for is the story told to you by the chocolatier, a story about purity and tradition and an almost ascetic gourmandism. What you are paying for is the assurance that you have impeccable taste, and what you are getting is the proof that you do not.


Saturday, December 23, 2006

Christmas Hiatus

I had planned on posting (for real) today and tomorrow, but it's not going to happen. My parents' annual open house is tomorrow evening, and there's too much work to be done before then (we are nominally Jewish, but my mother's religion is a religion of parties and interior decorating, so...Christmas for all!). I'm going to be busy baking dozens and dozens of brownies and decorating cookies and the house, and I still (!) have one gift to buy.

I'm anxious about the holiday-related money—it's not so much that I've been spending too much (though, um, that's a factor, too), but that I've been keeping track of it poorly—but I'll survive. I vow that my accounts will reconcile by the 28th. I should be back here posting by the 27th.

Merry Christmas. I wish you a wonderful holiday, and uncomplicated accounting in its aftermath.


Friday, December 22, 2006

Five Things You Don't Know About Me

Today the awesome Boston Gal and Wanda of Well-Heeled tagged me to reveal five things about myself that my readers don't know. Welcome to readers who found me through those links, and here goes:

1. I wrote my undergraduate thesis on James Joyce's Ulysses. It's my proudest academic achievement, and secretly, I miss working on it.

2. I lived in Berlin for about four months, learning German and exploring the (fantastic) city. I fell totally, entirely, completely in love with Berlin, and with Kreuzberg, the neighborhood in which I lived there. I can't wait to go back. My German, however, is rapidly deteriorating for lack of practice.

3. I don't own a television. When I'm at my parents' place, though, I'll watch Law and Order anytime it's on, no matter how many times I've already seen the episode.

4. I listen to audiobooks of British murder mysteries when I'm trying to fall asleep. This sleep habit bugs my boyfriend only slightly less than my habit of showering before bed and going to bed with wet hair (it's a curly-hair thing! it needs to air-dry!).

5. I have an extremely close relationship with my younger sister. We fought and hated each other for a long time, and now we're pretty much best friends.

I'm tagging the fabulous folks behind the following blogs: The 100 by 30 Project, No Money in Poetry, and A Pile of Coins (my very favorite German-practice pf blog!). Hop to it!


Thursday, December 21, 2006

How To Set Goals You Can Achieve

As I begin to think about setting New Year's resolutions (and as you may be doing the same thing), I'm thinking about something a very smart lady once told me that changed my entire mindset about setting and achieving goals. She told me not to focus on results, but on the process.

I'll try a little demonstration. Let's say, hypothetically, that I want to be prettier in 2007 than I was in 2006 (hard to believe, I know!).

Here's the worst way to set the goal: In 2007, I will be prettier than I was in 2006.
Basically, this kind of goal-setting just sets you up for failure. It's vague, it reeks of wishful thinking, it's impossible to tell if I've achieved it, and it doesn't tell me what I can do to achieve it. Thumbs down.

Here's a better way to set the same goal: In 2007, I will have better skin.
This is an improvement because it's more specific than it was the first time around. It tells me where I'll be focusing my efforts. Nevertheless, it's still unworkably vague.

Here's the best way to set the same goal: In 2007, I will find a skin-care routine that works for me by researching my skin type and trying some well-reviewed products. I will drink 32 ounces of water every day and cut out one caffeinated beverage each day. I will see a dermatologist twice over the course of the year.

First, this last way of setting the goal places the focus on your behavior. I don't control my hormones, just like I don't control the stock market. But I can control my behavior. I decide if I drink Diet Coke or water, and I decide how much I contribute to my investment accounts from each paycheck. Second, it changes the criterion for judging success. If, one year from now, my skin hasn't improved that much but I've done all the things I've said I'd do to improve it, I've still succeeded. Similarly, if the stock market has underperformed, I may not meet my goal if the goal is "reach balance of $20,000 in IRA," but I've still reached it if the goal is "contribute to IRA from every paycheck."

Set goals with reasonable expectations. Am I setting the goal of maxing out my 401(k) for 2007? Not a chance. The maximum contribution of $15,000 is an enormous 50% of my gross income. Instead, I'm setting a goal to 1) Sign up, and 2) Contribute enough to earn the full company match. I'm not even setting the goal of maxing out my Roth for the year, and that's only ("only") $4,000. Instead, my goals for my IRA are 1) to open the account, and 2) to automate contributions from every paycheck.

With money goals, there are two easy ways to make your goals achievable:
1) Work with percentages, instead of absolute numbers. Instead of "I'm going to put $10,000 in my 401(k) this year," try, "I'm going to increase my contribution from 6% to 10%." This builds in the requirement that you pay attention to how much you can really afford to give, and it lets your contribution grow with your income.
2) Work in smaller time increments. Instead of "I'm going to save $5,000 for a house this year," try, "I'm going to put away $100 every week towards a down payment." Every week you get to meet your goal (especially if you automate the transfer!), and if you miss a week, you can be back on the horse the next week, succeeding again. This can help to circumvent the "all or nothing" mentality, where you slip up on a goal and then decide to chuck the whole thing entirely (I do this a fair amount myself).

Both of these techniques remind you that your goals are something you work for every day. It's the difference between cramming for a test (trying to save $5,000 in your last 4 paychecks to meet a goal for the year) and studying one hour every day (saving regularly from each paycheck over the course of the year), and especially with the help of automation, it's a great way to set goals you can achieve and achieve the goals you set.


We Can Talk It Out

I talk to my friends fairly openly about money. I could tell you what my closest friends make, what they pay in rent, and what their savings allocation is (but I won't). There are a couple of things that make this possible.

