Minting Pennies - Personal Finance, Investing, and Microfinance » Money 101

How Much Does Your Job Cost?

Karl — Tue, 05 Jan 2010 21:24:13 +0000

The start of any new year always brings about reflections and resolutions. Gym memberships go up all over the country and people start really examining details in their lives. About 76% will look at their jobs and try to assess how they really feel about their current status at work.

There are many in this 76 percent who, despite the good fortune of still having a job, are nevertheless still unhappy with the their boss, coworkers, clients, customers. They come to this conclusion because they tally up all the costs their job is really costing them.

How much for a heart?

One common complaint that stems from work is stress. In particular, the amount of stress generated at work is usually so much that it carries to places outside of work like home life. With stress hovering over workers in the job and following them home also, it is easy to see how hypertension is so high up on the list of things that can kill you. And fighting stress is not cheap either. Destressors like yoga classes can easily exceed 16 dollars a session, especially here in southern California.

How much for the heart of your boss?

There are also those who are working at jobs where they get zero benefits outside of a regular paycheck. I consider this a cost because there are a lot of jobs out there that do offer benefits ranging from medical coverage, sick leave to retirement plans. Even sales representatives at a small company like REI are given excellent benefits. If your job is not giving you more than a paycheck, then it is definitely costing you.

How much for a new car?

A majority of people have some sort of commute to get to work every morning. In a city like Los Angeles, driving is almost inevitable. ALMOST.

I know not less than 5 people who work from home. Their commute to work is measured in steps. With all this technology allowing us to connect easier and more efficiently, people are finding ways to be employed while in their pajamas. They do not have gas bills like the rest of us. Their cars (if they own any) are serviced less and are therefore cheaper to own on year to year basis.

How much for your time?

In the end, this might be the most expensive part of your job. If you work a job that is not your dream gig and it is taking up a lot of your time, then you might be missing out on some opportunities out there. Opportunities that might “cost” less.

(photo: laverrue)

Looking In The Rear View Mirror

Karl — Wed, 23 Dec 2009 19:34:58 +0000

It’s that time again. Time to look back and reflect. Was it a pretty straightforward and easy road? Or were there more road bumps than expected?

Rough patch

For many of us, this year closing has been very hard and trying. I knew about the unemployment rate reaching levels not seen since the Great Depression. To me it was just a fascinating bit of trivia, like a fact you store for games like Jeopardy! but then a friend told me that he lost his job. Then a friend told me she lost hers too. Then another friend.

Close calls

Then it started getting closer and closer to me personally. My dad who works for the state now has to worry about furloughs and the subsequent pay cuts they entail. Then cuts to educational grants threaten the progression of higher learning pursuits. And closest of them all is the drastic drop in revenue from the state of California from the accounts I handle. For many months there, my accounts were not paying us. That was a little scary.

Wrong turns

Of course, the past year has also seen me make my own financial troubles to deal with. This was the first time I really started putting significant money in the stock market and I never realized why they always say that hogs get slaughtered. That was until I started playing with triple leveraged ETFs and then becoming greedy with them, holding them longer than I really should have.

Getting lost all together

With all the places I decided to invest in including my fellow man (check out our lending team), it would have been very easy to lose track of where exactly my money is at and how it is performing. But by using Mint.com, I am very confident in my knowledge of exactly what my money is doing and what I am doing with my money. It has allowed me to really fine tune a budget that I hope I can perfect even more into the next year.

Looking ahead

Now that we are at the end of this particular stretch of road to financial independence, it is very helpful to look back and see where we made good decisions in the past year and where we hit bumps on the highway. This way we can more accurately take advantage of good opportunities or shortcuts and avoid making the same mistakes as we move forward into the coming year and onto the next stretch of road.

(photo: chelseagirlphotos)

Comparison Shopping: The Good Kind

Karl — Sat, 21 Nov 2009 01:51:29 +0000

We recently talked about why comparisons are a sure fire way to distract you from your goal. Looking left and looking right, it makes it downright dangerous to be proceeding anywhere.

