Tags Posts tagged with "Savings"

Savings

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Financial CrossroadsIn three weeks time I’ll be eligible to call into the Dave Ramsey show and Dave will ask me how much I paid off, how long it took me, and what my household income is…

He’ll then ask my wife’s name and then we’ll do the countdown together, “Three… two… one… WE’RE DEBT FREEEEEEEEEEE!” and he’ll hit the sound effect button from the movie Braveheart.

Then he’ll ask what the last bill I paid off was and what was the hardest part about becoming debt free.

It’s all very predictable. I already know how it goes, so I’m not going to bother calling in. I don’t like to think of myself as that exciting, you know?

Besides, my story is kinda bland.

The hardest part was waiting for each pay day — time was the hardest part. I knew how to get “here”, I just didn’t enjoy waiting for the paychecks to come in.

And the last bill I’ll pay off is a 0% interest credit card.

Hardly the type of story he’s looking for…

Anyway, I’ll soon find myself with a lot more cash on hand each payday. In fact, that’s already happened — I’ve spent a lot of money already this month just knowing that there aren’t any large looming bills to come in the mail.

That’s coming to an end in November.

So, I’ve started putting together a new budget that will continue to pay down our mortgage at an accelerated, yet comfortable, pace and one that will hopefully make my savings account grow equally as fast as the balance of my 401k has been dropping of late.

What am I saving for?

I’m not sure.

No, that’s not true.

I know what I’m saving for, I just don’t know yet how much I’ll need. And I’m afraid to find out how much I’ll need because it might be more than I can imagine saving for.

Make sense?

Plain and simple, the entire first floor of my house needs to be remodeled. And we’re not talking about a coat of paint and some new lamps…

It needs to be gutted. We need new floors, new walls, new ceilings, new wiring, new plumbing, etc… We need everything.

As it stands right now, it’s an embarrassment — so much so that I almost don’t want to hand out Halloween candy this year because of the small glimpse of the interior that the kids will be able to see.

Yeah, it’s that bad.

Hang on, let me take a picture.

See what I mean? This is the entryway to my home. Mouseover it, you’ll see what I’m talking about. Not what you expected, huh?

It’s looked like this for over a year now. Really.

Now I’m sure you understand my plight.

I just spent all of the these years paying down my debt to get to this spot where I am right now…debt free. And now I’m in a position where I’ll need to spend $30k, $40k, maybe even $60k in one shot and put myself deeper in debt than I ever was before.

Yikes.

I can’t really imagine saving up $30k, let alone twice that! But seriously, look at that place? It *needs* to be done and the sooner the better.

One route would be to just deal with it for another few years (can you imagine?) and save like crazy until we can afford it.

The other route would be to get on the horn, get a few contractors over here for estimates, and get it done in the not too distant future while saddling ourselves with payments for next few years…

Obviously, I’m leaning towards the latter route. See, the roof and siding projects we took on between December 2006 and July 2007 cost us a little over $40k total — and here we are, already, lining up to be debt free in November 2008. While it felt like it took forever, it really didn’t.

History tells me that it’s possible for us to pay for a project this big, but my gut tells me that I want out of this $2500/month-to-creditors cycle… It’s worn me down.

Or maybe it’s walking into my house and seeing that scene above that’s been wearing me down…

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Nintendo Entertainment SystemIt’s funny how as you get older, parting with huge sums of money gets more and more difficult…

Just days into my plan of making car payments to myself, and feeling pretty good about it too, commenter Cath recently mentioned that, though she’s doing the same thing, she’d have a hard time parting with all of that saved up money in one shot

I found the comment pretty intriguing and, after thinking about it some, I think I’m exactly the same type of person.

Let’s fast-forward 4-5 years and say that my “auto” savings account has grown to around $20k. My current vehicle isn’t getting the job done and I’m car shopping.

I don’t know that I’d be able to just wipe out all of that savings in one fell swoop.

That’s probably because I’m a hoarder. A collector. An accumulator.

But I wasn’t always that way…

The first big ticket item I ever really religiously saved up for was the Nintendo Entertainment System.