We're all just now starting our post-college lives, and we have a lot to learn. When I got home from school after graduation, I would see my friends, and all anyone would talk about was a constant stream of, How's the apartment hunt going? Where are you looking? Are you using a broker? What's her fee? How many people are you living with? How's the job hunt going? Been on any good interviews lately? Know anyone at the organization I want to work for? What do they pay? And then, once we'd all had a bit more of a chance to get settled, it was, Where are you living? What are you paying? For how much space? How close to a subway? What are you doing? How much are you making? What are your benefits like? When do you become eligible for them? We usually had a little bit of meta-discussion about how we weren't used to talking about money all the time, and we'd append, "If I may ask" to the questions, but I don't think anyone felt embarassed, and the reason is simple: We needed to talk about it.

Things in New York change so much so fast that our parents aren't a great source of advice where these things are concerned. If you ask a 60-year-old who's lived in the same apartment for 25 years where he thinks you ought to look for affordable rent, he'll often shrug and say, "Brooklyn?" (Or worse, "Alphabet City?") Your friends will tell you, "Williamsburg's priced us out. Try Bushwick. Try Greenpoint. Astoria's priced us out. Try Flushing. Try Sunnyside. I have a friend who's looking to sublet this place in East Harlem..." Your friends are how you gauge what rent is fair, what salary is fair, what benefits are fair, what broker's fee is fair. Your friends tell you if they've seen a "for rent" sign on a building in a neighborhood you like or if their companies have freelance jobs available. This is what "networking" was before it was sleazy seminars with cheap wine and cheese and everyone passing out business cards--it was having friends. Like, actual friends. And as far as I'm concerned, it's still the most effective kind of networking there is, because there's real trust, not just gladhandling, involved.

It makes me sad to hear personal-finance bloggers advise their readers never to talk about money with their friends. Why not? I understand that income disparities may strain friendships, but is it possible they will have less of an effect if acknowledged? That your friends will stop asking you to meet them at restaurants that you can't afford if you tell them you can't afford those restaurants? When my friends and I go out, we look for places with big prix fixe menus for low prices, like the Indian restaurants on East Sixth Street, or Japanese places with big bento boxes. We share things. We don't like to pay more than $15 for a meal. We can't afford it. We all know we can't afford it. We buy each other drinks when we have money and someone else doesn't. We loan each other books. We help each other move. We share bargain-shopping tips. Talking about money is helpful. It helps us learn things and do better, it helps us learn from each other's mistakes and successes. It brings us closer together--makes us feel like we face our common problems together. We don't talk about money to brag or compare--we talk about it in order to help each other.

That's what friends are for, right?

So my advice is: talk about it. If you find yourself uncomfortable, ask yourself why. Ask your friends why. And if you still find yourself uncomfortable, if you feel judged or pitied, perhaps you need to think about who your friends are, and how much y'all have in common.


Wednesday, December 20, 2006

The Second Financial New Year's Resolution

The first, which came somewhat early, was to begin giving to good causes regularly, starting with 5% of my net pay.

The second, also somewhat early, is to open a Roth.

I'd like to open my Roth at Vanguard, which means a minimum deposit of $3,000. My ING account currently has a balance of $2,313.57. By the beginning of the New Year, the balance will be around $2,420. Still a ways off. Nevertheless, I feel really strongly about opening my account with Vanguard, because of their low fees and strong target funds. My (not-so-)secret hope is that my generous aunt will continue her tradition of generous cash gifts to the nieces and nephews, and with my January savings contributions, I'll reach the $3,000 threshold by the end of January.

Then I'll open the Vanguard account, plunk my cash in a target fund, set up automatic transfers, and forget about it for awhile.


Monday, December 18, 2006

Earning My Dad's Respect

As I mentioned some time ago, my father and I used to fight about money. One reason for that is that he vacillates between the desire to be generous with me and the desire to save money. Understandable.

Friday night we went to the theater together, and out for dinner afterwards, and over soup and salad he renewed his offer to give me money on a monthly basis. He really thinks (and pretty much correctly) that I don't make enough money to get to be spontaneous with it every now and again. "Put something on the credit card," he urged. (He means his, not mine.) I declined--one of the reasons we've fought in the past is the absence of clear boundaries--he'll tell me to use the credit card to have some fun (or buy some work clothes, or whatever) and then get upset when he gets the bill--and I like to think that I can learn from my mistakes. He asked if I was managing to save any money, and I got to tell him proudly that I've saved almost a full paycheck's worth. After all that talk about how I didn't make enough money to live comfortably, being able to tell him that felt awesome. It felt like telling him that I can take care of myself, that I'm resourceful, practical, and responsible.

He told me he was proud of me, and it meant more to me than he could have known.

And strangely enough, somehow that may mean that I feel like I can take money from my parents, that I don't have to sit at home when I could be out with friends just to prove a point. Of course, I've already done a budget with the money he'd like to give me included, and I'd be saving 46% of the extra money and giving away another 16%, so mostly they're helping me contribute to my savings, and it's hard to have a problem with that.

It's sort of a wakeup call, too, this kind of thing, because even though I'm a novice at personal finance, I'm doing okay, I'm doing well enough that my father can be proud of me. That's a good thing to remind myself, too.


Sunday, December 17, 2006

Billionaire Philanthropy For Everyone

If you have the time, I really heartily recommend that you read this article from yesterday's New York Times magazine. It's written by Princeton bioethicist Peter Singer, and treats seriously the idea of building an ethics-based model of philanthropy. It's a great read.