But comparing and contrasting different things can also have beneficial outcomes, especially when deciding where to place your savings for college tuition.

Yesterday, passionate students enrolled in the UC (University of California) system, protested a regents-approved tuition hike to the tune of 32 percent.

That means that in the public system of higher education, California students will now have to come up with about a third more money than they did a year ago.

I know many friends who went to UCLA and they struggled to accumulate enough change to pay for their education. Even with the help of financial aid, they still struggled mightily. Now, I’m not sure how high school seniors will face this challenge.

Shared responsibility

As a new parent, I have to think about how I am going to pay for college tuition. Though I chose to never finish my degree, I would like for my son to have the choice to go if he decided that university learning appealed to him. I have sixteen and a half years (give or take) to come up with a solution. This is going to be an expensive purchase.

Anything on sale?

The 529 education savings plan is the most prominent option for parents when it comes to paying for college. It is named after a section in the IRS tax code and it was designed to help families (like me) put money away for future college expenses. These plans are investment vehicles operated either by the state or individual educational institutions and are specifically designed and managed to help donors (me) get the most bang for their buck for their beneficiary (my son).

Does this make my butt look big?

As with most things, the right fit is very important. There are two kinds of 529 plans and one will not necessarily work for every parent.

The PREPAID PLAN lets you do exactly what it sounds like. As a parent you can pay for part or all of the costs (tuition and fees) of public college education. Because you prepay, it allows you to lock in tuition prices so you wont have to worry about regents hiking tuition by 32% every year. These plans are usually backed by the state so most require that you and Junior are both residents of the state. They also have age requirements for the beneficiary.
But with the SAVINGS PLAN does not have age limits. You can set one up for yourself if you wanted to. And you can contribute as much as 300,000 dollars in some plans for all (tuition, rooming, fees, books, MacBook) school expenses. Since this one is not backed by the state, you can lose your invested money in it. And you cannot lock in the tuition. Watch out for those increases.

Why buy?

Because it comes with some really cool benefits. Most notable is the fact that contributions grow in 529s tax-deferred and when the beneficiary takes money out, that’s federally tax-free too. And this kind of plan is very low maintenance. You can set up the automatic deposits and a professional will take care of the investing. Pretty cool.

In the end, this is just one in a wide array of tools that I can use as a parent to make sure that I can give my son the choice to go to school. If the odds of attaining higher education keeps rising with the costs, it is the least I can do to try even out his chances of getting ahead in life. Even if that means I have to go shopping.

(photo: sashawolff)

What A Nerd!

Karl — Thu, 19 Nov 2009 18:00:13 +0000

During my scholastic life I had a knack for defying stereotypes. I was always proud that I was never who people expected me to be nor did I have the characteristics they expected me to have. I was unique. I was beyond being labeled and often did yoga just so I can prevent injury whenever I gave myself a pat in the back. The most prominent stereotype that I did not fit into was the one about Asians being adept at math. Actually, I sucked at it. No matter what I did, I never was able to generate enough interest in numbers.

Getting help

But as we all know, we have to take a minimum amount of math courses. Yes, even though California is ranked near the bottom of all the states in the entire country, we were still forced to study math. It was cruel torture until I realized that the situation was easily remedied by one invention: the calculator.

For basic arithmetic, there was the 99 cent calculator. For trigonometry, there was a specific calculator for that too. And for calculus? Well, me and my TI-82 graphing calculator became very well acquainted. I honestly doubt I would have been able to progress in my studies if not for my little helpers.

Numbers keep chasing me

Now that I am an adult, numbers still seem to keep intruding in my daily life. It seems when your existence is based on the amount of numbers you have in your bank account, then numbers will always be a part of your life. And it is more complicated than just subtracting (money leaving your account) and adding (paycheck deposits). Oh well.

Grown up cheating

So I looked for calculators again to save the day and… I found a whole bunch of them. Just like before, there seems to be a different calculator for every single type of financial math you wanted to do.

