My Friend: help i need a financial consultation.
me: shoot.
My Friend: tiaa cref.
what the arse is it?
and how do i know what percentage of what makes good sense>
?
me: It's a retirement thing for non-profit folks.
What kind of account are you looking at?
Is it a 403(b)?
My Friend: yes.
me: Okay, that's the nonprofit equivalent of a 401(k). It's an employer-sponsored retirement plan.
Are you being offered a match of any kind?
My Friend: i have no clue.
they sent me this form.
they said 'return it!'
and then they said 'today!'
me: That probably means no, but I'd ask someone if you have time. Do you have a Roth?
My Friend: no.
me: Does the convenience make a big difference to you? If you start contributing to the 403(b), the contributions will be deducted directly from your paycheck, pre-tax, which is very convenient and doesn't reduce your paycheck the amount of the full contribution, which is also cool.
My Friend: no contribution match from employer.
i checked.
me: Okay.
My Friend: convenience?
no, not a big deal.
me: Ideally, then, I think you'd open a Roth instead.
But that requires a lot more individual initiative.
My Friend: i don't know if i have that option.
me: You do. It's an IRA, not an employer-sponsored plan.
My Friend: ah.
so what about the form that i need to return today?
me: Well, I think if you're up for opening and administrating the Roth yourself, you skip this form.
The advantage of the Roth is a tax advantage: you pay taxes when you put the money in, not when you take it out (that's what happens with the 403(b)), so it grows totally tax-free, and when you retire making more money than you do now, you save lots on taxes.
My Friend: right! which makes so much more sense.
me: Way more sense.
The obstacle is this: a lot of plans require an initial investment of $2,000-$3,000, which you may not have on hand.
My Friend: no, i do.
so that will be okay.
me: Cool. You can open one online at Vanguard in about twenty minutes.
It's way easy.
I would do that instead of the 403(b) if there's no match.
I contribute to my 401(k) at [My Company] because there's a super-generous match.
My Friend: woot!
unfortunately not the case here.
me: Alas!
My Friend: in the short term, my dental insurance is free . . .
me: nice.
me: One more thing: once you set up the Roth (Roth Individual Retirement Account, is its full name, often Roth IRA) with the minimum $$, you can automate contributions by linking your Vanguard account to your bank.
My Friend: wow!
you are the best financial advisor i've ever had!
Wednesday, September 17, 2008
A GChat Transcript In Which Financial Knowledge is Power!
Friday, June 20, 2008
Uh-Oh
I'm getting to the point where I dread rebooting my financial system after the move and a lengthy period of computer outage. It really is different when you're not checking in every day--scarier, more confusing, and thus, somehow, far easier to go, "Oh, maybe I haven't really spent too much--buying this CD is fine."
That means to me that it's time to reboot promptly, which means spending the money to get myself a new laptop battery and charger. Ugh. But I'm sure it'll be a win in the long term, because a girl could run herself into the ground like this. I hate to put yet another hundred bucks on my credit card bill--this month has surely been my highest ever--but I'm pretty sure it'll be worth it in the long run.
This urge to bury my head in the sand is strong, and it makes me queasy. For me, every day I go without getting back on track makes it a little harder, a little more overwhelming to finally do so. So the sooner the better. I'm taking my laptop in tomorrow.
Wish me luck.
Monday, April 07, 2008
TaxCut Giveaway Winner!
So, I've filed my taxes (I owed $157), and now one of you can, too, with free TaxCut!
The number is 37, which makes the winner...
...drumroll...
GL, who picked 42! Maybe it really is the answer.
GL, shoot me an email to claim your prize. Thanks for playing, everyone, and thanks for the haiku!
Thursday, January 10, 2008
Get Your ING Sign-Up Bonus Here!
My readership has had a substantial jump, lately--part of it is that WSJ article I was mentioned in, but I think part of it, too, is the increased attention to money management around the New Year--apparently, the most common resolution is to save more money. So though it's often taken for granted in the pf blogosphere, I thought I'd mention the financial staple that is online high-yield savings accounts.
