Archive for the ‘Question’ Category

Eyewear Sticker Shock
October 4, 2012

I’m lucky enough to have avoided most health problems in my life, with one exception: my eyesight is terrible.  When I was twelve, my dad (who also has bad eyesight) tried on my glasses and was amazed that the prescription was so close to his own.  Luckily, my prescription has tapered off by now, but I still need glasses and/or contacts to function like a normal human.

I went to the eye doctor last week to update my prescription and order new contacts and glasses. I have one pair of contacts left, so I need to reorder. I haven’t had new glasses in years, but the anti-glare coating on my current pair has started flaking off, so they need to be replaced.

Right now I’m going through a little bit of sticker shock!

For contacts, the doctor is saying I should go for daily lenses.  They gave me some free daily lenses to try out, and let me tell you, those things are luxurious.  No need to worry about remembering to pack a contact case or solution, no need to track how long it has been since I last swapped to a fresh pair.

However, do you know how much those things cost?? It’s $650 per year.  Normal 2-week lenses are only $250 for a year.  I am also worried about how much waste goes into the daily lenses.  That’s 730 little plastic blister packs with foil seals.  That’s a lot!  And it seems like such a stupid thing to worry about (especially since I contribute my fair share of waste to landfills), but seeing the pile from just a week of these babies made me feel like a bad global citizen.

I was considering getting a 6-month supply of daily lenses and then just wearing them half-time with glasses, which would at least decrease the cost/guilt slightly.

Unfortunately, it looks like glasses are going to be expensive too!  My insurance will only cover a specific amount for either glasses or contacts, so either way I’ll have to cover a chunk of cash.  Here is the glasses breakdown:

Frames: $250 (The cheapest pair they had were about $200, my favorites were, of course, around the $400 mark)
Lenses: $100 for thicker lenses OR $200 for thinner lenses, + $100 for anti-glare coatings

I could keep my old frames, but in all honesty, they have not fit properly since I bought them.  They look good on my face, but they slide down my nose.  Plus the plastic is discolored in places (and oh my gosh I walk around like that all the time, what is wrong with me).  The lenses would definitely need to be replaced, which I might end up also doing to have a backup pair.

I’ve also been looking at some of the online retailers that promise glasses for $100, but I’m a little wary of them.  Maybe as a backup, but that still means spending the $400 – $600 on the primary pair.

The debate in my mind seems a little silly since obviously I need to see, but at the same time, it makes sense to optimize my spending, especially when we’re talking about over $1000.

Do you wear glasses/contacts?  What kind do you use, and how much do you pay?

20 Financial Milestones and Creating Your Own Goals
December 21, 2010

So there has been this post from GenYWealth that has been making the rounds recently, and since everyone is measuring their life against it, I thought I’d jump on the bandwagon.

GenY Wealth’s 20 Financial Milestones You Want to Reach in Your 20s

# 1 – Finance a dream vacation…in cash
Kind of? Our trip to France for our honeymoon was definitely amazing, and we’re planning a trip to Ireland when Chad and my sister graduate from their Masters and PhD programs, which should take place just before we turn 30.

# 2 – Pay off your student loans
I definitely have the cash to pay off my $12,000 in student loans, but for some reason, those loans just don’t bother me. I have over 2 years until I’ve officially failed, though, and I’ll probably pay the balance off once we lose out on the interest deduction.

# 3 – Automate paying your credit card bill in full
It’s not automatic, but that’s crazy talk! I always review my bill thoroughly and make sure that the charges are from places I’ve actually been to and for the amounts I’ve actually spent. I’ve been double-charged, I’ve been charged wrong amounts, and sometimes I’ll make a return and can wait to pay the bill until the credit shows up. I don’t and will never accomplish this goal.

# 4 – Get rid of all bad debt
Besides the student loans, we have no debt. So, good job, us!

# 5 – Build an adequate emergency fund
Our savings are sort of all lumped together right now, so we have a very healthy emergency fund! Our other savings are extremely long-term goals (e.g. a house, which is probably a few more years away), and we could definitely that money if there was an emergency.

# 6 – Make your first, and last, investment mistake
Does this count?

# 7 – Develop a statement of cash flows
I’m going to assume that my detailed and slightly anal Excel spreadsheets fulfill this goal.