It came out when I was in the fourth grade. Jay Mooney, who was more of an acquaintance than a friend, lived up the street and was the first person I knew to actually get one. It was awesome.

I mean, it blew my Atari 2600 out of the water. Clear out of the water.

It was even better than Intellivision. Even the rich kids with Colecovision were jealous of Jay Mooney.

I wanted one. Bad.

One problem, though.

It was expensive and my parents weren’t about to spring for it.

It’s funny, to this day, I’m not really sure my mom can even pronounce Nintendo correctly… She wasn’t alone either. A number of my friend’s parents referred to it as, “Intendo”. Weird.

Maybe that’s why none of us actually got a Nintendo for Christmas in fourth grade (or fifth) — our parents were looking for something called the “Intendo” Entertainment System instead.

Any way, it was apparent that this was something that I was going to have to save up for myself.

At the time, the version I wanted (the one that came with the gun for DuckHunt) was $199.99 at Toys-R-Us.

Earning a sporadic $5/week wage (allowance) and $5 per lawn mow during the summer, it seemed as if I’d never get there.

And I didn’t.

The next door neighbor and I suffered the entire summer between 4th and 5th grade playing “Pitfall II” and “Congo Bongo” on the Atari 2600 on a 13-inch black and white television knowing full well that up the street, Jay Mooney was playing Mach Rider in full color.

We did the same the next summer too.

Looking back, we probably should have pooled our money.

Apparently the idea of “sharing” never crossed our minds.

But I remember getting really excited when I’d reached the $50 mark. I’d never had that much money in my life.

I could finally start to imagine having my very own Nintendo. To speed up the pace, I started pilfering $1/day from the lunch money my mother would give me each morning.

Being the dork that I was, I remember ironing all of the $1 bills I had so that they looked really cool all in a stack. I even taped a piece of paper around them like they do at the bank.

As months turned into years, it started to feel like I’d never make it, but I held on to the goal.

One day, the Nintendo Entertainment System would be mine.

Thankfully, at that point in history, Nintendo didn’t have any real challengers (like XBOX or Playstation), otherwise I’d have had to rethink my planned purchase.

Then, as luck would have it, my stash of cash got a major boost when my uncle slipped me a $100. “Shhhh… don’t tell your dad…”

I had enough!

I didn’t tell my dad about the $100, but it had to be pretty obvious. I mean, where would I have gotten a nice crisp $100 bill? Seriously…

My parents drove me down to KB Toys at our local mall (now torn down) and I had the privilege of asking to purchase one of their big ticket items. You know, the stuff that was kept behind glass…

It was so cool walking out of there.

That night, the Atari was disconnected for all eternity.

My sister and I hooked up the Nintendo full of excitement only to realize that, while we now had a Nintendo of our own, we only had two games (Super Mario Bros. and Duckhunt) and we’d played both of them to death over the past few years at friends’ houses.

Making matters worse, *everyone* had those two games, so we couldn’t even use them as trade bait. No one wanted to borrow those two games.

It was pretty horrible stomping on goombas and koopa troopas without any sort of challenge.

The light at the end of the tunnel was, as it turned out, well, boring.

That first night, in one sitting, I played through all 24 levels to win the game. Levels 7-1, 7-2, and 7-3 are easily the most difficult.

Back to saving I went…

Thankfully, while the system itself was too expensive for my parents to buy for us, the games were not.

Unfortunately the games I remember getting for Christmas were forgettable titles like “Jordan vs. Bird” and “A Boy and his Blob“…

A couple of years later, it was another year of saving for the Sega Genesis…

Rinse and repeat, really.

But now, like Cath, I can’t imagine spending every last penny in one shot — even if I’d saved up for it.

Already, now, I’m excited by the twelve cents of interest I’ve earned so far…

I almost think that I might prefer to pay back debt rather than eliminate my savings to prevent taking on debt…

Weird…

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ING LionThe way ING does things is a little wonky. They make it seem like it’s so easy to open multiple savings jars under one account, but I know I’m not the first to find their way of doing it a little bit confusing.

