Dollar Jane

Lately, I’ve been thinking a lot about whether I’m really invested in the best place. My Roth is in a T. Rowe Price Mutual Fund called Personal Strategy Growth. It’s okay, about 80% stocks, 20% bonds, with an expense ratio of .86%.

The way I picked it was pretty uneducated. At the time I opened the account, I had no savings, and therefore was limited in my options. T. Rowe Price is one of a few discount brokerages that offer accounts with low opening balances (you need a minimum of $50) as long as you sign up for automatic contributions. They hit you with a fee for having a small account balance (under $2,500) but it’s better than having no retirement account at all.

Once I had settled on T. Rowe Price (chosen among other options for the very logical reason that I like their name and logo) I had to pick from their offering of mutual funds. The way I chose it, embarassing as it is to me now, was by clicking through one of those “Which retirement account is right for you?” things where you tell them your expected retirement date and it spits out a fund recommendation. I literally did no research and let the website tell me where to invest.

I’m much more savvy now. Or, so I like to think. I now know that it’s always a good idea to do a little research before picking a fund or stock. I’ve become a big believer in minding the fees.

I’m not a stock expert. I believe in low-maintenance investing, and I think there are two things to really pay attention to when choosing a mutual fund: 1) The Expense Ratio and 2) Asset allocation.

Asset allocation is simply looking at the kinds of investments you hold and figuring out how much of each you should have. At it’s most basic level, you want to look at the percentage of the fund that is invested in stocks and the percentage invested in bonds. The expense ratio tells you basically how much you pay to be invested in a fund. You want the expense ratio to be as low as possible. At least, I do.

Since I opened the T. Rowe Price account, I’ve made $4,000 in contributions. Now that I have some money built up, I feel like I have more options and it’s time to take a harder look at my fund’s performance and whether I could be doing better with a different fund. For one thing, although an 80-20 stock bond split is pretty reasonable for a young investor, I’m very young and could safely risk a higher stock allocation.

My 0.86% Expense ratio is decent among actively managed funds but doesn’t look so hot compared to the Vanguard S&P 500 Index fund’s 0.15%.

I find the Vanguard S&P 500 very appealing. I’m considering making the switch. I need $3,000 to open the account. But after looking through my current mutual fund’s fees, I’ve realized that I’ll get penalized for taking out any money that hasn’t been invested for at least six months.

Since I make a regular purchase every month, that means I’d have to stop investing in my T. Rowe Price IRA six months before I move the fund.

I’ve been thinking about my cash cushion ever since I bought the Italy plane tickets. (Oh, did I mention I was going to Italy?) I currently have just under $1,000 in my savings, half of which is in a 6-month CD. I really don’t have a lot of liquid cash available.

So, maybe after I finish my 2007 Roth IRA contributions, I’ll stop my regular investments in the T. Rowe Price account and put the money in my ING account. Then, I’ll have until April 2009 to invest my 2008 contribution. This is plenty of time to decide if I want to switch funds, and it will offer the bonus of having greater liquidity in my assets.

Ok, drumroll please.

I made the standard $500 contribution to the Roth IRA. The market recovered enough at the end of the month to boost the worth of my retirement fund by $55. Not too impressive, considering my account right now is still worth $3,724; $276 less than the total contributions I’ve put in.

No change in my ING account except for a $3 interest gain. (Which is promptly wiped out by a $7 finance charge from my credit card).

The American Express Credit Card got a $100 payment, a $500 payment, a $250 payment and a $300 payment this month for a grand total of $1,150 in payments. I’m now down to a $766 balance. It feels great to have the balance under $1,000. The $100 and $500 payments are my scheduled monthly payments. The $250 payment was a rebate check from work that I got for belonging to a health club–my job will pay up $250 of membership costs. The $300 payment was just “extra”–I found that I’ve built up a $900 cushion in my checking account which isn’t earning any interest, so why not put it to good use? I get nervous when my bank balance falls too low but having a balance consistently above $500 is unnecessary.

Finally, on a whim, I decided to participate in Suze Orman’s Save Yourself challenge. I opened a TD Ameritrade account and put in $50. I’ll need to put in another $50 a month for the next year to get the $100 bonus.

So, grand total net worth increase is $1,735 for the month. That’s nearly a 20% increase in my net worth!

My first April paycheck comes on April 11th, and I’m thinking I’ll only pay the credit card minimum so I can make an extra Roth IRA contribution and get closer to maxing out my 2007 contributions. If I leave everything as is, I will have contributed $3,350 in 2007. Another $600 would get me very close to the $4,000 maximum. That means I won’t wipe out the credit card debt as quickly as I’d like, which is annoying, but it’s now or never for this 2007 Roth payment.

I finally put in the request with my boss for a vacation. I decided to take off for a week and a half in the beginning of June, during my birthday. I immediately felt that I should go for the full 2 weeks, but my last vacation was 2 weeks, and it was a nightmare trying to catch up with everything when I got back.

