November 4, 2009
The guest post on Money Tips from Poker at Bargaineering gave me a different perspective on the conversation we’re having at Fabulously Broke about personal spending limits.
As a once and former overachieving student, I like rules. Not because they’re limiting and I like to obey, but because they offer a benchmark to measure performance and the opportunity to go you one better, much like the Stretch goal is to the SMART goal. You’ve got to set the original goal first before you can beat it. [Note: I like my rules best. Who doesn’t?]
That’s why I kept moving my savings goals up as soon as I reached them – it’s boring not to have something to reach for. That’s not to say my rules don’t know how to limbo, they totally do. And have. And probably will again. It’s ok, as long as I don’t completely shatter the major ones.
When talking about the upper spending limits we set and why, it seems we all have a personal comfort level up to which we can spend. Spend more than that and we’re big squirmy excuse-making babies trying to justify the price tags. Or maybe that’s just me ……
But I don’t know anyone who has a mathematical reason for why this can cost up to $100, but that can only cost $15. The general levels rise and fall according to the feeling that one set of pricing is ok and the other is not, but why not set rules with a basis in fact? Mathematical rules? Ones that are rational? I’m talking about the bankroll management from the article.
I love the idea of setting your levels of spending by multiples of your available cash. In the article, the example is between 30-50 multiples of the bankroll. I’d like to steal that formula as is, but it doesn’t quite work out because my expense budget is vastly smaller than my entire bankroll. I’m protective of my savings, the multiple would be something insane like 300.
In our cases, that formula could translate into a percentage of the clothing budget. If you’re planning to save $100/month for clothing, perhaps each season gets 25%, or a weighted percentage because coats on sale tend to cost much more than bathing suits on sale. By a ratio of 5 to 1, in fact. If I were doing this, Winter would get 40%, and the other 3 seasons get 20%. That’s not precisely fair, but it’s probably more true to shopping reality than people realize. Breaking that down:
Winter: $480
Spring: $240
Summer: $240
Fall: $240
Right off the bat that tells you not to spend $400 before tax on a winter coat unless that’s the only thing you’re going to buy.
Of course, seasonality is only one way to break that down. You could just take that whole annual budget of $1200 and allocate 80% for staples like jeans, daily wear shoes, accessories, etc.; 20% for specialty items.
Truthfully much of this is hypothetical for me because I don’t yet have a clothing budget. I’m definitely still just saying “$100 is too much for jeans, I’ll pay up to $40 for them” and “No summer dress can cost more than $20.” As soon as my budget changes, though, I think it’d be great to implement a set of rational rules that I didn’t just make up as I encounter sales.
June 4, 2009
Every time I get set in my financial plan, I turn my mind one-quarter turn to the right and find myself seeing it in a slightly, or wholly, different way. That change of focus is, in many cases, a good thing.
So … I thought I had too much cash? No, not really, it was more like I finally realized that my previous worrying was excessive. Not unjustified, just rather obsessive. I am a slightly obsessive personality. Normally, I vent, develop a game plan, set the course and go! This time, I tinkered with the game plan, started off and kept second, third, and fiftieth guessing myself. For months. No wonder I was going slightly mad.
No small part of that is that there’s enough uncertainty in the job market, aside from the rather certain rejections I’ve had, to keep me guessing about how confident I should be.
More, reading articles about folks who planned well, saved, and still couldn’t find a job after months and even years of pounding the pavement catalyzed panic mode. I could literally taste my every fear coming to life: of following my family’s footsteps into unemployment and drudgery, of being the last bastion of support, and spiraling into financial and health failures … just like they did.
That’s one reason I haven’t even mentioned the layoff date to my family. I have no answers for them, other than unemployment +savings, and I can’t even mention the savings because my lousy brother will take that as an excuse to coast even more. The irony, of course, is that I’m hiding a major life event from my family that I support and still live with, yet I still haven’t forgiven my dad for lying to me about his job losses and indebtedness.
After spinning my mental wheels for a while, that steam wears out and leads to more productive thinking like, I can probably take a little of that stash and start investing now. I know that I haven’t maxed out either of my retirement vehicles yet, but with a dwindling income stream, I’d prefer not to lock up any more cash in the 403(b)/401(a)/Roth.
I’ve been wanting to buy some dividend stocks for years. Not on a grand scale. But what am I waiting for? Someone to take my hand and lead me through it? That’s not how I operate and that’s definitely not how I learn. I can read all I want about the schools of thought behind investing, but what I want is basic: to create income and protect assets. I’m looking for dividends and lower prices for companies that are basic and sound.