Like many personal finance bloggers (and many non-bloggers!) I keep my savings in ING Direct's high-yield online savings account. It's not the highest rate out there--I think that crown sits atop Emigrant Direct or E*Trade's head at present. Nevertheless, I stick with ING because I like their super-easy interface, great reliability, and, perhaps most of all, the ability to set aside money in sub-accounts for different purposes. And the 4.1% is higher than you'll find at nearly any brick-and-mortar bank. I think I was earning .05% before I found ING. (Yuck.)
I've referred a bunch of friends and family to ING, but, as Single Ma pointed out, ING has wiped their referral logs, so I can refer some of my readers. If you use this link to open an Orange Savings account with $250 or more, you get a $25 bonus--that more than equalizes the interest rate issue for most modest savings accounts (based on some quick calculations, it's worth going elsewhere for a 5% interest rate if your account is starting at $2,777 or higher--you may want to do your own math, given that I, uh, majored in English). I get $10, too, which I'd count as non-salary income and put towards grad school. Everybody wins.
Referral #11Referral #12Referral #13Referral #14
Referral #15
Like Trent does, I also use Electric Orange Checking. It's not my primary checking--it's a dedicated account for my grad school application expenses--but I do find it useful and simple. If I ever needed to get cash from that account, there's a very comprehensive network of free ATMs, too (though so far I haven't tried using one).
Anyway, if you're interested in that, give it a shot. Same $25/$10 referral structure. Here it's actually an even better deal, since interest on checking accounts is lower than on savings accounts.
Referral #1
Referral #2
I'm pretty sure you can only get one bonus. Let me know if it turns out otherwise!
Thursday, November 29, 2007
Roth 401(k)?
I just got an email announcing that my company is adding the option of a Roth 401(k) for next year. That's pretty appealing to me, given my low tax bracket--but one does hear finance-types whispering about "tax diversification," so maybe I shouldn't be putting all my eggs in one basket? I also hate the messiness and complication of having lots of little accounts floating around, so it would be even more appealing to me if there were some way of rolling my current 401(k) balance in--but then again, I believe it's the case that your employer can't contribute a match directly to a Roth 401(k), so I guess I'd have to keep the standard one open anyway.
Anyway, more research is clearly needed: I'll post more information about the Roth 401(k) as I find it.
Thursday, November 01, 2007
Dammit, ING
After the Fed's .25% rate cut, ING quietly dropped its interest rate from 4.3% (down from 4.5% before the previous rate cut) to 4.2%. I have no way of knowing how important that sort of thing is to ING's business, but I find it really irritating. Could I rely on them to bump their interest rate up immediately if the Fed were to raise rates, do you think?
I don't have nearly the kind of real understanding of these kinds of systems that I'd like to have. It's all sort of mysterious, but I definitely know that it affects my life in real ways. Just this month, my savings earned over $20 in interest from ING, and I was hoping that for next month I'd start edging in on the $25/month interest mark (effectively, my interest would be making one Freedom Fund payment for me, which would be very cool). But it looks like it'll be a little longer until that happens.
Thursday, October 04, 2007
Pulled My Credit Report...
...from Experian and Equifax (I'll pull TransUnion in six months), via AnnualCreditReport.com, which is the only place to get a truly free credit report.
I have a bunch of "authorized user" accounts on there, which I would rather not have to hash out with my parents--aren't those accounts supposed to be dropping off my bureau report, like, now? I'd like it if they could go ahead and hurry up with that--as it stands, it looks like I have credit limits approaching my annual income, which I certainly do not.
I also have a thirty-days-late from October 2001, on a store card I signed up for when I was in high school and didn't know how to use. I'd love it if that would drop off my report--it's just the one charge, a thirty days late note, and then zero balances all the way up through '06, when I last looked at my credit report, realized I still had that account open, and closed it--but it looks like I'm stuck with it until 2013--seven years from the last time the card reported, not seven years from the last charge. Annoying.