# 8 & 9 Max out a Roth & Contribute to your 401(k)
I’ve maxed out my 401K the last two years and my Roth IRA since 2007. This has made sense for me so far.

# 10 – Get a degree or certification that increases your earning power
I got a Master’s degree and promptly got a 13% raise. Win for me!

# 11 – Take a career risk
I don’t know if I’ve really taken a risk. Certainly I challenged myself by taking on a job that I might not have been good at, but it would have been a lot braver for me to stay at my job in California and try to make something out of a job that I hated.

# 12 – Negotiate something
Haven’t done this. Negotiating makes me feel queasy.

# 13 – Earn your first side grand
I earned $8,000 in overtime this year, does that count?

# 14 – Start a sub-savings account for an upcoming financial goal
I tried the targeted savings accounts last year, but it was too annoying to keep track of! I have a general idea of the amounts we have saved for certain things, but it’s all sitting together in one account.

# 15 – Set a target retirement date
If we save at our current rate, we’ll reach $1M by the time we’re 36. That sounds good to me!

In all honesty, I have no idea when I’ll want to retire. I’ve always thought about early retirement, or semi-retiring and becoming a teacher, but I really like my job and I really like what I’m doing. Will I still feel this way in 10 years? Maybe not, but arbitrarily deciding a retirement date based on nothing seems a little silly, even if I’m not going to be held to that date. My goal at this point is to save enough money so that money issues aren’t the thing holding me back.

# 16 – Monitor your credit
I check my credit report semi-regularly and use CreditKarma to check my score, but that’s about it. We’re still a few years from buying a house, and we have enough cash to cover pretty much anything else we’d want to buy, so I’m not very concerned with our credit status.

# 17 – Say no to a financial salesman
I don’t have enough money for a financial salesman to come after me. Is this a thing that happens to real people?

# 18 – Give just enough to make it hurt
One of my big regrets for 2010 is that I donated the most piddling amount ever to charity. I’m hoping to make this a priority in 2011!

2 Milestones for the Over Achiever

# 19 – Invest $1 for every $1 you spend
If you don’t count taxes, I’ve done this the past three years. Even counting taxes, we’re saving about 40% of our gross income. I think that’s pretty OK, and I think things will only get better once Chad graduates and works a proper full-time job again.

# 20 – Start a 529 College Savings Plan
I idly tossed the idea around when Chad was going back to school, but since he got a scholarship, it sort of fell by the wayside. I’m not sure it makes much sense as a “maybe” account, though. The tax deduction isn’t all that great, and we’d have to be pretty firmly set on having kids in order for it to be really worthwhile. So… maybe we’ll work on it.

I think one of the main things I learned from evaluating myself and reading others’ posts is that no one checklist is right for everyone.  I’d like the original post a lot better if it had been written as “20 Financial Milestones I’d Like to Reach in My 20s.”  Some of these goals seem stupid to me (seriously, if you’ve automated paying your credit card, I hope you’re at least reviewing the statements!), some of them seem reasonably worthwhile but aren’t important to me, some seem like they come from a place of privilege (maxing out a Roth and a 401K is $21,000 dollars.  Even coming up with the $5,000 for the Roth is difficult for a lot of people!), and some seem completely arbitrary (the “financial salesman” goal is a really odd one), as though they were adding simply to flesh out the 20 things.

I would challenge bloggers who read GenYWealth’s post to come up with their own list of milestones – 5 or 20 or 200 things they’d like to accomplish sometime, whether it be by 30 or just before they die.  If you don’t want to go on a vacation, maybe you’d like to save up for a house, or a wedding, or to send your currently-1-year-old niece to Harvard.  Maybe you can’t save $5000 to max out a Roth IRA, but maybe you can save $100 or $1,000.  Maybe you don’t want to earn side income, but can you push yourself at work for an extra bump in pay?

Chances are, you’re already comparing yourself to a bunch of standards that come from outside yourself, whether it’s your savings (my NetWorthIQ is high for someone my age, but low for someone in Washington, D.C. How am I actually doing?) , your possessions (I love my engagement ring, but that coworker just got a 3ct stunner!), your relationships (I hate loud parties and drinking, but this is what I’m supposed to be doing in my 20s, right?), or your weight (I can run 10 miles without stopping, but I’m not a size 0 so clearly I am too fat).