Debt calculators:

In the moment calculators:

Future calculators:

Keeping the progress going

These and others like them are very important tools that will enable anyone to master the numbers course that is their financial life. Just as my old TI-82 helped me feel secure in my classes, these calculators are valuable to anyone who would like to get their finances in order but are just too intimidated by math.

Held Hostage in the Movies

Karl — Tue, 17 Nov 2009 22:05:23 +0000

So imagine yourself as a vibrant young adult hanging out where ever it is cool young people hang out nowadays. Is Starbucks still in? Or is it Coffee Bean? Anyway, you get a call and it’s Dr. Evil on the other end. Yup, Dr. Evil. He says that he is holding your retirement hostage.

“How much?” you ask.

“ONE MEEELYON DOLLARS!!!!!”

Apparently, it costs that much to have a somewhat comfortable retirement for some people. Personally, I think I will need less than that based on my lifestyle (because ultimately this is what dictates the nest egg number) but then again I have never been mistaken for a cool young person. For some, this number will be slightly bigger but for the purpose of this discussion, a nice round figure of 1,000,000 dollars will work.

So how does one start to rescue retirement?

We have already discussed why it makes sense to start early and this is never more true than when it comes to retirement funds. By using this calculator we can figure out how much money we need to put away monthly/annually in order to reach that target of one million dollars in order to have a comfortable retirement. If you play around with the numbers, it is easy to see that in order to save your retirement a 25 year old would have to save significantly less money than someone who starts thinking about retirement at the age of 45. To get to the same goal of one million the average 45 year old would almost have to choose between retiring comfortably, buying a home or even paying for the college tuition(s) of their kids.

Cloning works

An actor who clones himself and plays multiple roles can make multiple streams of income. This is the other variable in the calculator equation. By making your money earn interest, you are effectively cloning yourself and creating another worker who brings in money and puts their paycheck into your account. How great is that? And there are other types of workers you can clone. There is the International Man of Mystery who loves China and its companies. There is Goldmember and his love of rising gold prices. And there are many others. Now with multiple workers working for you, the multiple streams of income will actually help you get to your one million dollar target faster.

Essentially, by having all these paychecks coming in every month on top of what you bring in, you can free your retirement from Dr. Evil a lot sooner. Maybe then you and your retirement can go hang out and go to the movies.

In Case of Emergency, Break Piggy Bank

Karl — Thu, 05 Nov 2009 21:00:18 +0000

Everyone knows that an emergency fund is necessary for financial success but what not everyone knows is that creating an emergency fund is more than just putting money away.

One of the most important things to realize is that you should have more than just one fund and that they should all vary in size. There is no such thing as a one size fits all fund that will meet the needs of every person trying to save out there. The first emergency fund needs to fit in your wallet, literally. I always keep a 20, a 10, and a 5 in my wallet at all times even if I do not plan on buying anything because I would rather use cash than have to rely on credit in case something comes up.

A Piggy Staying Home

If you find yourself having more money in your wallet than you could possibly need in a daily emergency, then it becomes time to save cash at home. This emergency fund that stays home all the time is the overflow from the daily cash you take with you outside of the house in your wallet. Ideally, this home emergency fund should cover most of the bigger expenses that might be incurred like buying new tires for the car or maybe a parking ticket that needs to get paid. It is basically there in the house to not be too liquid that it burns a hole in your pockets but is still accessible enough in a real pinch and can be deposited to your account the next day if need be. But if this fund gets too big then it should spill over to a place that is not as accessible and maybe someplace where it might actually earn some interest.

Another Piggy Went to the Market

Money market accounts that is. Or maybe even a CD. Putting money in one of these vehicles will give you a small return but the trade off is that your emergency fund is with the bank and it is not as liquid as the first two funds. This encourages you to really think and assess if something truly is an emergency and whether it is worth the penalty fees to take your money out early. However, if liquidity is a real concern then you can ladder your CDs to mature one month at a time. That way you will always have money handy every month just in case and you have the option to get another CD or take the money out completely.

It is recommended that this particular emergency fund be at least as big as eight to twelve months worth of expenses. But with the economy so unpredictable and the job market so thin, then it might be wise to have a little bit more than that. Maybe a little bit more than an entire year’s worth of expenses. That way a job loss can be survived even if the hunt for a new one lasts more than the unemployment benefits.