But it is supposed to be seven years, right? Then why does a card (another "uh, sure, I guess I'll sign up for the 20% discount" high school store card) that was closed in '02 seem to be scheduled to be on my report until 2012? And is "inactive" the same as "closed"? Because if it's not, I should close that account, right?
Conclusion: no identity theft (phew!), but the usual low-level financial-jargon confusion.
Thursday, September 13, 2007
Open Letter to the Bank of America
Dear Bank of America,
You disappoint me.
I've been a customer since my junior year of college, when US Bank decided that holding a check I needed to pay my rent for ransom for three weeks was a good idea. You've treated me pretty well, Bank of America. You give me free student checking even though I am no longer a student. You have many convenient locations. Most of all, Bank of America, you provide the wonders of an online financial aggregator, where I can see all of my accounts (even the accounts not with you!) in one place. I appreciate that, Bank of America. I really do.
But this $3 ATM fee is bullshit. Excuse my language. That plus the out-of-network ATM's fee means that I would pay close to $5 to access my very own money. Money that I've earned, Bank of America, and placed with you for safekeeping. It hardly seems fair.
So I'm thinking of switching to Washington Mutual. They have a location a block from my apartment, no ATM fees, and a high-yield savings account with instant transfers. Bank of America, this might be it for you and me. Consider changing your behavior. If you don't, I don't think this relationship will last much longer than it takes you to deposit my Keep the Change match.
Love,
English Major
Update: I do know that this is the ATM fee for non-customers to use B of A ATMs (though I did miss it on first reading). I'm still irked, though, because basically this means that B of A has no institutional objection to a $3 fee, and I think it's a harbinger of fees to come for customers. Currently, B of A charges a $2 "foreign ATM" fee, which is what they used to charge non-customers to use their ATMs. Because of the previous parity in the fee structure, I think there's reason for customers to expect an increase as well--I can't actually tell you that there hasn't been one already, since I haven't used an out-of-network ATM lately.
Monday, August 20, 2007
How to Close a CD
I dropped into the bank (I bank at Bank of America) on Friday to ask about making sure my CD doesn't roll over into a new CD (the interest rate is a measly 3.21%). I'd received a notification from my bank that my CD was about to mature, but its instructions on how to proceed had been pretty vague. So I stopped into a branch to check it out.
Apparently, the deal is like so: you have to wait until the CD matures, and then you have a window of seven days to close the CD, or it will roll over automatically. Frankly, one would think that in this Age of Computing Machines and Interwebs you could specify your preference in advance or address the issue online, but apparently not. Or at least not at Bank of America. So I'll have to stop in again between tomorrow and a week from tomorrow to tell them, "I want to close my CD." They'll close it just like a normal bank account and transfer the money into my checking account.
From there, I'll move it to my ING account, where the interest rate is more than a full point higher.
Monday, June 18, 2007
Credit Piggybacking
Today's Liz Pulliam Weston MSN Money article is a reminder that credit bureaus are closing the "authorized user" loophole, where the credit history of an account transfers to the authorized user's credit report. That's how I developed credit--I've been an authorized user on my dad's Visa since I was like 15. It's an old account with a high limit, and it was a big boost when I applied for credit on my own. Now I've got my own credit, so I don't mind that the information is going to disappear from my credit report--in fact, I'm glad, because my dad's become a little erratic with payment schedules (he's just retired, and he's not used to not having a secretary). I'll get the benefit of hanging onto the card (I hardly ever use it--only when buying groceries for my parents or airline tickets that they're buying me but that I need to schedule) but without the downside of a) taking a ding if my dad sends in a payment late, or b) having this huge line of credit on my report, upping my debt ratios.
On the other hand, this means that K needs to apply for a card in his own name right quick--we were doing a piggyback thing with one of my cards. The article reports that the new FICO formula will be introduced at one (to date, anonymous) bureau in September and rolled out at the other two over the course of the following year, so I'll just remind K to apply for a card in early August.
