Was running around the lake with the Guy the other day when he brought up the subject of “what he was going to buy with his bonus money.” Oh, what luxury. Oh, what eye rolling. The Guy makes twice as much money as I do. He owns his place (where I also live, at a significantly subsidized rate), has a reasonable mortgage, and we live a modest lifestyle (thanks mostly to my influence).
Clearly, his question galled me, just a bit. But when I asked him all of the basic saving questions, he had decent answers, and it was clear that he felt pretty safe in his financial condition, despite the chaos around us. He has a four month emergency fund, he has some $60K in investments towards future goals of either starting a business and/or downpayment for a house. Basically he has a remote idea of those goals, and a remote idea of what they could cost, but those are not itemized and he’s not tracking his progress toward them, because: 1) he feels comfortable and 2) these goals are far off.
After reflecting – long after we completed our run – the whole episode just reinforced to me the importance and need for having a detailed financial plan and continually checking-in on where you are. Even though it can be frustrating and discouraging at times, it helps to guide your decision-making in almost every situation, from should I go out for dinner tonight to when should I retire… from where should I put my next $1 to where should I put my next $15,000.
Our whole discussion if of course, quite illustrative of lifestyle inflation as well. The Guy was in part distressed because everyone else around him was making a big purchase or at least saving towards a big purchase, and he has no need for any big purchases at the moment! What a world we live in!
It also made me realize how excited I will be to reset my financial goals post-B-school – when I actually have a higher income and more resources, and when the Guy and I will likely be combining our finances to work towards these things together!
Showing posts with label financial plan. Show all posts
Showing posts with label financial plan. Show all posts
Thursday, July 9, 2009
Thursday, June 18, 2009
The Economics of Living in California
So, as I move on from the Midwest and I head out to Stanford GSB… I am now moving to California. The Guy and I shopped for houses in the greater Palo Alto area a week ago… and we found a great 2BR house, with a big yard and patio and two parking spaces that actually fits our budget! But despite the cheery news, the reality is my cost of living will be going up SIGNIFICANTLY. I currently pay $1000 a month in “rent” to the Guy (helps go toward his mortgage). That includes all utilities/parking etc. The rent for our new house will be $2650, which does not include utilities etc., which we can estimate at $150/mo. The Guy has advertised that he wants to / is able to pay more than me for our housing expenses. Let’s assume that means he will pay for all of the utilities. That brings me to $1325 in rent = a 33% increase in housing costs while I eliminate all income and take on debt. Hooray. We could go with a more economical apartment ($2200), rather than a house… but I think I am going to have a hard time convincing the Guy – he’s in love.
The Guy never likes it initially when I am his voice of budget reason (recall last night, when I forced him to go to the value grocery store vs. the convenient luxury grocery store), but later (when he realized the value store saved us $25) he appreciates it. So I will keep testing the boundaries of being prudent without losing all levels of desirability.
The Guy never likes it initially when I am his voice of budget reason (recall last night, when I forced him to go to the value grocery store vs. the convenient luxury grocery store), but later (when he realized the value store saved us $25) he appreciates it. So I will keep testing the boundaries of being prudent without losing all levels of desirability.
Monday, May 25, 2009
Planning for August
August is looming. The one month I will be without income prior to having student loan money come rushing in. Whew, makes you really feel the importance of a liquid emergency fund.
The advice that everyone has given is to arrange and organize your life so that you will have the lowest possible fixed expenses in the months you’re unemployed. Once I get out to California, I am sure things will inevitably readjust to a steady norm, but for that interim phase where I’m just a gal without a job, I’ve decided to plan things out pretty meticulously.
+ Changed my work 401(k) Contribution from 6% to 1%, which will give me another $258 each month (additional $517-$646 total depending on how many paychecks the change is included for)
+ Contact Financial Adviser to suspend Roth and NW Mutual Life Insurance monthly contributions ($450 deduction total beginning in August)
+ Suspend all other savings. ($250-295)
TOTAL: $1217 – $1391 swing in my usual income/expenses, which along with a bit of a cushion from the guy, should be enough to preserve my sanity until I get the loans set up
While I don’t feel great about reducing retirement contributions, I feel fine about it when I put it in perspective. I’ve been contributing a large percentage of my savings to retirement thus far, and it’s just nutty to take on additional debt to maintain my same level of savings. More than anything I think this will help calm me down and prevent me from developing a stomach ulcer. Regaining perspective and control of a messy situation is sort of what this is all about.
The advice that everyone has given is to arrange and organize your life so that you will have the lowest possible fixed expenses in the months you’re unemployed. Once I get out to California, I am sure things will inevitably readjust to a steady norm, but for that interim phase where I’m just a gal without a job, I’ve decided to plan things out pretty meticulously.
+ Changed my work 401(k) Contribution from 6% to 1%, which will give me another $258 each month (additional $517-$646 total depending on how many paychecks the change is included for)
+ Contact Financial Adviser to suspend Roth and NW Mutual Life Insurance monthly contributions ($450 deduction total beginning in August)
+ Suspend all other savings. ($250-295)
TOTAL: $1217 – $1391 swing in my usual income/expenses, which along with a bit of a cushion from the guy, should be enough to preserve my sanity until I get the loans set up
While I don’t feel great about reducing retirement contributions, I feel fine about it when I put it in perspective. I’ve been contributing a large percentage of my savings to retirement thus far, and it’s just nutty to take on additional debt to maintain my same level of savings. More than anything I think this will help calm me down and prevent me from developing a stomach ulcer. Regaining perspective and control of a messy situation is sort of what this is all about.