Why not craft some goals that are made just for you?

Converting a 401K to a Roth IRA
June 22, 2010

Chad has about $40,000 in a 401K he had with his old company, and since he’s probably not going to be returning to them, I started pondering what we should do with this account.  I started thinking about whether or not it might be beneficial to convert it into a Roth IRA.

Pros

+ If Chad remains unemployed this year, our income will be abnormally low, which means lower taxes.  Bush’s tax cuts are also set to expire after this year, so this might be our last chance.
+ We could probably handle most to all of the additional tax burden through my normal federal withholdings – I’ve been witholding extra from my paychecks since we weren’t sure when Chad would find work or how much it would pay.
+ The market isn’t doing so hot right now, which means less money being rolled over, although by the time we’d get around to converting, who knows?
+ Roth IRAs are awesome.

Cons

– Who knows what our taxes will be when we retire? I suspect they will go up, but if we live frugally & make small withdrawals, who’s to say we couldn’t be in a low tax bracket?
– If Chad does start working soon, we might exceed the phase-out limits for some things, like our student loans interest.  Not the end of the world, of course, but something to think about.
– We’ll owe about $9,000 more in taxes for 2010, which doesn’t make me happy while we’re on one income.
– I was also considering opening a deductible IRA for Chad this year & putting the full $5,000 in.  However, with paying the additional taxes and the fact that I was planning on maxing out both of our Roth IRAs this year, I feel like we’d be overloading retirement accounts at the expense of cash savings.

I’ve run the numbers through a couple of online calculators, and it looks like the conversion would be a good move… unless my predictions of the future are wrong.  Of course, I’ll have no idea if this is a good idea or a bad idea until approximately 30 years from now.  Dammit.

What’s a good buffer?
June 7, 2010

I try to keep a decent buffer in my checking accounts.  I figure it’s easier to keep some extra money in there rather than worry about bills being paid too early or too late.  However, I’ve always struggled with the question of how much buffer I needed.

Right now, I try to keep at least $2,000 in my personal checking.  This is enough to cover about one month of expenses, even though we pay for almost everything out of our joint checking account.  The buffer amount doesn’t include my fudge factor amounts, where I budget for stuff like gifts over several months (to spare myself the pain of coming up with, say, $600 for gifts around Christmas).

In our joint checking, we have a big buffer – it’s our rent + about $2,000 ($3500 total).  I’m more comfortable keeping a big buffer in this account, just for those months where the first paycheck is later or if I make a mistake and pay off my credit card through the wrong account (it happened once! naturally, it was on the CC bill that had a few thousand dollars in charitable donations, and not my normal $10 charges…).  With two people spending out of one account (plus rent, plus everything), it just feels safer to keep a big buffer.

Anyway, I’ve been thinking I should cut back the buffer in my personal checking.  First of all, we take care of normal expenses out of our joint checking account, and money from my paycheck goes directly into that account.  The only regular expenses I pay out of my normal checking are my cell phone bill and my student loans (< $200 together).  If there was an emergency and we immediately needed money, the joint account would probably cover it;  Chad has a personal checking and a savings account linked online, so we could get a little extra, if needed.

Having a big buffer never really bothered me, just because interest rates are so low that I’d be missing out on less than a dollar of interest. Now, though, I think it might be better to cut down, maybe to $1,000 buffer.  An extra $0.83 will add up (over a hundred years or so), and it will give identity thieves less money to work with, should they bother trying to steal the identity of a person who check account balances everysingleday. I don’t know if I’m adventurous enough to keep the minimal buffer that some of my blogger friends do, even if I will earn $0.12 more in interest!

How much of a buffer do you keep in your accounts & why?

To Smartphone or Not to Smartphone?
May 20, 2010

My Verizon contract expires this month, and I get the New Every Two credit.

I really want a smartphone.  I have no need for a fancy phone, but there you go.