Wednesday, May 16, 2007
What I Wish I'd Known About Money When I Graduated
It's that time of year, and it means that I'm no longer the most recent class of college graduates (this eliminates some of the power of the "but I just got out of college!" excuse, alas).
So I'm thinking about the financial mistakes I made as I tried to set up my life, and the things that I learned from them. Here are some things I blew:
1. I put money in a CD.
It seemed like a really good idea to me to put $1,000 of my hard-earned campus-job money into a CD the summer after graduation, to ensure that I'd still have it a year later. And I do, so, points for that. However, I really botched the interest rate, because I bought the CD through my bank, and the interest rate on a CD at a brick-and-mortar bank is not only lower than you can get on a CD through an online bank, it's lower than the interest rate I earn on my liquid savings at ING. No good. Check out Bankrate for the latest rates.
2. I was reluctant to put my money in an online bank.
It took me a long time to be willing to dip my toes into the world of online banking, and that cost me a better interest rate on that aforementioned thousand bucks. It's not that scary, really, though, and the interest rate is great. We're the internet generation: go for it.
3. I set up my housing from far away and by proxy.
I was in touch with my boyfriend by phone as he and our current roommate hunted for an apartment--and it was profoundly logistically difficult. In addition to the money I spent having things notarized and FedExing them (both of which would have been unnecessary had I been proximate), I ended up overpaying my portion of the initial costs (broker's fee, first/last, deposit, &c.). Technically, this just means that the guys I live with owe me money, but actually, I never expect to see that thousand bucks again. This would never have happened if I'd been there to write the check myself, as opposed to having to ask my father to access an account on my behalf and send a check.
...and here are some things I did a good job of:
1. Taking it slow on the startup costs.
Though getting into my apartment blew a big chunk of money, I did a good job of minimizing the cost of starting my life as a grownup. I bought some work clothes & shoes, but kept it minimal. I took hand-me-down kitchenware and asked for housewares for Christmas and my birthday. I limited my initial furniture outlay to a bedframe (bought from Overstock.com, split with my boyfriend) and a couch (bought at Macy's home sale, split three ways). K and I have only just gotten around to putting up shelves, and we are just now planning on going shopping for a dresser (actually, that one I'd recommend you do right away). We use a dining-room table that K inherited from a previous roommate and mismatched chairs. And our friends still think our apartment is great. You don't have to leap into grown-up-dom with a living room set and color-coordinated everything and a credit card bill to match.
2. Making friends with my Roth IRA.
This is such a good account for young people, and I think everyone should have one. It's especially valuable for those new grads who start out in hourly jobs, or other jobs without benefits (including not-for-profit jobs where there's no employer match in the 403b). I'm really pleased that I prioritized contributing to my Roth, and I'd advise that everyone do so, even if it's only a few bucks a month (indeed, there are companies that will let you open the Roth with very low or no minimums).
3. Starting off on the right foot.
It's way, way, way easier to learn to live on a smaller amount of money than it is to start out living on your full salary and then trying to start saving. I saved from my very first paycheck, which helped mitigate the feelings of deprivation. (Subsequent increases in saving and giving have been far more noticeable.)
4. Being eager to learn.
The best thing, hands down, that I did for my finances after graduation was devote myself to learning how they work. That's why this blog exists. The prospect of opening a retirement account, say, is really, really daunting--even just the logistics of it. The how and where remain mysteries even after you grasp the why. Again: the internet is great for this stuff. I pretty much just read everything I could get my hands on, and now I know enough about the basics of financial planning that I pretty much feel comfortable making my financial choices.
I think that last one is really the most important--if you're trying to learn and figure things out, you probably won't make the worst decision even if you don't make the best. The easiest way to botch your finances is to ignore them, so a little effort goes a long way.
Good luck, class of '07!
Monday, May 07, 2007
Financial Literacy
I don't know why it took me so long to find this, but Bankrate.com is running a year-long financial literacy-o-rama. It's great, a very accessible and thorough look at the basics of financial planning and money management. A very good primer, excellent for beginners--I think, when it's finished, this will be something young people can refer to as a way to get acquainted with lots of basic concepts of personal finance.