Tuesday, February 10, 2009
"In Case of Emergency" but not THE "Emergency Fund"
How much money is the right amount to have immediately available to you, in case of emergency?
With all of these big b-school expenses on the horizon, I’ve had that question on my mind lately. Like many of you I’m sure, I funnel a great deal of my savings into my ING account, which is not very accessible, purposefully so. I have two other accounts – Bank of America and my corporate federal credit union. My BOA account is the main one I use for direct deposit, paying credit cards and bills, etc., and I feel like I’ve kept it more or less at the right level – I have enough cushion that I’m not worrying about overdraft fees without wasting any interest potential. But the credit union account is essentially just a rainy day account – it’s helped when I wanted to take out a big lump sum for a vacation or a necessary shopping spree without interrupting my BOA cycle, and ensuring I’m always able to pay every credit card bill in full. But how much is too much to have in that account? Should I just move it over to the emergency fund – out of reach? Or should I keep some of those funds handy now that I have more unexpected expenses coming up? Right now, it’s at $1150.
I know it’s almost impossible to come up with that magic number yet, but I don’t feel like I’ve gotten there yet on this one… Does anyone have any principles / rules of thumb they use for how much “in case of emergency” (but not the emergency fund) money to have on hand?”
With all of these big b-school expenses on the horizon, I’ve had that question on my mind lately. Like many of you I’m sure, I funnel a great deal of my savings into my ING account, which is not very accessible, purposefully so. I have two other accounts – Bank of America and my corporate federal credit union. My BOA account is the main one I use for direct deposit, paying credit cards and bills, etc., and I feel like I’ve kept it more or less at the right level – I have enough cushion that I’m not worrying about overdraft fees without wasting any interest potential. But the credit union account is essentially just a rainy day account – it’s helped when I wanted to take out a big lump sum for a vacation or a necessary shopping spree without interrupting my BOA cycle, and ensuring I’m always able to pay every credit card bill in full. But how much is too much to have in that account? Should I just move it over to the emergency fund – out of reach? Or should I keep some of those funds handy now that I have more unexpected expenses coming up? Right now, it’s at $1150.
I know it’s almost impossible to come up with that magic number yet, but I don’t feel like I’ve gotten there yet on this one… Does anyone have any principles / rules of thumb they use for how much “in case of emergency” (but not the emergency fund) money to have on hand?”
Tuesday, January 20, 2009
Life Insurance as an Investment Vehicle
While I was recently enjoying my GoogleReader batch of the latest pf blog updates, I had a realization that I don’t think I’ve read much of anything on life insurance. I have a 90 Life insurance policy with Northwestern Mutual – it’s whole insurance, which means that it provides coverage similar to term life insurance (you pay premiums to receive a death benefit), but it can also be used as an investment vehicle. The benefit is that it produces guaranteed cash value – right now the cash value is around $607 but I’m hoping that by the time I’m paying for my kid’s college or starting my own company, it will be a great resource of guaranteed funds when I need it, not dependent on performance of mutual funds or stock portfolios or anything else. Everything sounds good, and I like that I have something planned for that mid-term savings horizon, but I do wonder how I should compare that to just investing with e-trade. Perhaps I could make my money work harder, but I don’t know if I’ll be disciplined enough to invest for twenty-five years out, in just a regular account. Thoughts?
Wednesday, December 3, 2008
Meeting with my Financial Advisor Today
I'm meeting with my financial advisor today – long overdue considering the progress I’ve made since our last meeting (a. became a personal finance blogger, b. applied to business school, c. moved in with the Guy, etc. etc.)
I completed the two update worksheets – one which had all of my income statistics and also what I hoped to be making in three years which was a lovely exercise in “who knows” now that the ceiling has come crumbling down. And the other was my monthly budget. I remember being handed this at our initial meeting and thinking it was pretty preposterous. How was I supposed to know how much I spent on all of this stuff? How naïve and not-yet-anal I was! I flew through it more or less with ease, applying a few ranges where appropriate, and was happy to see how close I was matching their categories with mine… I came up with only having a $38 surplus from my income to my expenses. We all know how quickly $38 can be sprinkled throughout multiple categories, so I’m sure that’s where it actually goes.
But it did make me think. Could I contribute $38 more to my Roth? Could I up my cash savings $38? Or more? I know it will only work when I increase something that I don’t already see. So I might just ask my friends at Northwestern Mutual to increase something without telling me. More later to report on the meeting....
I completed the two update worksheets – one which had all of my income statistics and also what I hoped to be making in three years which was a lovely exercise in “who knows” now that the ceiling has come crumbling down. And the other was my monthly budget. I remember being handed this at our initial meeting and thinking it was pretty preposterous. How was I supposed to know how much I spent on all of this stuff? How naïve and not-yet-anal I was! I flew through it more or less with ease, applying a few ranges where appropriate, and was happy to see how close I was matching their categories with mine… I came up with only having a $38 surplus from my income to my expenses. We all know how quickly $38 can be sprinkled throughout multiple categories, so I’m sure that’s where it actually goes.
But it did make me think. Could I contribute $38 more to my Roth? Could I up my cash savings $38? Or more? I know it will only work when I increase something that I don’t already see. So I might just ask my friends at Northwestern Mutual to increase something without telling me. More later to report on the meeting....
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