My First "Real" Net Worth Update (and Stock Sale!)

I had a few personal finance firsts this week.

First, my net worth update. I'm at $40,688 right now, which is probably a bit inflated because I have $1500 worth of bills (most of it is my rent) being paid tomorrow, but it sure does feel good to see a number over that magical 40 mark, if only for now. I'm also realizing that as long as I stay consistent, always doing these updates on the last day of the month, that slight inflation won't matter. I'm really looking to track month-to-month change, not the actual numbers and my bills tend to be due around the same time every month, so as time goes on, my method will still give me a good idea of how I'm doing.

Second, it was my first time actually losing money in the market. That's right... from 10% up at the beginning of the week, I am now actually slightly below my initial investment. I made a deal with myself that this was money I could "afford to lose" (since it's retirement money and I'm still a long ways away from retirement), but it's still a little disheartening. I'm still sitting tight and waiting for the recovery, but it doesn't feel so great to look at all that red.

On the bright side, my company's stock actually skyrocketed through the slump. Since the price was good and I'm going to be way overvalued in my company's stock if I hold on to everything, I decided to sell. I made some money on the deal, but this also means that 2006 was my last year of simple taxes. Come next April, I'll be learning all about short and long term capital gains whether I like it or not.

Buckets and Automation

I don't know if it was nature or nurture, but it seems that I've been more or less automatically frugal ever since I've had money. It's not so much that I'm the perfect saver or never buy frivolous and unnecessary things, but I do have some natural sense of net worth preservation. Pretty much ever since I've had a bank account (I think I was 16), my balance was always growing, and ever since I've had a credit card (I was 14), I've paid it off every month. I didn't plan or budget much intentionally until I was out of college, but I always had enough of an instinct to watch the balances and make sure the general trend was upward. Nothing was ever planned or automated.
Of course, that was also when the net worth in question was usually under $10,000, and I didn't really need it for much. Times have changed, and now my plan is changing as well. I've split my general savings into 3 accounts, all paying 5%+. There's my down payment account (let's call it DP), my emergency fund (EF), and my "fun fund" (FF). The FF is kind of a slush fund for big expenses - mostly vacations, but anything that's not long term or short term will come out of that. Because of account minimums, I'm starting DP at $10,000, EF at $6,000, and the rest (about $4,000) in FF. There's also a rent fund (RF) and daily fund (DF) for month to month expenses. I'm also thinking about setting up some automatic transfers, but I haven't really decided how yet. I've already fully funded my Roth IRA for 2007, but in 2008 one of the automatic transfers will be into that. I'm thinking about some automatic transfers into DP and maybe FF as well, but I haven't decided on the amounts yet. For now, the plan is to just move the (monthly? biweekly?) excess from my daily accounts into the FF and then move the extra from there into DP, but maybe I should set some more concrete goals. I'm going to leave my retirement accounts mostly out of this, although in reality having my Roth IRA go towards my down payment is a possibility.
I've already got a budget, so it's not that I'm not planning at all, but this is a new step. Also, while working out the buckets, I realized that between my company's stock purchase plan and my Roth IRA, it turns out I'm already putting away $12,000/year that can go towards a down payment, in addition to the 10% of my salary (7% mine, 3% employer match) that's going into my 401(k), it turns out my savings rate is over 25% of my gross pay, even before I put anything extra into any of my 3 new buckets. So I guess I was doing a bit of automatic savings already after all...

The Cost of (My) Gas Frugality

So yesterday I was proud of myself for finally going to the no-name gas station across town because it's cheaper than the (still moderately priced) local Shell that I normally use. That is, until I realized that the cheap station charged me for 14.8 gallons of gas... for filling up my 14.5 gallon tank! At today's gas prices, getting charged for even an extra half a gallon makes up for the price difference, but even if it didn't, I'd rather not feel cheated every time I go to the pump. I guess I'm sticking to Shell from now on...

What's It All For?