Incidentally, Warren Buffet's approach towards estate planning is, to my mind, absolutely perfect:
Buffet says he believes in giving his children “enough so they feel they could do anything, but not so much that they could do nothing.” That means, in his judgment, “a few hundred thousand” each.

He says "a few hundred thousand" flippantly, but that's because he's a billionaire. The point, I think, is to let his children pursue their own goals, but not to obviate the necessity of pursuing something. Exactly what I'd like for my own children, in the event of their existence.


Friday, December 15, 2006

How the Little Luxuries Add Up, and a Detour Into Gendered Luxury

I've been thinking all day about today's Purchase I Don't Regret, and nothing's jumping out at me. Mostly (I must confess) this is because I'm a recent graduate not just of college but of parental welfare, and it's a lot easier not to regret spending someone else's money. To the point that it really doesn't count. So I thought I'd take a look at where I let little luxuries into my budget--that is, when I choose not to buy the cheapest available. I think this tells me something about your priorities, and I'd encourage you to try this exercise with your own spending:

My "little luxuries" include:

Salon-brand hair products
According to my credit card statement, I spent $46.60 on two bottles of hair product on October 27. It's special curly-hair stuff, free of the gross chemicals (as opposed to the non-gross chemicals) that I don't put in my hair, ever. I am not even halfway done with either product, even the one that I use every time I comb my hair. So let's assume that these bottles last me through February. That leaves me with a monthly cost of $11.75 for two great products, or $5.88 each. I'm willing to accept that. It's also not that much more than I pay for my cheapo conditioner (let's not go into my complicated hair-care routine, okay?), of which I probably go through two $2 bottles a month.

I don't mess around with my hair. Although I've been thinking about getting myself one of those special scissors to do some maintenance to extend the time between haircuts, I'd never go to the local Supercuts. The person who cuts my hair will always be a trained professional who specializes in curls, and in New York, that will always run me somewhere close to or north of $100.

M.A.C. makeup
Lately I've been using a drugstore foundation, but pretty much everything else I use (except for mascara) is M.A.C. I spent about $80 on makeup when I got this job three months ago, and since then have only spent $14 for a new compact of (drugstore, as aforementioned) powder foundation. The nice thing about M.A.C. is that the color payoff is so huge that one eyeshadow lasts two years, easily. I also bought the palette (cheap, on eBay) so that I can buy $8 pans of eyeshadow rather than $12 pots. It saves money and space. But the point is, I don't buy Wet 'n' Wild.

Skin care
No, I don't use $45 face creams. I do, however, use Proactiv. Without it, my skin wouldn't be gross, but it wouldn't be great. Pure and simple: I'm willing to pay for great skin.

I tried to eat ramen. I did. I bought a bunch of Cup-O-Soups to take to work. I can't do it. It's too gross, and it has enough sodium to bring down a camel. I don't mean I don't bargain-shop, but there are things I won't do to save a buck in this department. I will eat mediocre sushi instead of the amazing stuff and deli sandwiches instead of fancy wraps, but I won't buy lackluster produce, and I won't eat ramen.

This is more a matter of finance than a place in which I disregard finance, but I'm always willing to pay more (within reason) for quality. The cost-per-wear is way lower.

It's interesting to me that my luxuries cluster around personal appearance. I kind of hate to confirm that girls-and-their-luxury-spending stereotype. I'd venture that these things feel more like "needs" than "wants" to many women because personal appearance is a point on which women are often judged. Look up some statistics on the pay gaps between women identified as attractive versus women identified as unattractive, hm? In women, "well-groomed and attractive" means "smart, competent, organized," and a hundred other things besides. I also have to work doubly hard, because being over a size 12 often means that I have some serious bias to overcome. In short, I have to wonder why these are the things I'm willing to pay for


Thursday, December 14, 2006

PF Bloggers=Poetry Elves?

I was just about to leave work, but checked in on the Donors Choose project to which I donated this morning. It's fully funded! Fifth-grade kids in my neighborhood will read poetry!

I know that some of my readers clicked out via that link. If you donated, thank you. I'm really, really grateful, and also quite moved.


The Simple Dollar on Shakespeare on Money

Big English Major props to Trent of The Simple Dollar for his post on taking financial advice from Shakespeare. He starts with the ubiquitous Polonious line, but goes on to the meatier (no pun intended) speeches from Timon of Athens and The Merchant of Venice.

I'll add my own from my personal favorite of Shakespeare's works, Twelfth Night:

These wise men who give fools money get themselves a good report--after fourteen years' purchase.

The point, of course, is that you can't pay people to like you, at least not without paying exorbitantly and continuously.


Personal Finance Grammar and Usage: Part Three

Here we go again!

Today, we take on the grammar of saving money. Aside from the overuse of the idiom "socking away," what do you think is the most common usage problem afflicting personal finance bloggers writing about saving money?

My vote goes to the "hoard"/"horde" Homophonic Dilemma.

Much as I like the image of little Attila the Sums storming up the piggy bank's back, waving their scimitars, in fact, when we save large sums, we are hoarding, not hordeing or hording money. Similarly, the product of that strict savings plan is a hoard, not a horde or hord. Less like the Visigoths, more like the loot in a dragon's cave.

Go forth, ye hordes, and hoard.


The First Financial New Year's Resolution: Putting My Money Where My Mouth Is

I know, I'm early. Seventeen days to go. But this one hit me with the force of a truck sometime during my subway ride this morning.

I have to start giving money away.

Let me be frank. I take home $889 every two weeks. I pay $600 a month in rent. There is not a lot of slack in my budget. Not an awful lot of fat to cut.