And if you manage to save a year’s worth of expenses then please share your tips and secrets because that is pretty impressive.

(photo: bootbearwdc)

Let’s Play A Game

Karl — Fri, 16 Oct 2009 12:00:15 +0000

Imagine yourself driving down the road during a rain-soaked evening just like the ones we have had here in Southern California for the last three nights when suddenly another car skids and hits you right on the passenger side. What would you be thinking of first after a long list of bad words? Will you be thinking about your health? The other driver’s? To be honest, when I rear-ended someone, the first thing I thought about was car insurance premiums and how expensive that was going to be after the accident. A couple of years later, I am sure that is what the other driver was thinking when I was rear-ended. Los Angeles is great.

Who needs insurance?

You do. I do. We all do. Without insurance, little accidents can become very expensive and will deplete your emergency fund faster than you can say, “I have a toothache.” An emergency fund really should be just for things not covered by insurance policies. Think about it like this: If you work hard at your job to be able to save money and then get sick once and have to get hospitalized, then all the savings will go to paying the medical bills. That’s IF you have enough savings. Worst case scenario is that if you are like most Americans you go into debt because of the medical bills. What is the point of working so hard to save when one trip to the ER can erase all your savings?

I am not saying not to work hard. My two cents is that if you have something valuable (your life, your health, your car, etc), then it makes sense to insure it. This way all your assets (no matter how small or big) will be protected. It prevents you from taking two steps back for every one step forward, in case something happens.

High stakes game

If you have others depending on you and your income, then it is a SIN (check the Bible, I’m pretty sure it’s there) if you do not do everything possible to protect that stream of money and make sure that it reaches those dependents. A sin, I tell you. Seriously though, it makes a lot of sense that the car you drive to work is insured, the health and life you carry are insured, and everything else in between. That stream cannot be stopped because if it does then you will not be the only loser of the game.

Can you think of other things that need to be insured? When has an insurance policy saved you and your finances?

Running On A Financial Treadmill

Karl — Wed, 07 Oct 2009 11:53:21 +0000

Except for the first two months of every year, enthusiasm for exercise falls toward the bottom of most peoples to-do list. And financial fitness? That does not even make it on the resolution list and people seem to be totally oblivious to it and/or just plain do not care. But a lot more people are on treadmills than they realize.

The machine

For many, having a budget and not going over it is the ultimate objective. After many months of adhering to the budget and not amassing any more credit card debt, some even get confused and believe that they have secured financial independence. What they are actually doing is running in place. I would use the walking analogy but we all know how fast paced life really is.

It just keeps going and going

I know many people, especially those around my age group who are living paycheck to paycheck. A number of them are not using credit cards to survive but they also are not able to do more than that. Financially speaking, they are in the same place month to month. So much effort and there is zero net change. This is one kind of exercise that delivers no benefit.

Try the stair stepper

Personal trainers from the local gym tell us that we are supposed to try different exercises anyway to get the best results. I think this could apply to our finances too. Instead of just running on flat ground in perpetuity, it might be a good idea to start hiking the ups and downs of the stock market also. It is almost guaranteed by the very nature of the stock market that there will be some net change.

More definition

By learning to invest (whether in the equities market or even just in a CD), I became more aware of how to use money and get out of the boring routine of just surviving from month to month. In the end, it does not really have to be all about investing, rather the goal should be to get off of the same machine that is getting us no where and fast.

Do you know people who are also just running in place? How else can we get off the machine and really work towards better financial fitness?

Stop Your Money from Disappearing

Karl — Tue, 06 Oct 2009 20:37:32 +0000

It might seem like some unexplained phenomenon is making your checking account shrink in size every month. Every month money goes into the account and every month before even a week has passed, the familiar concern over your money lasting the entire month starts to creep in. Sound familiar? Where did all your money go? Jim Rohn used to say, some people are always worried about having too much month at the end of the money. Wouldn’t you rather have too much money at the end of the month instead?