Pros
+ Sometimes, I really want to look something up, and I can’t because I’m not near a computer or I don’t have any internet. Problem solved!
+ It would be good to have a backup in case something goes wrong with my computer again.
+ The Palm Pre Plus – which is on the very short list of phones I’m considering – has the capability to be a WiFi hotspot.  Which means that I’d never have to worry about finding a place to connect when I’m traveling. (There is also the possibility of it replacing our cable internet, but probably not until Chad starts working.)
+ I’d pretty much get the actual Palm phone for free with the NE2 credit.
+ The New Every Two program is sort of a ripoff if you don’t upgrade your phone as soon as the contract expires.

Cons
– You have to get a data plan, which would effectively double my $35/month bill.
– My current phone still works, and I don’t really use it that often anyway.  I’m just not a phone person.
– I’m not allowed to bring my phone into work, which means that the usable time is pretty small (unless I give up sleep).
– I don’t usually go outside my home in order to surf the internet, so having that capability isn’t going to be life-changing.
– I already have an iPod Touch, which would probably do all the cool stuff the phone would do if I paid $9.99 to be allowed to get apps.  I still would need a WiFi connection to take advantage of some, but $10 vs $700 is not chump change.
– Surfing the internet on small screens is incredibly annoying.

Logically, I know that getting the smartphone would be a financially impruent move (committing myself to $700 in payments over the next 2 years).

Still, I want shiny and I think that the benefits, while probably not worth the cost, might be worthwhile.  I’m on track to exceed my savings goals for the year, and $300 per year isn’t going to make or break anything.  In fact, I need to scale back my 401K contributions again, and that would probably cover the difference.

I’m looking for someone to talk me into – or out of – this upgrade.  Just don’t be offended if my lust for shiny toys outweighs your logic. 😉

Why am I maxing out my 401K?
December 17, 2009

I mentioned in my 2009 Review that I had come close to maxing out my 401K this year.  I plan to try to do the same next year. 

But a recent post at Punch Debt In The Face (it is worth clicking through just to see the picture at the top of the post) made me stop and consider why I wanted to max it out. It just.. has always been something I wanted to do, and I don’t know if I ever honestly believed I’d get there.

PDITF cut back his 401K contributions, with the reasoning that he wanted more money to plan for the short term & midterm future. After all, you can’t touch that money until you turn 59.5 so once it’s gone, it’s gone. He’s also maxing out his Roth IRA, which means he’s still contributing the recommended amount to retirement (about 15%).

It’s not like he’s going to be spending the money, either – his plan is to invest/save that extra money for the short term.

Quite frankly, it sounds like he has thought out his plan. And for a minute, it threw me for a loop. After all, didn’t I whine about how much lower my cash savings rate would be next year? Maybe I’ve been so fixated on this goal of maxing out all of my retirement funds that I never bothered to ponder the alternatives.

So I did. And I’m going to stick with my plan to max out my 401K next year, because…

1. I will be saving enough cash next year.
It’s going to come out to about 25% of my take-home pay. That’s double the suggested savings rate. It just doesn’t seem like “enough” to me because I’m used to saving so much more than that.

2. I’m saving for two.
Chad can’t contribute to a retirement account if he’s not working. (Although this is misleading, since if he was working, I’d probably have him max out his as well.)

3. I’m going to have to scale back contributions anyway.
If I keep contributions at 20%, I will put in too much money in 2010. So I’m still going to get a cash bump next year, and that’s not taking into account any raise I might earn.

4. That money is not locked up forever.
I can take a loan out of my 401K if I really need money. I know they preach against this. It’s borrowing from your future! If I’m overcontributing, though, I’m just evening things out. The other argument is that losing your job means you have to pay back the loan balance immediatly or face tax penalties. Because my company is awesome, they do not require you to pay back the loan right away if you’re fired – you continue on your normal schedule. 

5. I could use the tax break.
Especially if Chad does find a job, lowering our taxable income could keep us within Roth IRA limits for a year or two extra.

6. I don’t know what I’ll want to do in my 30s, my 40s, my 50s.
That 15% contribution usually assumes you’ll be working right up until retirement. What if I decide to retire early at 45? I’d miss those last few catch up years. I sometimes toy with moving to a small town and becoming a teacher, but I could only handle that big of a pay cut if I’ve planned ahead. Or, if I do need more cash when I’m 40, I can scale back contributions then. Contributing now, while I can afford it, gives me more flexibility later.