That is not a good enough reason. That is, it's an okay reason, but there are better reasons to give money away, not least to get in the habit of doing it so that when I make more money, I give more of it. As I started thinking in the last post, I need to make sure my financial decisions support my principles. If Millionaire Artist can do it on a much-reduced income, I can do it on the biggest income I've ever had. I'll let myself start small, but from here on out--that is, starting with the paycheck I received today, a percentage of every paycheck goes to a good cause.

So I've just donated $40 (a paltry less-than-5% of my paycheck and slightly more than 5% of the project's total requirement) to support a teacher at a public school in my neighborhood in establishing a poetry library for her fifth-grade class. Seventy-nine per cent of this teacher's students come from low-income families. Check out the teacher's description of the project and consider making a donation to this project or another Donors Choose (which gets the full four stars on Charity Navigator) project. If I can do it, you probably can too.


Wednesday, December 13, 2006

Office Jobs, Purpose, and Making Money Work

Perhaps you have noticed that I don't really know what I'm doing with this personal-finance blogging stuff. Perhaps you have noticed that I write screeds about values a little too often and direct my small readership to articles from Kiplinger's too rarely.

I'm confused. Not about blogging--in general. I'm confused about what I want my life to be.

I took a job basically right out of college. It's a job at a company whose name impresses people, and it offers opportunities for advancement, and all that sort of thing. It offers a 401(k) with a decent match and health insurance. It's a good job. It doesn't pay a great salary, but it's a good job.

But much like the dissatisfied co-worker whom I advised to quit (and who will, in fact, be giving notice after Christmas), I'm not sure those things are more important to me than doing interesting things with my life, the kind I may not be able to do from an office. How can people do this their whole lives? How can they sit in offices, which basically means being alone all day, spending the bulk of the day treading water? Am I supposed to just sit in this office and save money every paycheck and wait for the milestones of my life to pass outside the window (no, my office does not have a window)? Am I supposed to sit in my office and wait to get married and have kids and send them to college and retire, go home worrying about the balances of my accounts, watch a movie, fill in the day's expenses into my budgeting software, go to sleep? For years?

I find this prospect terrifying, depressing, and absolutely untenable. I can't do that. I cannot do that. And I won't. I'm not saying I couldn't do this job for a couple of years until I go back to grad school--but not my whole life long.

I feel like with lots of people, focusing on money gives a sense of movement to a static life. If your goal is to make a million dollars by the age of thirty-five, each day at work is a challenge not because you like the work, but because you're trying to position yourself to advance. And I guess I can respect that, but it's not for me. I can't do a job I don't love. Not for my whole life.

I want to travel. I want to see beautiful things I've never seen before. I want to have lots of friends in lots of places. I want to read lots of wonderful books. I want to use my brain, which is a pretty good brain, all day long. I do not want to use it printing up shipping labels. I come home from work exhausted. I come home from work not wanting to read a book or go to a museum. I haven't seen my best friend (who's an unpaid intern at a theater group she loves, and is thinking about starting a company with a couple of her fellow interns--that's a theater company--and tutors rich high school kids to pay her bills) in more than a week. I want to have silly parties, drink cheap beer and laugh at jokes about Paris Hilton and Ulysses. Maybe I want to go back to Portland, where I have friends who roast pigs over backyard spits and sit on Goodwill couches on the porch, doing the crossword and watching things go by. Maybe I want to stay in New York, where the people-watching and the public transit are unparalleled and you can always find good bread. Maybe I want to study for the GRE, apply to grad school, and pick myself up to move wherever I get in. New people to meet. New books to read. I don't know.

I don't know what I want to do. I'm learning, slowly, about what I don't want to do, but I really haven't come much closer to figuring out what I do want to do. Whatever it is, I want it to sustain me. I want doing it to be something to look forward to and to enjoy every day (or at least, the vast majority of days).

Personal finance bloggers often scoff at needing to find one's purpose. They advise, instead, settling down at a well-paying job and keeping financial goals in mind. My priorities are different. I will make the money work, honestly I will, just as long as I can figure out what I should be doing and find a way to be doing it. This doesn't mean that I should be reckless, and it doesn't mean that I shouldn't educate myself on how to deal with money, but money is not the point. It is not enough to sustain me. I need to pursue a life driven by a sense of purpose.


Tuesday, December 12, 2006

Conundrum Quickie

What does personal finance gospel dictate in the event you're invited to a dinner party (free food!) on very short notice given by people of whom you're not particularly fond (poor company) and to whom you may then have to extend a reciprocal invitation?


Staying Solvent While Socializing

I have an entire week off, paid, between Christmas and New Year's. That is awesome, please do not get me wrong, but I am also anticipating that it will be somewhat expensive. My friends at grad school (or, in a couple of cases, still in undergrad) will be home visiting, and I'll want to see all of them often, and it'll be one of those times when I schedule my days like this: Lunch with X. Coffee with Y. Dinner with Z. Drinks with big group. Taxi home. Declare bankruptcy immediately. Do not pass GO, do not collect $200. Since I'd obviously rather stick pins under my fingernails than withdraw from my savings account to cover the extra socializin', I'm thinking about ways to minimize its financial impact.

1) Use grocery money.
Not as dumb an idea as it sounds, I promise. Two reasons: first, with my boyfriend visiting his parents in Chicago and my sister home from college, I'm guessing I'll probably do what I did over the long Thanksgiving weekend, and pack up my little overnight bag for a stay at my parents'. That means? That's right. No grocery shopping. Second: leftovers. They throw a huge party every Christmas Eve, and I speak from experience when I say that there are leftovers for two weeks. I'm sure they'll let me take some home. This frees up about $75 for catching up with friends while drinking beer.