Friday, May 04, 2007
What's the Point of Points?
I checked my credit card statement the other day, and realized that I have quite a few rewards points--enough to get a $25 gift card to various stores and nearly enough for an assortment of small appliances. What I don't know, really, is how I handle these points. Part of me is just like, "eh, get another Starbucks gift card and get yourself a few iced lattes over the coming summer months." Another part of me is like, "No! Save up the 50,000 points for a round-trip ticket to Europe!" A third part of me is like, "Hey, if you save these points until, say, November, they could take care of a chunk of your Christmas shopping."
No decision has been reached. How do you handle your rewards points?
Thursday, May 03, 2007
The Kids Are Alright
This article on the savings habits of young adults (25 and under) is, how shall we say? Ah yes: DUMB. It is dumb.
Why is it dumb? Let's examine!
1. The author is shocked--shocked!--he is clutching his pearls!--that only 4% of workers 25 and under max out their 401(k)s. Do you know why that is the case, Paul J. Lim of U.S. News and World Report? It is because for a majority of workers 25 and younger (hey look! MSN says that "the median income for families headed by people aged 20 to 29 was just under $28,000 in 2004"), maxing out a 401(k) would involve cutting their after-tax income in half or nearly in half. Paul J. Lim, if I maxed out my 401(k), I would be making $17,000/year before taxes. I pay $7,200/year in rent alone. That is why I am not maxing it out. Seriously, even at a 15% savings rate, you'd have to be making $100K to max out your 401(k). How many 25-and-under folks make that kind of money? Around 4%, you think? Less? As we Gen Y-ers are so fond of saying, DUH.
2. DUH, too, to the only-19%-of-young-workers-fund-an-IRA thing. Consider that most 401(k)-eligible folks who do not contribute to a 401(k) are not likely to contribute to an IRA. Then consider that of the percentage that do contribute to their 401(k)s, many will exhaust their capacity to save before exhausting the employer match, and nearly all will do so before exhausting the contribution limit. There's also a lot of really dodgy language in here, but it looks to me that we're only talking about full-time employees and their IRA savings tendencies, so is it actually that shocking that only 1 in 5 employees age 25 and under has sufficient capacity to save and is sufficiently on top of things to divide her retirement savings between her 401(k) and her IRA? No. It is not that surprising.
3. I particularly like the graphic of the tattooed, soul-patched hip-football-jersey-wearin' youngster that accompanies the article. He is scratching his head in confusion, people. Gosh darn it, U.S. News and World Report, young people never have reasons for our financial decisions! It's just that we're baffled by pieces of paper! In fact, we've almost never seen a real, live piece of paper. What's a "letter"? Is that like an email that you carve into a stone tablet and send by Pony Express?
4. Since we've established that young people tend to be in low tax brackets, how about considering that tax breaks are of substantially less value to us? Not no value, mind you, but less. (Hence the whole point of the Roth.) In the example about medical FSAs, I wouldn't at all be surprised if the margin of error incurred in young people's estimates of their medical expenses were equal to or greater than the tax break, and that money's nonrecoverable. There's also the question of how much hassle it's worth to save forty bucks a year in tax breaks, given young people's lower overall medical costs. I don't use my medical FSA for this reason.
5. Consider what that there are other financially responsible things young people can do with their money. We can save cash for an emergency fund or a down payment on a house. We can pay down student loan debt or consumer debt. These things are all contributors to a strong financial foundation.
Please don't misunderstand me. I would of course encourage all young people to save aggressively, and to do it in the best vehicles available--youth is a great financial opportunity. But do I blame my fellow Manhattan-living, little money-making coworkers for not contributing to their 401(k)s (let alone Roth IRAs and medical FSAs)? Am I surprised that they might find it difficult to do so? Not at all. It's hard. I think there are two main obstacles to utilizing these savings vehicles:
1. We don't have that much money to begin with. It's difficult to give up 10% of your paycheck just to see a 401(k) balance growing in what feels like a pitifully slow fashion. My 8% contribution with dollar-for-dollar match (up to $1,500) will bring me to around a quarter of the maximum contribution level.