All this talk about money is making me think. Why do we need all this money anyway? Or, more specifically, why do I need it? What is it that really motivates me to save, and why should I do it? For me, money isn't really the goal in itself. I do not need a big pile of it just to prove something to myself or anybody else. Sure, seeing a 5 or 6 digit bank account balance would make me happier than seeing a 0, but beyond that, I can't say I care that much. Beyond a certain point, more just stops being better for me, unless I have a specific goal in mind (do I have enough for a condo? that vacation? a new car?).
I do like nice things, and money is a way to get them. But there does seem to be a certain level that I'm happy with there too. I like to have a nice car, but I don't really have any desire for a Bentley or even a Porsche. I like nice clothes, but I don't need a closet full of designer labels. Maybe a piece or two every once in a while would be nice. I'd like to buy a place, but with the market where it is right now, I'm willing to wait. When I do buy, I don't need anything terribly large - a 1 or 2 bedroom condo would be fine with me now and until I have a kid that's big enough to want their own room. I figure that's at least 5 or 6 years out. Aside from the apartment, I have pretty much everything I want right now - my car's newish, my place is finally pretty well furnished, and there aren't any gaping holes in my wardrobe.
So what am I saving for? I've come up with a few things:

Travel - It doesn't really matter how expensive plane tickets get or how much the dollar falls. I have a need to go see the world. I'm always frugal about how I travel, but it adds up no matter what. And I don't mind that one bit.

Hobbies - As a commenter mentioned on a previous post, some of my hobbies aren't cheap. Everything from lift tickets, to ballroom shoes, to wetsuits can end up costing an arm and a leg. I feel like my youth is a unique opportunity to go out and do all that fun stuff, and I don't want to lose out on that because some things can be expensive. Besides, my main hobby (managing my finances) definitely helps pay for the others!

Security - Yes, sometimes it's just about peace of mind. I like knowing that if I needed to move at a moment's notice, had some unexpected medical expenses, or tottalled my car, I'd most likely be able to take care of it without asking for help or going into debt.

Freedom - I don't ever want to be tied to a location, a possession, a relationship or a place of work by money. If I am ever in a situation where I am truly unhappy with something, I want to be able to leave. Having enough money to give myself that flexibility is important. I am grateful that I can choose to live independently of my parents, for example.

Education - This is for both me and any future children I may have. While I'm not sure where I stand on sky-high tuitions and parents that empty their bank (and retirement!) accounts to send their kids to the "right" school, I do think that an education is the most important thing my parents have given me, and the most important thing I can pass on to my own children.

Birthdays: Happy for Who?

I went to a close friend's birthday party this weekend, and had a lot of fun. Unfortunately, today, my wallet is smarting. What happened? First of all, the present. I went the frugal route and went in on a present with some other friends. That way, we don't break our banks and she can still get something she really wants. That was $40, not cheap, but reasonable. So far so good. Then she decide to celebrate by renting a limo bus and having us take it to a club. We were warned that the bus would be $35 per person, but I was willing to accept even that, since club admissions, cabs, parking, and gas can easily add up to that much in a night anyway.
The trouble started when we got to the club. Since we were such a big group, they wouldn't let us in, even if we were on the free guest list (we were) unless we bought a table. Since the table wasn't reserved in advance, they could charge however much they wanted, and it ended up being $25 per person. Then I guess some people ordered drinks for everyone without asking, because on the bus back, we were asked to hand over another $25 per person for drinks, of which I had one and my boyfriend had none. Since he wasn't drinking at all and the party was for my friend, not his, I felt obligated to pay for my boyfriend's "share" of the drinks as well. So, I went expecting to have an expensive night at $75, and I ended up being forced to spend $150. I'm sure that would blow the budget of just about anyone that has one.
Now, don't get me wrong, I'm not against spending a fun night out with my friends, even if it is expensive, but I don't like being forced to, especially without warning. If it had been a regular night (not her birthday) I could have chosen not to go, but since it was a birthday I felt obligated. If I had at least known the full cost ahead of time, I could have planned for it. I'm lucky enough to have enough of a cushion that this won't put me in major debt or anything, but she doesn't know every one of her friends' financial situations in detail. What if this was a huge problem for somebody?
I wasn't sure how to handle the situation, but ended up just paying that night and mentioning my concerns to my friend the next day. I'm not sure if that was the right way to react or not, but I didn't want to cause a confrontation on her birthday night. The whole thing is making me consider paying for all of my own party outright. Sure, it won't be cheap, but I can at least rest assured that my celebration isn't putting a strain on any of my friends. Because that's not what birthdays should be about.