My boss was on vacation last week, so I’m not going to hear back probably until this Wednesday. That’s when I get to start looking for plane tickets. It’s nice to be able to finally pay cash for a big-ticket item like this. I really can afford it. Granted, I’ll have a very small cash cushion for a few months (only $500 in savings) but I will be able to build it back up quickly. Plus, I haven’t been out of the country in 7 years.

My friend thinks she’ll be staying in the Les Cinque Terres (The Five Villages) when I get there. These are five villages right by the water (if you think of Italy as a boot, it’s in the top left edge of the boot) and it sounds so idyllic. I’m so excited I’m actually going to go!

…Was Spam! It’s this weird site that scrapes personal finance blog posts. The blog’s title is the big tipoff: “Debt on the Finance World for News and Information Around the World on Finance.”

With all of the sophisticated spam techniques out there, why is it that grammar continues to elude spammers? I guess it’s a testament to the difficulty of mastering the English language.

I’m not going to update the save-o-meters until the end of the month, but my credit card payment has already been processed. My balance is now down to $1,058. I’m so tantalizingly close to paying it all off! About a year and a half ago I wiped out my credit card debt and I’m so looking forward to doing it again.

In my line of work, I review a lot of grant applications. This gets me thinking a lot about charities, and the many different options I have for charitable giving. This is probably the first year of my life that I’ve really had enough income to think seriously about planning my giving.

I’ve tried to give small gifts to my alma mater every year, and this year I’m thinking about how much to give. I gave $50 last year, and am thinking about bumping this up to $100 or $200. I’ve also got a payroll deduction plan. I take $10 out of each paycheck and divide it among six designated charities (it’s an annual amount of $260).

I also was inspired on the spur of the moment to donate $160 to a project on donorschoose.org. If you’ve never visited donorschoose.org, I’d highly recommend checking it out. School teachers across the country propose projects; the site staff then calculate the total cost of the project and visitors to the site can browse projects and choose which ones to fund. You can see the name of the school, the age of the students, the percent of needy students at the school, the location of the school, and the total amount of the project funded and the total amount left to fund. The site allows you to find a project that appeals to your individual giving criteria, which makes it highly appealing for me.

Anyway, I’ve committed $420 this year to charitable causes. I still need to decide how much to give to my school. But I’m wondering if I should try to give more. Even if I give $100 to my school, that’s still less than 1% of my annual income. I think that I should aim to donate 5% of my annual income, or closer to $2,500 a year. That’s $200 per month or $96 per paycheck.

It seems like a lot, but $200 per month isn’t really that much when I think about my monthly budgets for other things. From the articles I have found online, it seems that most Americans who give to charity give about 2% of their annual income. If I was to apply this standard, I’d give about $1,000 per year, or $83 per month, or $38.50 per paycheck.

I think that for 2008, I will aim to donate $1,000 to charitable causes. I will aim to give a higher percentage in 2009.

I’ve read plenty of posts on how a healthy diet can lead to a healthy wallet. I liked Millionster’s three-part post “How I Lost Weight and Gained Control” for an interesting take on how to get into the habit of bringing your lunch to work and how to cut grocery costs. It’s very obvious that if you make food at home instead of eating out, you can save significant amounts of money each week.

Brewing coffee at home instead of buying it out is another popular money-saving tip. I am a big believer in this one. I drink coffee every morning, and for a while would pay $2.55 for my morning Starbucks every day. That’s $17.85 a week, or $928 a year! Instead I have my trusty Mr. Coffee 4-cup drip coffeemaker (bought eight years ago), $.99 coffee filters that I probably buy every 3 months, and an $10.99 pound of coffee bought once a month. (For those of you doing the math, that’s a savings of $781 per year, and I don’t include any costs from the coffeemaker since I’ve had it too long to even remember what I paid for it.)

But lately I’ve had another link between healthy living and frugal living on my mind. I’ve recently begun taking two classes at my YMCA, a spinning class and a yoga class. The spinning class is Mondays and Wednesdays and yoga is on Saturdays.

In the past few weeks, I’ve noticed I go shopping a lot less. When I say shopping, I’m not talking about grocery shopping, or picking up more conditioner at Target. I’m talking about recreational shopping. The sort of shopping where I head down to the mall just because I feel like it. Browsing the stores just to see what’s on sale. I have literally spent hours at the mall, just window shopping. The problem is, with all of these frequent trips to the mall, I don’t always leave empty-handed. I’ll find a cute top, or a suit that’s just too good a bargain.

Although I haven’t paid too much attention to it before, I do believe that during prior fitness kicks the same thing has happened. I’ll be so busy getting to the gym I have less time to wander Filene’s aimlessly. I suppose you could call it time displacement.

By committing to an exercise regimen, I’ve made a time commitment. Because my time is fixed and limited, by taking up this time with my exercise routine, I’ve been forced to devote less time to other activities. My theory is that recreational shopping is a lower priority activity, and by taking up these classes, I’ve displaced time I might normally spend shopping with a lower cost activity.

