Done To Zen

PT Money shares what some of his readers are saving money for. Made me think about what short-term goals I have. For the rest of 2008, I would say I’m saving money for my 401K and Roth IRA.

Can I Get Rich on a Salary (among others) posts advice from the richest person alive on how to become rich. Simple, common-sense advice (but then again, I wouldn’t have expected anything else).

The Simple Dollar talks about how to find your least important bill and seeing if you can’t perhaps eliminate it even if you can afford it. Going through his exercise, I figured out that my least important bill is gym membership. And, yes, I can live without it, and, yes, I cancelled it, just an hour before reading the article, in fact. :-)

Millionaire Mommy Next Door says it’s entirely possible to get FDIC insurance for your money even if you have more than $100K.

Quest for a Million is finding it hard to not touch his portfolio. I don’t have the urge to do something about my portfolio, but it still sucks big time when every contribution I make to my 401K disappears by the time I make the next contribution. But I just keep reminding myself I’m buying shares at a low price, which is a good thing. Hopefully, I can look back in ten years and laugh about it.

Blueprint for Financial Prosperity has a nice table on projected income tax brackets for 2009.

Bespoke Investment Group talks about how the current yield for three-month treasuries is an unbelievable $4 per year for $10,000 in investment. This certainly sucks and is one of the reasons I haven’t purchased any treasuries yet despite finally getting my account fully authorized.

New York Times reports that a shareholder at the now-defunct Lehman Brothers lost $6 million in just one night. Yikes. My paltry losses don’t seem so bad anymore.

MoneyNing shares the story of a coworker who apparently can’t afford her house but spends around $1320 every month on unnecessary things. The most interesting part of the post was how much people spend on utilities. $600 for electricity bill??? I freaked out when I got a $70 bill (my house isn’t a mansion, but it isn’t a matchbox, either). He says his last electricity bill was $13.01. My last bill was $21.60.

Charles over at The Kirk Report thinks that bailouts are band-aids, and I couldn’t agree more. The more I think about it, the more I feel that the government should just step back and let the market crash and work itself back up the right way.

DashOver shows us the stock market graveyard. It hurts my head just to look at the charts. Are any of them good investments to make, now that they are trading south of embarrassing?

An article from Slate on Merrill Lynch avoided the fate of Lehman Brothers compares the two CEOs and how one of them played his cards right and the other took the company to the cleaners.

Most personal finance gurus suggest that you have at least 3 months of expenses set aside in case of emergencies. Here’s a calculator that helps you figure out exactly what that amount is. Try it out!

I recently talked about how I increased my 401K contribution % way up so I can max it by the year-end. For most of the year, I’ve been contributing very little (less than 10%), though I did up it a couple of months ago somewhat significantly. I bumped it again maybe a month and a half-ish ago and then bumped it for a third time significantly about fifteen to twenty days ago.

Unfortunately, my payroll department apparently didn’t get the memo. The 401K amount witheld from my pay is less than what I was expecting. So this means that I have to figure out what to do with the extra money.

1. Increase 401K contribution % for the rest of the year to compensate
2. Accept that I will come a little bit short of maxing my 401K account
3. Figure out if there is a way to deposit additional funds into my account
4. Take the additional income + money from e-fund to open a Roth IRA
5. Use it to pay for an expense I’ve been procrastinating on for two months

Of the three choices, number three sounds the best to me. I spent a couple of hours looking around in my account to see if there was a way to deposit additional funds into my account (i.e., outside of a payroll deduction), but I couldn’t find anything. I have to wait until Monday to call them up and see what I can do.

If it doesn’t pan out, I’m thinking about doing number four. I currently don’t have enough money to open a Roth IRA at Vanguard (where I want to do it). But if I don’t have to take the whole minimum deposit from my emergency fund, just a part of it, it might work out.

Anyway, this means that I still don’t know what my paycheck is going to look like, which means another 15 days of nail-biting wait.

Can I Get Rich on a Salary talks about an article in the September 15 issue of BusinessWeek that suggests that short-term thinking may be a lot more effective than long-term thinking when it comes to your savings.

In one of their experiments, people were asked how much they would save the following month and reported (on average) $287. This in mind, they then went on to save (on average) $440 that following month.

But when asked to plan ahead four months, people said they would save (on average) $946 over that time. And they then went on to save (on average) a grand total of only $123—which translates to $30.75 per month. If I’ve read the experiment description in the article correctly, people concentrating a one-month savings goal did more than 14 times better than those concentrating on a four-month savings goal.

I was initially shocked with the results, but then after a moment of thought, I realized that the results weren’t actually that surprising.

I always knew that I sucked at making “long-term” goals. I am really good at meeting my savings goals per month, but I’m terrible at meeting my “long-term” goals. That is to say, whenever I sit down to write down my long-term goals, I am always too optimistic, counting on (hoping for?) thousands of dollars in freelancing income and interest.

Can I Get Rich on a Salary suggests the following steps:

1. Set a long-term savings goal.
2. Break up the long-term savings goal into smaller savings goals (such as monthly goals).
3. Look at the savings goal for the upcoming month and make that your focus.
4. Consider specific, concrete steps to achieve the savings goal for the upcoming month.
5. When you consider your daily spending or saving decisions, think about them in terms of the savings goal for the upcoming month.

I just finished creating a budget for September, and it’s significantly different than the one I created for July. I have never lived with a budget before this year (I was saving over 95% of my income then, so it hardly mattered, I guess), so I’m still working on spending according to my budget. Though I always meet my savings goals (I joke to my family that they feel more like bills than like savings), I’ve noticed that I tend to spend more on miscellaneous expenses than I allot. It’s something I have to work.

Anyway, the budget for September looks like this:

If you compare this with July’s budget, the first thing that jumped out at you is probably the significantly smaller emergency fund contributions. I actually have a good excuse for it: I recently upped my 401K contributions. Though I tried to wring the numbers so I could maintain my current level of savings and up my 401K savings, I finally gave in and accepted that there is no way for me to save as much into my emergency fund anymore. I don’t know if it is a good trade-off to be making, but I obviously think it is.

The second change is the money that’s allocated for bonds and a 529 plan. I recently opened both accounts. The contributions to both accounts are very small (and the contribution to 529 will actually go down in the next month).

The third change is the addition of the “sports” category and the removal of the “homeowners insurance” category. I’m also tracking mortgage and taxes for the property as two separate things now, in anticipation of getting rid of my escrow account eventually.

The amount slotted for fun went way down. This is OK with me because it’s a short-term (about 2 - 4 months) deal. After all, the increase in 401K has to come from somewhere. Because I’m not willing to decrease my savings even further, my spending on variable expenses had to go down.

Note that eating out comes under “fun.” However, as I’m going back to my previous 30-day-trial goal of not eating out at all for a month, I will not be spending any money on restaurants.

Finally, the amount slotted for home gas went down from July because the bill has been going down steadily. On the other hand, the bill might go the other direction now that we’re heading towards winter.