(The most interesting part of #6 is that this is one of the same reasons PDITF decided to scale back. We forsee the same issues – what if I want/need more money before retirement? – but have chosen completely opposing strategies to handle it.)

7. You don’t get to make it up.
When I’m 30 and am positively rolling in it (a girl can dream!), I won’t be able to tell the IRS, “Look, I gave $10,000 less than the max when I was 25. Let me just sneak that in there now!”

8. Contributing now gives me the biggest bang for my compound interest bucks.
There was a blog post a year or two ago where someone did the math and said that a 26-year-old who maxed out his/her retirement accounts just that year would have a million dollars at age 65. Now, I might want to retire earlier than that, and I think the annualize growth on that was a bit high (12%), but the principal stands. To combat the uncertainties (will the market really return 12%? What if I want to retire at 55?), I’ll keep my contributions high for as long as I can.

9. No one ever regrets saving too much for retirement.
As long as I’m enjoying my life, I won’t be on my death bed thinking about how I should have spent more money. (Although, come to think of it, a 1% contribution reduction could get me a Coach purse or something. WAIT I NEED TO START OVER!)

Ramit had a survey where 62% of people in their 40s wished they’d saved more for retirement. I don’t want to be one of them.

10. If I die before I turn 60, I can leave that money to my loved ones.
Here again, the fact that I’m still enjoying my life means that even if I die before getting to use any of this money, I won’t regret it. And I’ll be able to leave it to my (hypothetical) children, to my sisters, to Chad, to my parents, my cousins. And that might be a better use than me finally buying some Marc Jacobs when I retire.

What do you think? Are you changing your contributions? Why?

Also, is it just me, or have I been doing a lot of list-based posts lately?

Leftover Savings
December 10, 2009

I created several savings sub-accounts at the beginning of this year, for gifts, for the wedding, for the honeymoon, etc. Lots of these are cyclic – the honeymoon fund will just become a travel fund, I’ll still need to buy gifts next year. So that’s easy.

Now, my question is about the $700 left over in my wedding fund. Near the end, we just started cashflowing a lot of it, and once I wrote the $7,000 check to our venue, my half of the wedding costs was basically covered.

So what should I do with the extra money that’s left over? I’ve been making a list in my head.

  1. Put in back into savings. After all, that’s where the wedding fund came from, and it’s not exactly like we stayed under budget for the wedding.
  2. Blow most of it on one expensive item. Like a high-end winter coat, a pair of boots, a real leather purse (I have never owned one!), or some sexy Louboutins. I have trouble spending more than like $80 on any one item, so by saying that I have to spend most of it in one lump sum, that could let me get something I wouldn’t otherwise get.
  3. Shopping spree! Spend it all as I wish – probably on a bunch of mid-range retail items. (Or at Anthropologie, although their sales have been getting picked clean lately. It’s almost like the Banana Republic sales where nothing is left except size 00 and size 16.) It could also be used to pad my personal spending budget for next year.
  4. Donate it to charity. I haven’t donated since January, which was really when I donated an extra $1,000 for the tax deduction in 2008 and counted it against January’s budget.
  5. Use it as a “wardrobe rebuild” savings account. Every month I’d transfer the leftovers from my clothing allowance into this account, and eventually use it to replace everything in my closet. This doesn’t appeal to me very much as an option since about 60% of my closet is stuff I wear and like, and I could probably get by with just those items for a while. I don’t need a What Not To Wear cleanout.
  6. Use it to pay off debt. Even though I’m not really worried about that right now, it can’t be a bad thing to pay down the balance a little bit extra here and there.

And of course, combinations of any of these would be OK as well.

What do you think?

Question about 401K contributions
April 8, 2009

I had an interview recently for a job in Virginia.  Chad and I have talked about moving back to the East Coast to be closer to our families, so I’ve been looking for jobs there as well as here in California.

If I get offered a job in Virginia, Chad would probably quit his job and come with me.  Since we’re in one of the worst job markets in recent history, I’m wondering if this is a smart move.  I have no doubt he could find a new job eventually; he’s smarter than I am, and has relevant experience.  He has more in savings than I do, so monetarily we’d probably be fine.

Still, there’s a part of me that’s worried.

