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Sunday, December 30, 2007

Suze Orman's Top 10 List for 2008

On last night's Suze Orman Show, Suze gave a top ten list of things to do for 2008:

Suze's Top Ten List for 2008

  1. Try to get out of credit card debt.
  2. Begin a 6-8 month emergency fund
  3. Sign up for your 401(k) to the point of the match, then fund a Roth IRA
  4. Look for the best buy on a home. Purchase only if you have enough for a 10%-20% down payment and qualify for a 30-15 year fixed mortgage.
  5. Never loan money or co-sign for someone
  6. Annuities - single premium deferred annuity is ok, but never buy variable annuities within a retirement account
  7. Buy individual bonds, not bond funds
  8. Get a will and a living revocable trust
  9. Get term life insurance only
  10. Buy no-load mutual funds only.
I'm pretty good on most of these, but not all of them, and it's a good goal to work towards. I do still rent my home, but mainly because I'm not sure that I plan to stay in this area long term. I'm giving myself 2 years, and then I'll make a decision. The other thing that I absolutely need to do this year is set up a will. I really should have done this years ago, but like so many people, I don't like to think about it. My uncle is an estate lawyer and would do it for me, but I only see him on holidays, and well, at Christmas, the last thing I want to think about is my demise.

So that is my goal from this list. How about you?

Wednesday, December 26, 2007

The Today Show: Give Yourself a Year End Bonus

I just caught a segment on The Today Show about personal finance. This was called "Give Yourself an End of the Year Bonus."

The segment started out talking about how the majority of people didn't get a year-end bonus this year (I didn't, but my co-workers did - I haven't worked there long enough). And while you may not have gotten a bonus, there are ways you can give yourself a bonus by saving money in the coming year. They gave three suggested ways to give yourself a bonus.

Pay attention to spending
  • save 15% of your income
  • pay attention to what you're buying
I don't think any of this is news to people who pay attention to their finances, but it is always a good idea to remember these two elements. I know how much money I save in a month, but I'm really not sure what percentage of my income I am saving. That's something I plan to look at when I get home from my Christmas vacation. As for paying attention to what you're buying, I think that's something we all can take another look at. Some days, when I go to the grocery store, I am very exacting about what I buy. Other times, I just buy at random and may not be making the best choices, either nutritionally or financially.

2. Change the allowance on your W-4
This was probably the most eye-opening part of this segment. While I inevitably end up breaking even or owing money to the government due to investment income, apparently, the average tax-refund is $2200! That is $2200 that you're loaning to the government for free! You could very easily save that money in a high-yield interest rate yourself and have even more money when it's tax time.

I do know people who like the fact that the government holds the money for them because it keeps them from spending it. If your spending is that uncontrolled, then perhaps letting the government hold your money is the best plan, but I have to believe there are other ways you can keep from spending your money.

3. Cut your taxes
  • Put money into your 401k
  • Take advantage of Flexible Spending Account
These are two great ways to reduce your taxable income, and great ways to save. The recommendation was to put the full allowable amount into your 401k, but at least put in up to the match. I agree with the match part, but from everything I've read, you should put the rest of your income into another investment account, because you will make significantly better returns.

A lot of people don't like to use FSAs because if you don't use the money by the end of the year, you lose it. It is worth it, however, to sit down and figure out just how much money you will use on these types of expenses. At the very least, figure out what you pay for any medications you use year-round and for your annual physical. Those are guaranteed expenses. It might not be a huge reduction, but I figure any reduction in your taxes is a good thing.

Overall, these ideas made me think, but didn't tell me anything I didn't know. But I'm sure a number of people have benefited from these savings tactics.

Monday, December 17, 2007

What to do with old textbooks

Over on College of Cash, there was an article about whether or not to sell your college textbooks back to the school bookstore. The article was linked to from the most recent Carnival of Personal Finance (which I highly recommend), so I’m sure it’s getting a number of hits.