2. There is a veil of impenetrability that surrounds savings vehicles. I continue to suspect that these things are made to seem difficult on purpose, when in reality they are not that difficult (email HR person, fill out form, dump contribution in target fund, done). Nevertheless, young people feel baffled by the whole prospect--I certainly did--and there is a serious dearth of accessible information.
I'm just saying, we are not financial morons because we're not all plugged into 401(k)s and Roths. These aren't particularly meaningful statistics, and alarmism about the financial habits of people who by and large have only been working for 2-3 years is patently unwarranted. We're young, we're poor, we're working on it. Chill out.
Wednesday, April 25, 2007
How I Got a $10 Starbucks Card for Free
I'm a member of MyPoints.com, which is one of those online shopping rewards sites. As far as those sites go, it doesn't hold a candle to Fatwallet (of which I'm not actually a member), but here's what it does do: it lets you sign up to earn points by reading what's basically spam. They send me two or three emails a day. I click a link and earn 5 points per email. And then, several months but basically zero effort later, I cash in my points for free Starbucks. I could have gotten something more useful, but I figure hey, as long as it's free, get the luxury.
If you're interested, I'll send you a referral (which earns us both points), but one caveat: don't do this if you're susceptible to ads. I don't even load the images on my webmail, and I close the windows before the linked pages fully load, so I've never bought something I wouldn't have otherwise bought (in fact, the only thing I've ever bought through MyPoints is a dress from Nordstrom's site). Nevertheless, they're sending you ads, and if that'll throw a monkey wrench in your routine, skip it.
Wednesday, April 18, 2007
When Target Funds Miss Their Mark
This article from CNN Money, When Target Funds Miss Their Mark, piqued my interest, but really just comes down to two caveats about target funds:
1) Cost ratios can be high, and
2) The structure of the fund can obscure your view of your holdings.
I've yet to see a really substantial argument against target funds (per se, rather than a general "funds with high costs are bad, and some target funds have high costs" kind of argument) for young, single investors. My own slight hesitation about target funds, I think, came from a sense that investing should be complicated, like the stock market won't make me money unless I have to sweat and strain and read Kiplinger's. I'm delighted to be done with that idea, and very pleased with my target funds, both of which have rebounded from the late-February hiccup nicely. My Vanguard fund (their 2050 target) has returned about 4.7% for the year to date.
Thursday, April 05, 2007
Absorbing Costs & Playing Musical Accounts
Immediately upon returning home last night, I entered the paycheck for today into Budget and began rejiggering my virtual envelopes to cover the Metrocard expense, figuring it was better to account for it in some way than to wait for my FSA reimbursement check in a state of confusion. I covered the expense pretty easily--a leftover $20 from the previous pay period, this paycheck's $40 "unexpected expenses" allocation, $16 worth of skimming, done.
Then I set out to find some money for the trip this weekend, my eBay plan having been an abysmal failure. I figure I need money for getting to the airport today (bus), getting home on Sunday (cab, probably), for covering the (relatively few) meals that won't be related to wedding festivities, and...for anything else that might come up. After assembling that sum (mostly, I co-opted this week's contributions to the clothing and haircut envelopes), I packed, put some airport snacks together (the hell I'm paying $12 for a disgusting sandwich), and spent some time catching up with my Internetting.
Then K came home. He'd thought to stop and get the mail, and there--lo and behold--was my FSA reimbursement check.
Hmm.
What I decided to do is this: I'll deposit the check into my Bank of America savings account, the one that holds my Keep the Change transfers and that will now hold the $100 float fund. I'll transfer the balance over $100 to my savings account over at ING.
I'll withdraw $120 of the $140 I put together for the trip from my checking account today. Hopefully, I'll come in under--but if I do, I'll need to figure out whether to "reimburse" my spending envelopes or to use it as an opportunity to save.