2) Use clothing money.
Am I going to need to buy new clothes right after Christmas? I think not. That's why God invented gift receipts. I can divert that $50 into Necessary Taxis, which I foresee occurring with increased frequency during this week.

3) Play a lot of Scrabble.
It is the game of the young and hip (you think I'm joking, and I am totally not). Really, the point here is to find ways of socializing that don't include cash outflow, or that include less cash outflow (e.g., "Hey, let's all take the 7 out to Queens for a cheap matinee instead of seeing the movie in Times Square!")

4) Don't buy more than one drink.

What money won't I be using to cover the extra expenses of my profligacy? My gift fund money. Not only does my boyfriend's birthday approach soon after Christmas, but the whole point of the gift fund is to save it when I've got it so as to be able to spend it when I need it. I'll begin contributing to 2007's gift fund with the paycheck I get on the 28th of December (I really, really love it when I get paychecks while not in the office).

The idea here is to predict what I'll actually be doing and rebalance my budget expectations so I can set realistic goals based on which budget categories will be circumstantially straining at their boundaries and which will be largely unnecessary. Like I've told my boyfriend a couple of times, budgeting for me is all about knowing my own habits.


It's Nice To Have A Plan

It's hard for me to disagree with Wanda at Well-Heeled when she says, "Now I know it’s not smart to rack up credit card debt, but I can see Tolu’s side of the story. He’s been to 22 countries! I guess you can say the experience was priceless." Word, Wanda. I've also got the wanderlust. I've been to England, France, Italy (and the Vatican, technically its very own mini-country), Germany (where I lived for a few months), the Netherlands, South Korea, Mongolia, and, uh, Canada, and my hunger for travel is piqued rather than sated. My next major travel goal is to ride the Trans-Mongolian Railway, which connects Moscow and Beijing via Ulaan Baatar, an absolutely extraordinary city to which I'm frantic to return. After that, I'd like to travel through North Africa, visiting Egypt, Libya, Algeria, Tunisia, and Morocco.

Unlike the person to whom Wanda is relating, however, I have no $100,000 salary to which I can look forward. For that reason (among others), I wouldn't ever travel on credit. I would, however, defy personal-finance gospel by prioritizing saving for travel over saving an emergency fund. My parents' financial situation permits them to cover my emergency expenses, and (at least for the next few years) they would choose to step in if I had an emergency that money could help me out of. Without that security, I don't know if I could say that for me, travel is more important than a $10,000 emergency fund.

As I begin to get a sense of my financial goals, my plans for my own savings become clearer. Travel plays a big part in those savings plans. It's not, however, absolutely my first priority. I absolutely must open a Roth IRA. I want to open it with Vanguard, where there are minimal fees. Vanguard's minimum balance for a new Roth is $3,000. Therefore, when my ING savings account reaches $3,000, I'll open my Roth at Vanguard. At that point, I'll begin (little teeny) automatic contributions to the Roth in addition to working on rebuilding the ING account, which will be devoted to saving for what are essentially "experience purchases": travel and graduate school.

This plan takes advantages of the resources I've got and prioritizes the things that are most important to me. It also doesn't leave me totally dependent on my parents: in the worst-case scenario, I could break my $1,000 CD at Bank of America at this point without losing principal. I think that allows me enough peace of mind to begin saving aggressively for the things that really matter to me.


Monday, December 11, 2006

Fortune's 10 Rules For Building Wealth

CNN Money features "Fortune's 10 Rules for Building Wealth." I'll review them here, and see how I measure up.

1. Start early.
Check. I currently contribute about 12% of my net income to a high-yield savings account. When I become eligible for my company 401(k), I'll begin contributing to that too (see below).

2. Use your 401(k).
Not yet. I don't become eligible for my company's plan until January, but you can bet I'll be asking for the signup information before we close for Christmas and New Year's. I'll be contributing enough to get the full match ($1,500/year).

3. Keep it [your asset allocation] simple.
Well, right now it's a little too simple, but that's the plan. I'll probably lean heavily on target retirement funds, at least for the time being. Anything else is too intimidating.

4. Don't try to beat the market.
Pursuant to #3, um, no fear.

5. Don't chase trends.
See #4.

6. Make saving automatic.
Actually, I have to confess that my transfers from checking to savings aren't automated, yet, though of course I make them religiously. One reason I haven't wanted to automate is because my current savings allotments aren't permanent. Once I open my Roth and my 401(k), hopefully in January, I'll get a better idea of what's going on. My biggest financial New Year's resolution, after setting up the aforementioned accounts, will be automation.

7. Go heavy on stocks.
See #3.

8. Hold down fees.
I'll be opening my Roth at Vanguard, so no worries there.

9. Ditch credit card debt.
I pay off my bill online after each charge. Credit card debt isn't going to happen.

10. Defer taxes
Not so much applicable to me, insofar as I lack any investment accounts.

In sum, a pretty good set of goals for someone beginning to manage their own financial life, and a nicely-formulated simple set of guidelines to which I can aspire. Also, a neat diagnosis that tells me that the things I'm doing I'm doing pretty well, but there are things I need to be doing that I'm not, yet. I'm working on it!