I agree with some of the advice and disagree with some of the advice. In general, I do recommend selling any books that you don’t think you will ever use again, unless it was a book you truly enjoyed. I sold almost all of my law school textbooks. I didn’t sell all of my undergraduate books, but I have an English degree, so many of the books were short novels that I enjoyed and wanted to read again. Besides, I had made so many notes in them that the most I could get for any of them was around a quarter. Not really worth it in my mind.

Where the author and I disagree is on how to sell the books. The author mentions getting books for cheap on Amazon, and I am guessing that this means the books were bought used through Amazon’s resale service. Then, the author suggests selling the books back to the school’s bookstore. Why not resell the books on Amazon or on half.com?

One quick answer to this would be that if you sell the books to the bookstore, it is instant cash. At both my undergrad and my law school, you could take the books to the bookstore, they would look up how much they could give you, and then you were handed a stack of cash. That was a very satisfying feeling.

But I quickly discovered that I could make significantly more money by selling the books online. My tactic was always to look at what the books were selling for and try to list mine at the lowest price. If I thought the lowest price listed was completely unreasonable, I would bump my price up, but for the most part, I was quite content to list my book for 50 cents below the lowest listed price.

And inevitably, the books were snapped up. Yes, I had to take them to the post office for mailing. And that is a hassle for a lot of people.

I prefer to sell on half.com. Why? Their fees are lower, meaning that at the end of the day, I take home a bigger percentage of the sell price. Both sites do provide you with shipping costs and from my experience, the money given for shipping costs has always been slightly more than the actual cost to mail the books. That can account for packaging costs, but most times, a book can either be wrapped in an old paper bag or placed in a manila envelope. I don’t think I have ever purchased any special materials to ship a book.

I think it all depends on what is important to you. And how much money the bookstore is willing to offer – it never hurts to go in and ask them what they will give you for your books. Sometimes the price is right, but you don’t have to say yes if the price they quote you is too low.

My advice, however, is to check out online sales. I even managed to unload a few old college texts this past summer. I listed them for very cheap, and even though they were old versions, people were willing to buy to save money. The money doesn’t roll in quite as quickly, but usually within three months, your books will have sold and you will have made more money back from the books than you would have by selling to the bookstore.

Sunday, December 16, 2007

2008 Financial Goals

As the year is winding down, I've finally taken the time to solidify my financial goals. I made a list of things, some of which I think are very doable, some of which I think will be a struggle and might be a bit more dependent on the market than I like.

So here we are, my 2008 Financial Goals.

1. Fully fund my Roth IRA for 2008 (if possible).
The plan this year is to set aside the full $5000 for my Roth IRA contribution. Because I'm not sure what's going to happen financially, I'm not sure if I will be eligible to make the full contribution. Therefore, rather than contribute all throughout the year, I plan to set aside $5000 in a high yield savings account and then put it into the Roth IRA if I can. If not, I will have to look into other options.

2. Keep a running total of all taxable income.
This ties into goal #1. What better way to track whether or not I can make the full contribution than to keep a running total of all of my taxable income?

3. Place 3 paychecks directly into savings.
In 2008, there will be three months where I receive three paychecks. Because I'm used to budgeting with only two paychecks a month, I plan to take those extra three paychecks and put it directly into savings. Again, this may tie into goal #1, and be a relatively painless to at least partially fund my IRA.

4. Save a minimum of $400 a month outside of the above goals (not including investment income).
I think I can do much better than this.

5. Increase net worth by 20%.
This is the one that I think will be the hardest to achieve, and will be very tied to my investments. The past two months haven't been so great for my net worth, but I believe the market will bounce back, and hey, if nothing else, it lets me start at a low point. But in all seriousness, I would like to see a significant increase in my net worth. I have been pondering buying a home in the next few years, and I want to have at least a 20% down payment for that. So some serious savings are definitely in order.

So there you have it. My five financial goals for 2008. Pretty simple, but definitely worthwhile.

Friday, December 14, 2007

$1 a day? Why not $10?

Over at No Credit Needed, there is a great post about what you can accomplish if you save just $1 a day and what you can accomplish if you can manage to put away $10 a day.

Kind of makes you re-think that trip to the vending machine, doesn't it?