I'll update on this when I return--probably not before, though we can certainly hope that the hotel room K's parents have kindly gotten for us comes fully equipped with internet access.
Wednesday, March 21, 2007
Losing Interest, Keeping a Cushion
The balance in my checking account is $802.47. Why is that remarkable? Well, because tomorrow is payday, and instead of being broke as the proverbial joke, I have very nearly the equivalent of my full, biweekly take-home pay in my checking account.
Where does it come from? Well, mostly it comes from "envelopes" of money that aren't used on a weekly basis, but rather in large spurts, notably the envelopes for clothing and haircuts. Half of the money I'll need to pay my rent is there, too, plus some money for household bills (though those have just come in, actually).
It feels sort of silly to be losing the interest on that much money, but at the same time, I like having a cushion in my checking account (not so much because I'm afraid of overdrafts as that it's nice to have a sort of transient emergency fund). I like being able to buy shoes (as I did yesterday on my way home from work--just $20 cheapies at Payless, but I'm hoping they might match my dress for K's sister's wedding) without having to transfer money from one account to another, and waiting for it to clear, and all that slow, irritating jazz. So I guess I've decided by default that it's worth it to me. I can't really justify it logically, though, other than with the "do what works for you" maxim.
(There's also the peril of getting too attached to that money--I do kind of dread what it'll do to my net worth when I decide I need a haircut and a new spring wardrobe, immediately.)
Friday, March 16, 2007
I Hate Float
Is it weird that I hate float? Apparently, most people count on float in their finances, like, they can write a check knowing that it will take time to clear, and in that time, they'll have the money to draw it on. Not me. I would rather eliminate float entirely; I'd rather have everything be absolutely instantaneous. Not being able to see where my money is makes me crazy--I hate the limbo of "it's been debited from my checking account, but isn't in my Roth yet," or, on the other side of the coin, "it's showing up as part of my ING balance, but hasn't yet been debited from my checking account." I find these situations truly frustrating; they upset my sense of order.
Right now, I'm waiting for a $40 check I wrote K for my half of the Bed, Bath & Beyond gift card-overflow to debit. He deposited it early this week, but it's still hanging out in the ether, causing a problematic margin between what I think I actually have and what my checking account says I have. Similarly, a check I wrote him for my share of a utility bill was deposited last Friday--I was there--but only just cleared my account today.
Aside from the fact that I really like the calculations Bank of America's My Portfolio feature does to be right, and not thrown off by double-counting or invisibility, float makes it really easy to get confused. I don't know how anyone functioned before debit cards and internet banking, honestly. I would have torn my hair out.
Update: Well, this is timely: an article about decreasing float by scanning checks.
Wednesday, March 14, 2007
Net Worth in Context
Like Nick, I believe that there's more to measuring your finances than net worth. My net worth is around $13,000. That's not a lot, but what if we compare my net worth as a 23-year-old to a net worth of $75,000 belonging to a 56-year-old? Who's better off? I am, right? Then again, what if you compare my net worth to, say, Wanda's? If I recall correctly, we have about the same amount of money invested (2 years' worth of Roth contributions), and though I've got a nascent 401(k) into the bargain and she's got a little student loan debt, she's got a job lined up for after graduation, replete with a salary that may bump her over the Roth contribution limit, whereas I make a salary at the very bottom of the 25% bracket and am considering going back to graduate school (for a doctorate in English literature) in the near future. Who's better off? I'd put my money on Wanda.
The point here is not just to beat my favorite dead horse about personal finance being personal, but also to point out that a single number can't really sum up the factors that affect our financial lives, chiefly opportunity. Being an American citizen, a native English speaker, a college graduate, a holder of a business degree, a holder of a PhD, a holder of substantial reserves of time over which to reap the gains offered by compound interest...there's no way to quantify those things. They don't turn up in our net worth calculations. But they certainly do affect our senses of well-being, both financial and otherwise.