Apres Moi Le Deluge

The Christmas spending is officially begun. I haven't bought any big gifts yet; just craft supplies. I found a bulk supplier for the cloves (the difference between $4/oz. and $1/oz. is a big one), but am still trying to find acceptable prices on a couple of other items. That said, I bought:

10 oranges: $3.99
20 oz. cloves: $19.98
3 yards satin ribbon: $5.97
3/4" hole punch: $8.99
Total: $38.93

Still to come: flat marbles, magnets, silicon glue. I tried a craft store and a hardware store for the magnets; no luck getting them for under $2.50 per package of 8 (clearly an unacceptable price). I'll either find them in bulk on the internet or I'll return the hole punch and do a baking project instead. Because while I'm basically coming in at budget on the clove oranges, the magnets are turning out to be far more expensive than I'd envisioned. If the magnet project isn't coming in under $40, I'm scrapping it (I only cut it that much slack because I'm getting about 10 gifts out of it with the probability of leftover supplies). That means I can't pay two shipping charges--I can either buy the marbles online, or the magnets, but not both from two separate sites. New York has a strange and notable absence of craft stores, but I'll head down to Canal Street this afternoon after work to see if I can find supplies at reasonable prices without shipping charges.


Sunday, December 10, 2006

Open Letter to the Internet on the Subject of Lazy Days

Dear Internet,

Hello from bed. Yesterday, my boyfriend and I were serious homebodies. We slept past noon, watched cartoons, played a parody of the old text-based videogames he grew up with from start to finish, and played a cutthroat game of Scrabble (I won). I made chicken cutlets, garlic couscous, and steamed artichokes with dipping sauce for dinner; he made ice cream sandwiches with homemade chocolate-chip cookies for dessert. The only things we bought all day were chocolate chips, vanilla ice cream, and the "oh yeah" items that going to the grocery store reminded us of (paper towels, a box of pasta, an avocado). We spent less than $20 for a relaxing, rejuvenating, and all-around lovely day. Internet, I am not demeaning the pleasures to be found outside the home—brunch, for example, is a favorite and somewhat costly weekend practice of mine. Every now and again, however, this is the kind of day one needs, and it is a privilege that costs next to nothing.

English Major


Friday, December 08, 2006

Purchases I Don't Regret: Part Two

It's time for another post about a purchase I don't regret!

And this time, it's a two-for-one special on hardcover books. Specifically, Zadie Smith's On Beauty and Marisha Pessl's Special Topics in Calamity Physics.

I never, ever buy hardcover books for pleasure reading--I think these are the only two new hardcovers I've bought in the past three years or so. Two reasons: they're a bitch to carry around in my purse, and they're expensive. (An additional reason: I almost never read something that close to its publication date.) I spent close to $60 on these two books.

They were, however, worth it.

Here's why:
1) I really, really wanted to read them. I wanted to read On Beauty both because I think Zadie Smith is an interesting young writer and because it works intertextually with Howards End, one of my all-time favorite books. I wanted to read Special Topics in Calamity Physics because it was being described as a "literary mystery," which is one of my favorite genres (though, as it turns out, if it's one of yours, too, I'd recommend Donna Tartt's The Secret History or anything by Dorothy L. Sayers instead.)
2) I enjoyed reading them (not to say I liked them without reserve, because that's not the case--but I enjoyed thinking through them and forming opinions about them).

Here's the important part, though:

3) Reading them soon after publication (that is, when only hardcover is available) added value to the reading experience. Other people were reading these books around the same time I was, and I had several very enjoyable conversations about them. There is no other time when a book offers that opportunity for lively, engaging conversation with a wide range of people.

I wouldn't make a habit of it, but sometimes it's worth it to pay double the price for the hardcover edition. It offers both the intellectual satisfaction of the communal focus on the book and the visceral satisfaction of holding a nice, fat, heavy hardcover book. And there's always the justification I'd use on my mother when I was a teenager:

"Oh, poor you, your daughter skipped the drunken party in favor of an expensive book."


I Use Budget

Across the spectrum of personal finance blogs, people use a wide variety of budgeting methods. There are Luddites amongst us who use actual, physical envelopes with actual, physical cash inside, and there are techies who have Quicken, Money or Mvelopes synched up to their bank accounts and use Yodlee and Wesabe in addition. Personally, I use a funny little combination of the two: Budget, by Snowmint Creative Solutions. Much like Mvelopes, Budget creates a high-tech mockup of the old-fashioned envelope system, earmarking funds from each pay source into different "envelopes" so that I can always see what I have available for a particular category of expenses. Budget doesn't synch with your accounts (or, rather, it allegedly does, but I haven't been able to make it work), which I actually kind of like, because it allows me to round my spending up to create a buffer in my checking account, but it's a convenience downside (you have to enter your own transactions). I really love Budget--it's not too much software for me, and it's a lightweight, Mac-designed program that does exactly what I need it to--show me how much money I can spend and allow me to "save" without opening a zillion ING subaccounts. All in all, it's a great little program for a visually-oriented Mac user whose finances aren't too complicated and who likes to create "bank errors" in his or her own favor.


Thursday, December 07, 2006

Personal Finance Grammar and Usage, Part 2.1

Very much like the last usage issue, what's wrong with the following real personal-finance blog sentence?

I wasted .98 cents.

Much like last week, the issue is redundancy. Here, though, more than last week, we run into an actual comprehension issue. The dollar sign and the word "dollars" don't interact to cause confusion--they're just redundant and silly. The decimal point and the word "cents," though...that's a whole different story. What this sentence actually says is that the waster wasted an amount we might transcribe as point ninety-eight cents--a little less than a penny. In fact, the waster (wastrel, even) wasted ninety-eight cents--a little less than a dollar.

To say what you mean with a mimimum of confusion try it one of these ways:
I wasted $0.98.
I wasted ninety-eight cents.
I wasted 98 cents.

Writing is like balancing your checkbook the old-fashioned way--you have to be careful with those decimal points!