The same, tired act

Then this anxiety shifts from not having money to having to pay overdraft fees. Again. Some banks and institutions are nice and will waive one overdraft fee annually and make it vanish but what happens to all the other times? More often than not, you will have to pay. And pay mightily I might add. I have my checking account with WaMu (or Chase as it likes to be called nowadays), and they charge a whopping 33 dollars per overdraft. Talk about disappearing acts. Just three of these overdraft fees could have transformed 4 different people here.

Who is the magician?

In this very common set up, the one in control of making your money disappear is the bank (or where ever it is you are keeping your money) so saving money becomes very difficult when you feel like you are prevented by all these extra fees. Maybe you should be the one to put on the straight jacket on yourself instead of the banks. Then you will know how to get out.

Learn the tricks

A little magic might be what you need in order to be able to save money. What I do is I take out money myself and transfer it to another totally separate account all the way on the other side of the Internet. By doing so, I trick myself into being extra, extra careful with the remaining funds or else face the consequences. It could work for you.

Grand finale

For the final act, I recommend using Mint.com to create a budget. Here, you can setup alerts via email or text message for when you are low on cash, approaching due dates for bills, and even if you are over-budget in a particular category. With a budget in mind, you can watch the spectacle of your dwindling account but you can rest assured that it will stop shrinking right before it totally vanishes into thin air. It’s like knowing the end show before it even happens but then again, when it comes to money, surprise endings are usually not good news.

How much do you pay for overdraft fees? How do you avoid them? Do you have a separate savings account?

More Money, More Problems

Mike — Sat, 26 Sep 2009 20:46:57 +0000

For many of us making more money is something that we are always striving for and is something that we look forward to at the end of every year. But have you really thought about why that is? Many will say that it’s plain and simple–making more money will put us in a better position financially and solve all our problems, right? Maybe.

Make A lot of Money, Spend Even More

Back in March Sports Illustrated wrote a fascinating article on How (and Why) Athletes Go Broke. The shocking statistics are below:

By the time [NFL players] have been retired for two years, 78% of them have gone bankrupt or are under financial stress because of joblessness or divorce.
Within five years of retirement, an estimated 60% of former NBA players are broke.

How? Why? If you really want to know then I highly recommend the Sports Illustrated article above, but if you boil it down, professional athletes aren’t going broke because they didn’t make enough money it is because they didn’t keep enough money. They have a problem with cash flow.

What is Cash Flow Anyway?

Income – Expenses = Cash Flow

When we talk about cash flow, what matters most isn’t really how much you make or spend, but rather how much you keep that will make a difference. Let’s say for example that you made it to the big leagues and were making a ridiculous amount of money, say $5,000,000 per year. But due to the pressures of super stardom, you spend $5,000,001 per year just to keep up with the Joneses Kardashians. So does making more money really solve your problems? In this case, not really. But it can IF you knew how to manage your cash flow.

The Best Kind of Diet Plan

For a lot of Americans, the idea of having a budget is treated more as a triviality and as a suggestion rather than a steadfast rule. Let’s face it. Having a budget sucks. It’s like going on a financial diet–that’s die with a t. Nobody likes limitations. Maybe that’s why consumers love their credit cards so much. But for those of us that see the bigger picture and are building foundations for the long term, we know that having a sensible budget will go a long way in increasing our cash flow and avoiding debt, or even bankruptcy.

What Are YOU Going To Do About It?

If we really want to increase the amount of money we have, we really only have a few options:

Increase the amount of money we earn
Cut back on spending
OR do both

What are you mostly focused on? Is it even possible to do both at the same time? Is this all really worth the time effort? Ultimately the choice is yours. For me, the choice is a no-brainer. The idea of having money coming in and growing while sipping a cold mai thai in some remote location in the world, is an idea worth fighting for and a dream that deserves my best effort.

Tools and Resources

For those that don’t already have a budget and would like to get a brief overview of your cash flow, here’s a pretty comprehensive worksheet from MSN.
For those that value elegance, simplicity and ease of use, check out Mint.com. This is what I personally use.