I was thinking of pulling back on my 401K contributions, (to 8%, enough to get the full match) and socking away more cash.  I’m not sure why I feel compelled to do so; after all, the move is purely hypothetical at this point.  I also have a job interview in my current city next week.  We could stay, and I could wind up kicking myself for wasting the chance to invest.  Of course if we do move, I could wind up kicking myself for not having enough cash to tide us over.

What do you think?  Should I scale back until it’s not necessary, or keep up contributions until I know for sure we’re going to have a cash flow problem?  What would you do?

… we’ve got answers!
March 27, 2009

shtinkykat asked…
I am curious – how exactly do you save $1800/month?? I’d like to see what your expenses are per month that allows you to save so much. (I’m sure being debt free is a big part of it!)

I wish I could save $1800 every month!  I try to average around $1500, but some months I’m over and some I’m under.  I’ve put a screen capture of my budget at the bottom of this post.

Fabulously Broke asked…
1. Pic of hair would be nice. And maybe your favourite go-to outfit?
Picture of my hair (yes, the curls and color are natural):

myhair_anon1

I wear a lot of jeans in my down time.  Usually I’ll pair them with a cute shirt and a cardigan.  For work, I follow the same formula, only with black or brown pants.  When I’m going out, I like to wear clothes that aren’t too short or too low-cut, but that are form-fitting.

2. Were you ever in debt? How did you get out of it? If never in debt, how did you avoid it?
At my worst point, I probably had about $38,000 worth of debt.  It was mostly student loans and my car note, but I did have some credit card debt – maybe about $5K.  Added up it sounds like a lot, but my payments were manageable, and the stuff on the credit card was mostly start-up costs for my new job/apartment – clothes, a mattress, meals on the road.

3. A budget breakdown would be fab!
Bottom of the post!

Stacking Pennies asked…
I’m a huge fan of looking at budgets, so yeah, I vote for budget for a year.
Ok, and for something a little less pf nerdy, but still potentially pf controversial… What do you think about having kids? Do you think you want them? Would you want to stay at home with them? “I’m not sure” is a valid answer.

For a really long time, I was opposed to the idea of having kids.  I didn’t trust myself to not completely screw them up.  Now that I’m a bit happier with where I see my life going, I’m a little more open to the idea. I don’t want any right now, but maybe a few years down the road?

If we have kids, I’m hoping we’ll be in a situation where either Chad or I can stay home with them.  I just think it’s better for the kids, especially when they’re young.  My mom stayed home until I was nearly in junior high, and my sisters and I all turned out to be engineers!

If you have any other questions, leave them in the comments and I’ll try to answer them!

Budget information after the jump!

(more…)

Car Crashes & Ethics
March 23, 2009

I’m working on answering the questions from the last post; if there’s anything you’re wondering about me, make sure to ask! I’ll post answers on Friday (gives me time to get a good shot of my hair for FB).

So now I have a somewhat ethical dilemma that I’d like some input on.

Chad got sideswiped, and there’s cosmetic damage across the whole right side of my car.  The guy who hit him was really nice about and has already cut us a check for the repair cost.  We didn’t even use insurance companies since his deductible is more than the repair would have cost.

The problem is that one door on that side was already damaged – the panel was dented and there’s some lost paint.  We were lucky that the 2 sets of damage are very distinct from each other; there was no confusing which damage came from which accident.

The problem is that the older damage is very expensive to repair since it involves dents & not just paint.  We don’t have the money set aside to repair it since it was really just cosmetic and doesn’t affect the operation of the car in any way.

My question, then, is about the ethics of not repairing the new damage.  The body shop guy said there was no point repainting over the preexisting dents, so we’d have to either get both fixed or neither.  I have enough money in my emergency fund to cover the cost of the repairs, of course, but I don’t know if I want to – the appearance of my car is not an issue for me.

My feeling is that it’s not ethically wrong to put off the repairs.  The guy who hit the car did the same amount of damage whether we repair it or not.  Since we didn’t go through our insurance companies, there’s no fraud (although I’m not sure how well this hold up if we get hit on that side again).

I’ve put the money into a newly created Auto account since it doesn’t seem right to absorb it as income.  Does this make my decision better or worse?

What would you do?