I don’t know — clicking on a link titled “Open an Account” indicates to me that I’ll be getting a new account number, login, and password. That’s a lot of hassle. Maybe that’s just me?

But when you click on that link, that isn’t what happens. You keep your current account number, login, and password — they just add a new “bucket” to add funds to.

Perfect — exactly what I was looking for.

So why am I doing this?

Well, I want to keep some of my savings off to the side.

Since I finished paying off the auto loan last month, this will be my first month in over 11 years that I won’t have to pay a car bill of any sort.

The thing is, I’ve grown accustomed to paying that monthly bill. It’s just part of the budget, you know?

After so long, I barely even notice the money missing each month, so I’m going to keep paying it — to this separate savings account.

The original Volkswagen minimum payment was $224. The original BMW minimum payment was $689 — that makes my head hurt. And the original minimum payment on the Scion was $289.

Averaged together, the monthly bill was/is $400. And that’s what I’m going to set aside each month — but not yet…

I can’t afford it!

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Dangling CarrotThe idea of taking advantage of the 0% offer Chase is dangling at my nose is really getting to me.

I’ve put together all kinds of charts plotting out how much I’d save if I did this or if I did that.

Eh, let’s borrow an extra $4k and just wipe out the car loan at the same time. That’s the most recent variation.

Grant over at Clever Dude recently took the bait offered him by Citibank.

His offer was a 0% balance transfer offer with a 3% fee capped at $75.

I’d have probably taken that deal too — even if it isn’t for a full 12 months.

Logging into my own Citi account, my offer isn’t really comparable. Not only do I have a lower credit limit on that card, but my fee isn’t capped… at all.

Um, no thanks.

So it’s back to Chase. $19,200 available, 0% for 12 months, and a 3% transaction fee capped at $199.

Hmmmmm…

A little over a year ago now, I did the arbitrage thing and I didn’t get burned.

But it didn’t work out exactly as planned either. I didn’t exploit the fact that I’d borrowed money at 0% by earning a nice (at the time 4-plus percent) rate of return in some savings account.

I’d planned to do that, I just didn’t.

Instead, I ended up using most of it to finance home improvement projects.

It wasn’t a complete backfire, but not really a success either. Yeah, I saved a little money, but I certainly didn’t make any.

Clever Dude had the same problem last time he tried to pull off one of these arbitrage moves. He ended up paying off a car instead and, well, probably saved some money but didn’t actually make any.

He’s in a different position now — he CAN make money because he doesn’t have funds tabbed for anything. Yeah, he still has an auto loan but, well, you can read his entire post

As for me, I’m not there yet. I’ve still got a car loan at 5.35% and the ever-annoying PMI issue to deal with.

To eliminate both of those, I’d have to take up my 0% offer for at least $6k.

Borrowing that little, my 3% transaction fee would be $180 — doesn’t even hit the $199 cap. To me, that means I should borrow more, you know, to at least take some advantage of the cap…

But at the same time, I’ve started to grow accustomed to not carrying any credit card debt. Do I really want to dig myself into that hole again?

Sure, if I borrowed, say $10k, I’d send $2k to the mortgage, $4k to Toyota, and then put the remaining $4k in my ING account to accrue interest.

At the current rate, that $4k in savings would “earn” me around $120. That doesn’t even cover the transaction fee.

And is a “free” $120 worth going back to carrying a credit card balance for another year? Not to me…

And technically, factoring the $60 or so of interest saved by paying off the car, it really works out to a complete wash…

$180 transaction fee – $120 ING interest earned – $60 Auto Loan interest saved = $0

So now I’m leaning the direction of NOT borrowing and just staying the course…

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Q*Bert was a terrible game.  For some reason though, my mother thought it was the funniest game out there…I’ve just updated my side bar progress for my
2008 goals
and so far, I’m well ahead of pace.

My financial goals added up to $30846 this year. To date, I’m right around $21k of the way there or just under 70%.

We’re just over the half way point of the year, so things should be looking great, right?

Well…

Starting at the top, I have finally conquered the credit card monster. I’ll never again approach my all time high of around $28k. I’m done with that forever and by “that”, I mean carrying a high interest balance.