There are definitely costs associated with working out. The costs of a gym membership, workout clothes, sneakers, bottled water and other accessories can quickly add up. I try to keep these costs down in the usual ways, by shopping around, going for the cheapest option, buying only the workout clothes I really need, etc. The critical point here is that I’ve replaced an activity (Shopping) where the sole purpose is to walk around considering purchases, with an activity (Exercise) that requires one to make some purchases, but where the purpose is to sweat and get fit.

Healthy and Cheap!

Although it’s already March, I did set financial goals at the beginning of 2008. My goals are:

1) Fully fund my Roth IRA. In 2007, I contributed about $3,500. My January, February, and March contributions all counted towards 2007, so beginning in April, I’ll be making my 2008 Roth contributions. I recently bumped my automatic contributions up to $500 per month, so I’m on track to finish my 2008 contributions in 10 months. This is my easiest goal and I’m not worried about reaching it.

2) Payoff all credit card debt. In 2006, I took on two big credit card debts. First, I bought a new laptop. I think it was a reasonable purchase, because it had been six years since I got my last computer (an iMac desktop), and the CD drive on the desktop broke. I did get a new drive but after a while the incompatibility of the old machine with all the new software meant the desktop had to go. The laptop cost me about $1,500, and happily, I have paid it off since (for those of you interested, I did use a 0% APR offer card to pay for it, so I wasn’t racking up interest charges). The second debt is a private student loan that did not qualify to be refinanced. It had a variable interest rate that was hitting 9% by the time I used a credit card offer to pay it off. The terms of the card are such that I should pay 5% on the debt for the life of the balance, however, with the way the market is right now, I think I’m better off making aggressive payments to completely eliminate this debt. My 2008 goal is to pay off my credit card debt by my birthday in June.

3) Build up my emergency fund and save for a down-payment for a house. This one’s going to be the hardest. Right now, all of my spare cash is going towards the credit card payments and the Roth. I think once the credit card is paid off, I’ll move those payments over to the ING Savings. At this point, I’m not differentiating the two goals–I have one savings accounts for all goals. Which brings me to my next goal…

4) Visit Italy this summer. I usually hate spending money on vacations, which is why I haven’t left the East Coast in five years. But my painter friend is going to be there for 3 months over the summer on a fellowship, and getting to visit her in her Italian villa will be a chance in a lifetime. Airfare looks like it will be about $1,400, and if I include food, shopping, and “fun” money, I’m going to budget $2,200.

So, the plan is to pay off the credit card debt, then head to Italy in late June. In July, I’ll turn my focus to building up my savings. If the Italy trip doesn’t happen, I’ll leave the savings account untouched. If it does, I’ll leave $500 in the account, and use the rest on the trip. Either way, from July to the end of the rest of the year, I intend to save about $600 per month, so, by the end of the year, I’d like to have saved $3,600.

Since the beginning of the year, I’ve been putting $500 per month in my Roth. The credit card got the minimum payment in January, and a $700 payment in February. I should be on track to pay it off by June.

I’ve been reading personal finance blogs very regularly for several months now. Lately the little voice in my head saying, “I can do this!” has grown loud enough that I’ve ventured over to Wordpress to give it a try.

I am obsessed with personal finance. Yet, I’ve read very few pf books. The few exceptions include Suze Orman’s The Money Book for the Young, Fabulous and Broke, a book I recommend as a must read for anyone about to enter the working world. I bought YF&B after I graduated college in 2005. At the time I was unemployed, living with my parents, and the proud owner of $8,500 in student loan debt, and a hefty credit card balance.

I quickly got a job (a $10.00/hr job, but a job nonetheless) and used a cash advance on my credit card to sublet a room in an apartment with some friends. Now I’m on the verge of being credit card debt-free. I recently obtained a slightly positive net worth, which is very nice feeling. Check out my “About” page for my complete story.

Anyway, after getting Suze’s book, I got addicted to online pf websites and articles. Then I discovered the blogs. Blog after blog, each person shared something in common with me. I couldn’t stop reading. But it wasn’t just about boosting my financial literacy. I’ve read so many personal finance articles I’ve practically memorizes the 401(k) annual contribution limits (For an individual in 2008 it’s $15,500), and the Roth IRA personal income eligibility requirements (For a single filer in 2008 it’s $101,000 to fully contribute). No, my addiction to pf blogs is about the voyeurism (maybe not the best word) of looking into another person’s wallet. It’s about being able to check out how much other people my age make, how much other people at my salary level spend and save, and just seeing other people struggle with the same financial obligations and desires that I face. For me, the appeal in reading other people’s personal finance blogs is about the community it creates.

So that’s why I’ve decided to give my own personal finance blog a try. I work pretty demanding hours but I’m setting a goal to post once a week. I’m learning how to blog and how to get my financial house in order, so I’ll be posting on a variety of topics within these themes. I’ve got several posts in mind to write, but if you’d like to see a post on a particular topic, make a suggestion in the comments.