Wednesday, December 12, 2007

Personal Library

In recent months, I have been doing my best to declutter my home. I've tried to get rid of things that I don't really want or need, or things that I just have too many of. Since I just moved in September, I did a pretty good job of cleaning things out before the move, but in a few areas, I'm still realizing I just have too much stuff. One area is, of course, clothing, and I do my best to cull through my closet every so often and bag up stuff for charity. The other area is books.

I love books. I have always loved books. Bookstores are one of my favorite places to visit, and also a very dangerous place for my wallet. I find it very hard to walk into a Borders or a Barnes and Noble and come out with nothing. But I've been doing my best, especially since I have a giant pile of unread books at home.

One way that I discovered to get rid of books (and also get new books to read for next to nothing) is book swapping sites. There are a number of them out there, but I use both PaperBackSwap and BookMooch. The basic premise of these sites is that you post a list of books you want to swap. People request the books and you mail them (via media mail). You then get a point for sending the book, and you can use that point to request a book from someone else. Simple!

The process isn't quite free, obviously. You do pay to ship the books, but you don't pay when you receive, so it all sort of evens out. Either way, it's much cheaper than buying a book new.

Wouldn't a library be cheaper? Well, yes, clearly. But I often like to keep books that I really enjoyed, or I like to pass them on to friends or family. This gives me that option. Or if I choose, I can take the book I received and post it back into the system and end up passing it on.

One of my favorite features on these sites is the Wishlist feature. The two sites work the feature a bit differently, but if there is a book that is not posted or not yet released, you can wishlist it. With PBS, you are on a waiting list, and the books are offered to requesters in order. With BookMooch, everyone on the waiting list gets an e-mail when a book is posted and you have to go to the site to request it. Each of these methods has its plusses and minuses - if you are on your computer a lot during the day, BookMooch might give you the better chance to get the book. If you don't mind waiting your turn and you would rather not have to rush to the site all the time, then PBS is more your speed. Personally, I use both, and frequently have the same book wishlisted on both sites.

Ultimately, this has led to me saving money, because when I go into the bookstore and see a book I really want to buy, I wait, and I come home and check the book swap sites for the book. Sometimes I can get it for nothing!

Sunday, December 9, 2007

Thinking about 2008

Now that 2007 is quickly coming to an end, I've started thinking about my financial goals for 2008. I'm trying to set goals that are attainable, but not goals that are a given.

One clear goal is that I want to again fully fund my Roth IRA. I don't plan to actually fund it until the end of the year, however, as I'm not sure where my income level is going to be, and I don't want to deal with excess contributions. I do, however, plan to set aside the full $5000 and then put whatever I can into my Roth at the end of the year. Along with that, I plan to very carefully track my taxable income month to month so I will know where things stand.

I discovered that during three months next year, I will be receiving three paychecks a month. This is not an uncommon phenomenon - if you're paid bi-weekly, you will likely see something similar. I budget as if I only get two paychecks a month, of course, so the plan is to put those three extra paychecks directly into my long-term savings account. This is the account that I automatically put money into every month. I don't necessarily have a purpose for this account - it's just money that I don't touch. I might use it for a large purchase, perhaps towards a down payment, or maybe for a vacation, or just about anything. It's just another "pay yourself first" account.

I want to increase my monthly contribution to that account by $50 as well, possibly $100. I will have to crunch the numbers on this first.

I plan to continue to contribute to the match to my retirement account through my employer. That's an easy one. I will finally be eligible for the match sometime this spring, and it will be nice to see those contributions hitting the account.

I expect to get two raises this year - a cost of living increase at the beginning of the year and then a promotion of sorts at my anniversary with my employer. The goal is to try to continue where I am with expenses and just bank the salary increase. The COLA increase will likely only be an additional $100 take-home, if that, what with changes in my health plan and such. So it shouldn't be tough to just bank that. Every dollar helps!

I'm also considering setting a goal of increasing my net worth by a set percent. Right now, the number I'm toying with is 25%. That seems scary, but I think it's doable.

I will finalize this list in the coming weeks. What are your 2008 financial goals?