On the Moneyed Midways

It took me quite awhile to find it, but I'm delighted to be included in the most recent edition of On the Moneyed Midways, which selects a favorite post from personal finance-related carnivals. They list me as the best of the first carnival to which I ever submitted a post! I'm quite honored.

I'm also glad to have found On the Moneyed Midways, because it encourages me to read posts from carnivals I wouldn't otherwise read, like this post from the Carnival of Personal Growth.


Wednesday, December 06, 2006

The Value of an English Major: A Follow-Up

One Frugal Girl, an English major herself, kindly linked me to this article on, in which hiring managers address the job prospects of liberal-arts majors.

English majors are, I think, appealing to employers for the same reason that we're appealing to law schools, business schools, and med schools: your typical English major is articulate, communicative, a good writer and a close reader--these characteristics are conducive to being a good lawyer, making a good pitch, or having a good bedside manner, but are also crucial office skills.

Frankly, I think the reason you see low "average salaries" listed for English majors is that many of the same people who want to be English majors want to take on low-paying careers because they love the work: teaching, say, or work in not-for-profit. An English degree without subsequent training can prepare you beautifully for a career in advertising, say, but often the people who are really dedicated to pursuing that fat Madison Avenue paycheck will opt for Communications as a major because they think they'll learn more directly applicable job skills. Basically, I think an English major can earn as much as a Communications major easily--it's a matter of if he wants to, and whether the people who strive for high salaries choose to be English majors or Communications majors.


Coin Jar Gifts

I keep a coin jar (well, strictly speaking, I keep a coin mug) in my office, and I dump change in there over the course of the day--change from when I buy lunch out or a Diet Coke from the vending machine. I consider it a sort of self-taxation system. I've had the coin mug since a couple weeks after I started this job--almost three months ago now (wow!). I think, in order to somewhat alleviate the holiday burden, I'm going to be cashing it in at my local CoinStar machine somewhere in the next week and a half. I'm thinking I'll probably take somewhere in the neighborhood of $25 away from the machine.

That $25, totally painlessly, will buy me a dozen oranges, a yard or two of ribbon, and a big bag of whole cloves in bulk from one of the Indian markets on Lexington Avenue, and I'll be able to give a dozen hanging clove oranges, which are long-lasting, sweet-smelling, and decorative, without touching a dime of my earmarked gift money.


Spreading the Personal Finance Gospel

(Sorry for the post-free Tuesday; our internet connection at work was down, and I was out all evening.)

Now that I know a teeny-tiny bit about personal finance, I've been feeling compelled to talk about it. I don't mean talking about money with my friends--that's a different subject, really, and one I'd like to address. But I did have a little come-to-Jesus chat with my boyfriend last night.

My boyfriend is a freelance video editor. He works mostly in TV, and after a long stretch of doing day-here-day-there gigs, he's taking a 46-week job with one show. He'll be on payroll and everything, which is great--they'll deduct taxes, and save him the hassle of paying taxes as a self-employed person (he still has to do that this year, and it's going to be a nightmare). It also means that, for the first time in a long time, he'll have a constant and consistent cash flow. What does that mean? It means that he can make a budget!

I can't even remember how we got on the subject, but on the subway last night, I basically pulled the Gospel of Personal Finance out of my back pocket and got up on my soapbox. By the time we got off, he'd agreed to open a Roth. By the time we went to sleep, I'd helped him draft a quick monthly budget based on a conservative estimate of what his paycheck would look like after taxes.

I think he's going to join Mvelopes. He's exactly the kind of person it's designed for--hates keeping receipts, loves being able to tinker with graphs, wants to be able to enter data directly from his Treo, wants everything electronically synched up with everything else, &c. He's also going to close his low-yield savings with his brick-and-mortar bank and open an ING account (I sent him a referral). Like me, he likes the subaccount feature, and plans to open subaccounts to save for an emergency fund, new gadgetry, periodic clothing purchases, and even a gift fund.

He had what he called "an a-ha! moment" when I was explaining how I do my budgeting: I may not spend $50 on clothes every two weeks (okay, bad example), but that means that every month, $100 is available to be spent on clothes; I have the money ready, earmarked for that purpose. I think the idea of budgeting as planning ahead, as guessing about your lifestyle and prioritizing when things conflict, was new to him.

See, the thing about him is that he's often anxious about money but has had a hard time, because of both his personality and his inconsistent financial situation, getting on top of his financial situation. My hope is that if he starts learning how to manage his money during this time of consistency, he'll be interested enough and proficient enough in his finances to continue good planning and managing over periods of inconsistent pay. My hunch is that if I help him set up a system that works for him, I can help his tendency towards inertia be constructive rather than destructive, because once he gets a system set up, and it works, and it alleviates his financial anxiety, I think he'll stick with it as long as humanly possible.

I told him to stop me when I get too pushy, but he seemed to appreciate the help. I know that I'll be less anxious if he's less anxious, so I consider it time well spent.


Monday, December 04, 2006

Maybe Your Sanity Is Your Greatest Asset

This afternoon a co-worker I like a great deal came into my office, closed the door, and burst into tears. She hates her job: finds it unchallenging, tedious, and ultimately mind-numbing. She expressed the opinion that, "Yes, it's valuable to have money in my 401(k), but isn't it worth something not to cry at work every day?"

I absolutely agree with her. I told her as much. Contributing to your 401(k) from the age of 22 on is valuable--extremely valuable. But not crying at work everyday is, to paraphrase the old ads, priceless. (Besides which, no matter what she's doing, she can still contribute to her Roth!)