The temptation is to do it up big: throw five grand in the pot and create a diversified portfolio right from the get-go. But that dips far too heavily into the emergency pot for something that is essentially a business venture, non-essential, and a bit of an analgesic for the financial fear that swamps my common sense every so often.
So! The plan: open up an account with TradeKing using a referral from Sun at The Sun’s Financial Diary, deposit $1000, and buy some stocks. And hold them. No day trader am I.
Simple. Quick, except for setting up the ACH transfer capability which has always seemed rather primitive to me. Easy.
It’s all about finding the comfortable zone between being ultra-safe and taking some risks. I’m not going to get anywhere by stashing all my money in retirement accounts and CDs, nor will I throw caution to the wind. It’s just time to get in the game. More importantly, it’s time to work on things I can do.
May 30, 2009
Ah yes, hindsight. I knew this layoff was coming, most likely mid-year, yet it took me until April to start making appropriate adjustments.
Earlier this year, it was important to have cash on hand, so I cut back on retirement contributions to a bare-bones 3% (not including company match, which was maxed). My reasoning at the time was sound, but flawed due to incomplete knowledge.
Error One: I’m entitled to severance equal to one month pay when I separate from this employer, as well as over 200 hours of vacation pay. Didn’t take that cash payout into consideration. I made this assumption because I hoped to quit before the layoff which would have meant no severance.
Error Two: For another, my cash savings program was much more successful than anticipated. In January, I had $7000 for routine monthly expenses and $23,000 in savings. Since then, I’ve added ~$10,000 to those accounts, all while still paying bills. I could have spared a few thousand for retirement savings, considering the “sale prices” of the past several months, without being cash-poor & investment-rich post-employment.
Error Three: I didn’t consider that I’d be eligible for unemployment, and that it’ll cover all my monthly bills. At the time the plan was conceived, monthly expenses were well over $2000/month, so I estimated needing at least $35,000 in cash for 12 months of unemployment. In the meantime, the truck was sold, the family car was totaled and if nothing else, my monthly needs improved tremendously thanks to both events.
Being that pessimistic means I have an unusual stash of cash, just sitting around, while only having made just a little over $2000 in retirement contributions. Ergh. I hate throwing away both the opportunity to invest at lower prices and the tax benefit.
Don’t get me wrong, I’m certainly not bemoaning doing better than expected, for heaven’s sake. I’m just wishing I’d done a little better at making decisions based on the long-term, or at least considering the whole fiscal year. I subscribe to the “hope for the best, plan for the worst” mentality, but I clearly need to work on my automatic worst-worst-worst case scenario planning reflex. It’s a little dire. After all, it’s not like it’s the Zombie Apocalypse.
Of course, I haven’t hyperventilated about being a bag lady in a while, so maybe that was necessary for peace of mind.
For now, I’ll make a small adjustment to my contributions for the last check and leave payroll alone. Maybe I’ll make a few smaller investments, in addition to the CD I just bought. No sense in fussing too when we have so little time left, not until I learn how to read the future!
[Dear Magic 8-ball: will I find a good, well-paying job with benefits adjusted for COLA this year? What’s that? “Concentrate and ask again”? Hmph. I prefer Neil Gaiman‘s Magic 8-ball. I miss it.]
May 29, 2009
I’ve just locked up $10k in a one year CD.
It would have been more prudent to ladder them, but there aren’t any rates that are worth locking up the money for any amount of time apart from the one year term for which I’m earning a whopping 2.25 APY. At that price, it’s still twice as much interest as the formerly high-yield online savings accounts. Remember when those were the five magic words? I loved saying it, back in ought-one, the days of 5.35% APY: High-Yield Online Savings Accounts. Mmm…. delicious.
Oh, right, back to reality. What a drear existence for cash monies these days: interest-bearing checking accounts are barely registering on the interest scale at 0.10%.
This was what you could call an impulse investment. It wasn’t a scientifically, mathematically or otherwise analytically sound decision based on how much money I could afford to have locked away for 12 months. It was a nice round number, and I figured in a mental, back of the envelope calculation that it leaves me with approximately 20K in savings. That’d get me through 12 months of no income before breaking into the CD. (Worst case scenarios around here, all the time.)
Works for me.
How about you? What are you doing with your money? Or is it just lollygagging about like the rest of mine?