Friday, December 7, 2007

The Advertiser's Dream

Seven days into December, and so far, my spending plan is going well. I've managed to bring my lunch and my coffee into work every day (I can't say that it hurts that the weather is awful and the last thing I want to do is leave the office at lunch time). I've also managed to keep from buying anything online, and I have to admit, that has been the hardest part.

(Ok, that's a bit of a lie - I bought a second humidifier the other day. My apartment is so painfully dry that I was creating sparks everytime I touched just about anything. Sadly, the second humidifier has not completely solved the problem, so I might be looking for a third, high powered humidifier. If anyone has any recommendations, I'm all ears.)

I'm sure many of you have been getting inundated with advertising e-mails and catalogs during this holiday season. Most of the time, I cull through the catalogs, tossing most into the recycle bin and keeping a few, just to see what's inside. I'm not a catalog shopper though, so it's rare I actually see something and end up purchasing. I am, however, a total sucker for online ads. Free shipping? Free gift with purchase? Wow! Let me see what I might need to buy! I am the person they are targeting.

Most of the time, I just visit the website, realize that I don't actually need to spend the money, and close the browser window. As of late, I'm trying to not even look. But that's hard. Especially when the ad is for something I use. For example, the store where I buy my moisturizer was having a free gift/free shipping sale. Do I need moisturizer? No. But was I tempted to stock up just because of the free offers? Most definitely. Of course, I then reminded myself that my birthday is in January, and that store offers discounts during the month of your birthday, so I would save just as much by going into the store next month, when I am closer to needing a new tube of moisturizer. But I was still tempted.

I think this month is a good experiment for me. Seeing just how little I really can buy, and only making important purchases. Like the humidifier. Or the dinner I plan to buy for my friend tonight when we go out to celebrate her birthday.

I'm hoping to make it through the month with some significant savings. I am spending a week at my parents' house for Christmas, which limits my grocery spending, but on the other hand, I had to pay someone to care for my pets, so that negates that savings. I bought my plane ticket months ago, and won't have any other travel expenses. I do, however, have plans to go out to dinner a few times with various friends who I haven't seen in a while. To me, that's a worthwhile expense, but every time I have these purchasing urges, I have to remind myself that I need to save my money for those outings.

Another thing that helps me save is that as I mentioned, my birthday is next month, and when my family has asked me what sorts of gifts I would like, I have mentioned that I would love gift certificates to the local mall. I'm planning a shopping trip for the day after my birthday. I have trouble spending a large sum of money all in one shopping trip, so this plan is much less dangerous than it sounds. Plus it has made it easier to not spend money now. "Oh, yes, those shoes are cute, but I will just wait and buy them for my birthday." And the odds are good that by the time my birthday shopping day rolls around, I won't really "need" those shoes quite as much.

Saturday, December 1, 2007

November Net Worth Update (-2.16%)

Inspired by a few other bloggers, I have been keeping track of my net worth since August. And in September and October, I saw steady increases in my net worth, both due to growth in my investments as well as the fact that in September, I started a new job after finishing graduate school.

November, however, was a bit different. My net worth dropped 2.16% in November. It's actually a few hundred dollars less than it was in August, which is a bit disheartening. But I have a feeling that most people who invest and who track their net worth will see a drop this month. My investments fell by about 5% this month. They're already starting to come back, so I expect December will be a bit better.

However, November was also a month of excessive spending for me. As I mentioned earlier, I blew through my monthly spending budget. I didn't go into debt or have to go into any of my long term savings accounts, because I typically spend under budget and then save the excess for upcoming expenditures. But this did hurt my net worth. I also track my gift certificates in my net worth, and I spent $125 worth of gift certificates this month.

My goal for December is to keep my spending tight. This will be tough, with traveling home at Christmas. My plane ticket is purchased and paid for, but somehow, traveling still seems expensive. Additionally, I plan to meet up with some of my friends while I'm home, which means a few restaurant bills.

I realized that January will be a three paycheck month. Because I'm paid bi-weekly, there are a few months in the year where I receive three paychecks. My plan is to keep my budget as if I only get two paychecks in that month, and then put the third paycheck directly into my long-term savings account. It will be a good feeling to see that account balance go up so significantly.