Since paying it off in full, I’ve run up around over $1k every now and then, only to pay it off in full before the statement is issued.

Moving down to my savings goal, I dunno, lately I’m just having a hard time imagining this goal coming to fruition in the next 5 months. Simple math tells me that it can be done (at the rate of $2k per month).

That number seems crazy-high to me, but it’s right around the amount that I’ve been throwing towards debt for years now. With the debt gone (just around the corner), it shouldn’t be a problem but for some reason, I just can’t imagine throwing that kind of money towards savings on a monthly basis…

Ahhh, the PMI

While I’ve reached the goal I set back in December, I can’t yet claim that I’ve eliminated PMI. It’s been an on-going process and I’m still sending additional money towards my mortgage to make it finally happen. (please?) So, while this goal may appear to have been completed, it continues to suck up a large portion of my monthly budget which would otherwise go elsewhere…

The last goal is my auto loan — listed last because it has *always* been the lowest priority.

That’s about to change though as I’ve already initiated a payment plan that will see it drop a minimum of $900 per month starting this week and being in my “Red Zone“, it will be done and over with by mid-September and possibly even sooner.

In the end, three out of four isn’t bad. I’ve mastered debt repayment already, but getting the hang of saving is still a work in progress…

Maybe next year…

(I know, I know… It’s only July…)

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FDIC Logo
With the collapse of IndyMac and the news that it was the second largest bank failure ever (I’d never heard of them), the role of the FDIC is getting some press. So far, so good… In comparison to FEMA, the FDIC looks to have their act together.

Now I’ve always known about the whole $100,000 per account rule. Every bank teller window has a little sign. Every bank commercial mentions it with some super fast-talking at the end. It has something to do with the max that the FDIC would insure. Makes sense to me.

I don’t have any accounts that large, but when daydreaming about winning the lottery, I have put some thought into it.

Like, let’s say you win a million dollars. It’s no wonder that it’s suggested that you seek come money help before you even collect your winnings.

At first glance, it seems simple. Just open up 10 accounts and drop $100k in each one. Just to get you all set up before you start sending money this way and that way.

Simple enough, right?

But what about the interest? It’s going to put you well over the $100k mark in each account in no time…

Oh crap.

Alright, make it 12 accounts with $83k in each one. You know, room for growth. That would work, no?

I had it all planned out in my head. Probably not wisely, but I had it all planned out.

But now, having heard a few of the horror stories from account holders at IndyMac (as well as an hour or so or research on the FDIC website), I now realize that my plan wouldn’t work at all…

See, the FDIC really does insure $100000 worth. But it’s not per account like every single bank commercial I’ve ever seen seems to imply.

They only cover $100000 per depositor (in my case, per person) per bank.

There’s the catch. Per bank.

So my plan just got a lot more complex… Can you imagine having 12 different bank cards in your wallet?

(Oh wait, I can… I used to carry that many credit cards?!)

So now, upon winning the lottery, and before I start spending my new found fortune, I’d have to go out and find at least 12 different banks and open a new account at each one of them?

(I’m not sure I can even name more than 8 banks with local branches.)

The VaultThen, I’d have to keep track of where the balances fell in each account to make sure I don’t go over $100k or overdraw one of them. Wow… That’s a lot of work. And I’d still be too cheap to hire someone to do it for me…

Kind of makes the Scrooge McDuck method of banking look a lot more attractive…

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After reading about so many people super-saving their way to wealth by living off of 50% or less of their total income, my wife and I have been toying with the idea of giving it a try ourselves.

For a month.

Not this month, mind you. Definitely not happening this month.

I spent a few minutes running the numbers this morning and it seems that people run them differently. Some use their gross pay as a starting point. Some use their net pay. Some just use what seems like an arbitrary estimate of sorts.

For me, I’m going to use my bi-weekly take home paycheck amount plus my 401k contributions all multiplied by 26 (the number of paychecks per year) and then divided by 12 to give me a nice monthly starting point for my income.