I really feel extraordinarily strongly about this. The whole reason I want to learn to manage my money is so that I can afford to live the life I want to live. None of my aspirations carry with them the promise of fabulous wealth--if I know how to manage money and live within my means, I can make it work; otherwise, I may always resent the limitedness of my financial compensations. My point is, though, that for me, personal finance is a tool, something I use to construct the life I want. I do not, and will not, construct my life around my personal finance goals.


Saturday, December 02, 2006

Personal Finance Grammar and Usage, Part Two

It's time again for that most entertaining of English Major tics, the grammar and/or usage correction! Tired But Happy cites savers striving for "piece of mind" as a pet peeve. Valid, but I'm going to go with another one. What's wrong with the following sentence?

Will you give me a $100 dollars?

Two things!
1. The redundant combination of the dollar sign and the word "dollars." We read "$100" as "a [or "one"] hundred dollars." Theoretically, then, we should read "$100 dollars" as "a [ditto] hundred dollars dollars," implying some sort of exponential math, like compound interest on crack.
2. The redundant combination of "a" and the number 1. The numeral 100 reads as "a hundred," or as "one hundred." It does not need an article, especially an article that technically disagrees with the noun it's working with ("a"? singular. "Dollars"? Plural).

The phrase "a $100 dollars" contains two unnecessary components. It can be correctly rendered either as "$100" or "100 dollars," whichever suits your fancy. The only time you will ever need the "a" is when you are beginning a sentence this way (e.g., "A hundred dollars buys a lot of ramen."), because it is technically incorrect to begin a sentence with a non-letter (but there's no semantic confusion, so I tend to shrug at that rule, despite the fact that I obey it myself). There, of course, you are welcome to swap it for "one."

There! I have just saved you the time of typing "a" and "dollars." Time is money, you know.


Friday, December 01, 2006

Purchases I Don't Regret: Part One

I've been thinking a fair bit about stuff because of the holidays, and the fact of the matter is that there isn't a whole lot of stuff I really want. There's a ton of stuff I'd like to have--like, I wouldn't turn it down if you offered it to me, but I probably wouldn't go hike twenty miles up a mountain to get it, either (most of this like-to-have stuff is clothing)--but there isn't any particular item that has totally captured my imagination right now. My mother is slightly irritated, because this makes buying me Christmas presents kind of tough. I've been mentally running through the list of things I sort of could want, and I pretty much just don't. I don't need a new cell phone, or a BlackBerry, or a new iPod. Most of these desires are satisfied by great things I've already got, so I thought I'd do a little set of posts (every Friday, I'm thinking) about the things that I've had for awhile and really appreciate--things that were good purchases that have brought me lasting enjoyment.

So, the first item on this list is my truly excellent headphones. I use them with my iPod, which would definitely be on this list had I bought it myself.

I use Sennheiser HD280Pro headphones. I've had them for close to three years, ever since I picked them up for $90 on eBay my sophomore year in college, dreading another flight home with only my flimsy Radio Shack 'phones between me and the ferocious engine rumbles. Three years later, they still retail for $200 (okay, $199.95), so you can tell I got a good deal. The first time I put them on, I felt like I'd never listened to music before. Every instrument is individually distinguishable through these headphones. Sound is richer, better. Because they're circumaural (that is, they go around and on top of your ear), they do a far better job of insulating me from background noise than iPod earbuds, so I can listen to them at a lower volume and avoid blowing out my eardrums (also, sound quality is best at lower volumes).

In three years of heavy usage, they've suffered a few cosmetic blemishes (I am not the most careful human in the world where my electronic devices are concerned, I confess, and I carry my headphones and iPod everywhere, shoved into my purse, so my Sennheisers have a couple of cracks in the plastic shell and a tear in the fabric that covers the right earpiece). But that's all they've suffered. They work like new (actually, they work better than new; it takes good headphones a few hours of cumulative listening time out of the box to reach optimal sound quality), they've just increased their street cred.

Yes, I sit on the subway in my big, puffy DJ headphones, and maybe that makes me look silly. They take up a ton of space in my bag, which means I can't carry cute little clutches and wristlets on a day-to-day basis. But, in my opinion, they're entirely worth it, and I do not regret their purchase for one second. I love them. They're sturdy, long-lasting, and they've vastly increased the enjoyment with which I listen to music. And I got them for less than half-price.


Cab Fare Hike, and a Spending Challenge

I haven't even had a chance to recover from the previous fare hike before getting hit with this one. I haven't taken a cab under these rules yet, but the free paper I was reading on the subway this morning puts the increase at far more than 11%. Anecdotally, a cab from Penn Station to the Met cost their writer about $18, not including tip. That's insane.

I really may have to swear off cabs. Thankfully, I very much doubt this price hike will affect my late-night transportation of choice: the gypsy cab. For non-New Yorkers, a gypsy cab is a non-medallion car, a sort of freelance livery service that picks people up on the street (though I believe this is technically illegal). You negotiate the fare with the driver before getting in the cab, a process I've always found intimidating. Because my neighborhood doesn't attract a lot of yellow-cab traffic, and because I'm often coming home from bars in far-flung places late at night, I've become more comfortable with gypsies. From many neighborhoods in Brooklyn and Queens it costs me $20 to get home quickly and safely in a taxi, and I don't think that price will change. But with this latest price hike, I think it's possible that taxis have exceeded a price at which I can take them when I am tired, or inconvenienced by the weather, or running late.

It's December 1. My goal for the month is to take no non-essential cabs (as defined above).


Festival of Under 30 Finance is Up!

Student of Finace has the latest Festival of Under 30 Finance here. It features my post, Holiday Shopping (which is, in retrospect, a really awful title and should have been something like "Holiday Shopping For The Frugal Semi-Hipster").