May 6, 2009
Has anyone else had a problem with their account aggregators of late? For the past 3 months, Yodlee has given me error messages for my ING and ED accounts and I’ve been growling at it under my breath. They finally told me that the contact was being limited at ING and ED’s end today. ING’s reply to my inquiry into the veracity of this statement:
I understand that you recently had an issue trying to connect to our website using Yodlee. This service is commonly referred to as an account aggregator. While this service may have worked in the past, most users are finding that their aggregator does not work with our New Sign In Process.
The security of your information is very important to us. Once your personal information leaves ING DIRECT, we have no control over your information or how it is used by third parties. Because we have no way of monitoring how account aggregators address security, privacy or the use of cookies we are unable to support the use of these services.
To best protect your personal information and your funds, we recommend that you do not share your personal information (including your Customer Number and PIN) with any third party.
Thank you,
XXXX
ING DIRECT USA
This pretty much infuriates me. Why did it take Yodlee this long to tell me what the real problem was? Why did I keep getting useless “we’re working on it” and “the problem has been resolved” messages?
And ING! And ED! Why do ING and ED get to arbitrarily decide that they’re not going to allow you to allow access to your own accounts?
I feel like I’m being flung back into the personal finance era of 2001 before I discovered account aggregation and had to sign into every single account manually.
I am not a happy ING Direct customer. Why can’t we have the choice about whether or not we’re going to share our personal information with a relatively secure third party? Is it my account or not?
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And while I’m on my soapbox about losing personal control to a faceless entity that “knows what’s best” for me:
This Reuters article about The End of Personal Finance really put my back up. Of course individuals can’t take care of, plan for, or be prepared for every single possible disaster in life, and expect to succeed. But to suggest that “personal finance” primarily consists of hot stock tips and therefore, personal responsibility was simply a pipe dream? *deep breath* And the implication that taking responsibility at all – under the “guise” of a misdefined personal finance – is actually usurping the “rightful role of the government?” That has me sputtering in outrage. Ridiculous.
The government is not our life-support parental unit! Heck, my actual parental units don’t expect to support me for the rest of my life, as well as my kids’ lives. And you bet that I’m disabusing brother of the notion that he’s got the right to that as well.
*grumble*
April 22, 2009
These are the best CD rates Citibank’s offering right now:
What’s even sadder is that the 2.25% APY is still marginally better than my regular savings accounts which hover just around 1.5%. Yay. P’raps it’ll be worth my while to lock up about 10K in the one year CD. It’s certainly not worth my time to hunt around for slightly better rates if I don’t want to open up yet more bank accounts. (I don’t.)
April 1, 2009
I’ve been working on making an habit of bringing decent lunches on a very short attention span. The best way to form a habit is to actually do it. Repeatedly. Simple? It should be, but it’s equally easy to fall out of the habit of say, going to the grocery store every Sunday. Things come up, y’know?
Sometimes the bringing of lunch works out wonderfully throughout the week, sometimes groceries are supplemented by leftovers from dinner, other times I have to get creative or purchase a meal or two. Here are a few of the oddities that prove I don’t always eat well. 🙂
Normal: Leftovers from dinner.
Creative: Egg and spinach on a whole wheat bagel, 91 cents
I’d failed to plan for lunch one week, and had brought disparate ingredients that were supposed to magically coalesce into a meal. It sort of did. My unboiled egg was microwaved just long enough to make a little scramble, spinach meant for a salad served double duty as greens for the sandwich and leftover bagels brought for breakfast become sandwich bread.
This was so yummy I did it again the next day, this time mixing in leftover string cheese, for some dairy.
A huge helping of spinach topped with sunflower seeds (that I’ve had in my desk forever) and some balsamic vinaigrette rounded out those meals.
Deal and Coupontastic: Quiznos turkey sandwich and deli sandwich on Dutch crunch, $5.60
Armed with a Quiznos free small sandwich coupon, I picked up a small turkey sandwich (terribly puny, if you ask me), a small drink, and a small Italian sandwich at a deli joint (twice the length and width of the Quiznos sandwich) to make a lunch for two. The deli sandwich was quite a good deal, it was only $4.50 for a substantial roll and hefty meat filling. If we’d gotten the equivalent meal at Quiznos, sans coupon, it would have cost about $14.50.
Filling at the time: Bags of salad (usually $1/bag) are great when topped with some chicken or tuna, and other veggies. It’s satisfying, but for a much shorter period of time.
I could use some good ideas for what to try next!