This is my way of pretending that taxes don’t exist while pseudo-padding the numbers in my favor by making my income less than it actually is.

For instance, technically, I contribute 15% of my income towards my 401k. But using this calculation (which omits federal taxes, state taxes, and health benefits), I contribute 19.86% towards my 401k.

Make sense?

Basically, all I’m doing is using my actual take home pay for my calculations. Plus my 401k contributions. This is sounding a lot more complicated than it needs to…

Anyhow, after some “quality time” with my 99-cent calculator, the numbers look like this:

Savings (50% total)
19.86% – 401k
30.14% – Unaccounted For

Expenses (50% total)
24.95% – Mortgage (Minimum Payment)
11.36% – Auto/Insurance/Gas (Minimum Payments + Gas)
 9.34% – Utilities
 4.35% – Unaccounted For

I found these numbers shocking.

Each month, I feel like my checking account balance is pretty stagnant. And I’m supposed to have like 35% of my paycheck available? Really? No way.

But upon closer inspection, it actually does seem to jive. For the past few years, I’ve been sending all of that “unaccounted for” money towards debt — credit card, auto loan, and mortgage. It adds up pretty close.

So, essentially, I already have been living at the 50% level. All along…this whole time.

I’m just not seeing the wealth yet because I’m still carrying debt, so one thing at a time… Scratch the 50% idea for August and wipe out the $4000 left on the auto loan first.

I’ll revisit this idea again in a few months when, hopefully, I’m debt free…

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Denied!Just three more days until we go on vacation so it’s time to start tying off all of the loose ends that could be forgotten as we head out the door.

The first thing we did was stop mail delivery for the time we’re away. It’s super simple to do now over the internet. That’s done.

We’ve gotten all of our legal documents, passports, green cards, and birth certificates together and ready for the trip. Sure, we’re only going to Canada, but the border crossing rules seem to change on a daily basis these days.

Never hurts to have everything on hand but even with all of the documentation in the world, it’s probably not enough to prevent an overzealous border patrol agent from handing out a few one way tickets to Guantánamo Bay.

Yes, I think the Patriot Act is stupid. Always have, always will.

The next thing we did was initiate transfers from our ING accounts to our checking accounts. Because this can take 2-3 days to clear, today was the day to do it. We won’t necessarily need the money while on vacation, but it will be nice to have it readily available.

I also made sure that all of the bills are paid and for those that are expected to arrive while we’re away, I’ve set-up an auto-payment. That’s overkill to a certain degree as we’ll be back home long before they’re due anyway. Better safe than sorry, though.

And the last thing I did was make sure that all of my credit cards have a $0 balance. Not only will this make keeping track of our vacation expenses very easy, its just eases the mind.

For the trip, I’ll be carrying two personal credit cards and one business card. Why, you ask?

Well, I’m only planning on using one card for everything, but on a past vacation, while shopping, the one card I had in my wallet was denied by the credit card company’s fraud department.

Apparently I was making suspicious purchases that were out of line for my account, so they locked it up.

Understandable, really, we’d probably covered over 500 miles and two countries in the span of 24 hours with purchases all along the way. I can see how it might look fraudulent.

After the rather embarrassing denial, it was humiliating actually, I called the number on the back my credit card from my wife’s cell phone and sat on hold as the battery power began to fade. Anxious moments, let me tell you…

Anyway, you know how when you get a new credit card they always say that you need to activate it from your home phone number? Well, they mean it.

I spoke to a very helpful and sympathetic customer service rep but because I wasn’t calling from my home phone, they weren’t able to verify that I was indeed the true account holder.

“Sir, can you call back from your home phone?”

“Um, no.  I’m standing in a parking lot 300 miles from home… I’m on vacation…”

Again, it makes sense, I suppose, but I still wasn’t happy about it.

Thankfully we were only a day away from home and my wife’s debit card could cover the rest of the vacation’s expenses, but it taught me a lesson — always have an EXTRA credit card on hand when away from home.

Kinda like American Express’ old tag line — “Don’t leave home without it” — but without the fees… That’s the plan this time… multiplied by three.

Can You Dig It?

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