Thursday, August 16, 2007
Watching a Down Arrow
Like many people with any money in the stock market, I've been watching my investments go into freefall mode over the last couple of weeks. I am comfortable with losses since all the money I have invested is in retirement accounts, and therefore extremely long term (40+ years) but when you start seeing numbers like -11%, even with that long term outlook it takes some deep breathing and repeating of the "i don't need this money for another 40 years" mantra to not hit that sell button. What goes down must come back up eventually, right?
Wednesday, August 1, 2007
Hello Unexpected Medical Costs
As someone that is young, well insured, and generally fairly healthy, I don't tend to give much thought to medical costs. Even if something were to go wrong, my medical insurance has no deductible and covers just about everything except a co-pay ranging from $15 for routine medical visits to $50 for hospitalizations. I thought I was pretty safe. What I didn't think about as much was my dental insurance, which at $1,500/year of coverage each for dental and orthodontics with only a $50 deductible is also very good. Saturday at the dentist's office, I heard what every parent of teenagers dreads hearing - I need all 4 wisdom teeth removed and braces! It was even more of a surprise because I had braces for 4 years when I was a teenager.
I still have no idea how much the wisdom tooth surgery will cost (though I do know some of that will come out of my pocket), but the first estimate I got for the cost of the braces was $6,500. With the $1,500 that insurance will cover, that still leaves me at a whopping $5,000 that I have to pay out of pocket (or at least out of my pre-tax flex spending account). I'm doing the frugal (and best for your health!) thing and getting more estimates, but that first one gave me a bit of a reality check. I thought braces were maybe $3,000! Then again, I haven't had them in 8 or 9 years, so what do I know?
I know it could be a lot worse. People get stuck with paying tens of thousands of dollars for surgeries all the time, so in the grand scheme of things $6,000 (if I end up spending $1000 on the wisdom teeth) isn't that bad. It will pretty much wipe out my emergency fund, but I guess this is the type of thing that I have one for to begin with.
I still have no idea how much the wisdom tooth surgery will cost (though I do know some of that will come out of my pocket), but the first estimate I got for the cost of the braces was $6,500. With the $1,500 that insurance will cover, that still leaves me at a whopping $5,000 that I have to pay out of pocket (or at least out of my pre-tax flex spending account). I'm doing the frugal (and best for your health!) thing and getting more estimates, but that first one gave me a bit of a reality check. I thought braces were maybe $3,000! Then again, I haven't had them in 8 or 9 years, so what do I know?
I know it could be a lot worse. People get stuck with paying tens of thousands of dollars for surgeries all the time, so in the grand scheme of things $6,000 (if I end up spending $1000 on the wisdom teeth) isn't that bad. It will pretty much wipe out my emergency fund, but I guess this is the type of thing that I have one for to begin with.
Tuesday, July 31, 2007
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.
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.
Thursday, July 26, 2007
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...
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...
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