Lessons from my mom on finances

Well I just spent a good hour talking to my mom about how she dealt with finances and I guess I have learned quite a bit from her. (Although it seems like I already know what she did).

She worked at Con Ed, an electric company for 25 years, which she receives a pension, social security, and has a bit saved in a 401K and an IRA. She has her house paid off and makes more than enough to live on her pension and social security (when she told me how she doesnt touch her 401K or IRA and said that she will need to at 70 I know she is in REALLY good shape).

So I asked her what she did to get to this situation, and it was pretty easy. She would save up to the match on her 401K, the rest she would simply save in her checking account until it got to a certain amount, and she would buy CD's with that money. Thats it! I asked her what she invested in her 401K and she simply said vanguard. I wanted to know where in vanguard but she did not even know the answer! This is definitely keeping it automatic.

My mom turned out to be fairly conservative in her retirement accounts and super conservative in other accounts, and it worked out extremely well for her. Then again she does get a pension and social security which is extermely hard to do these days (If I teach for 30 years I would get 2/3's of my highest salary there, by then I might need a decent retirement account as well.)

The biggest thing I have learned today was that as long as you stay the course and automatically save/invest each month, its not too hard to have a secure lifestyle.


As for frugality, I could write a whole book on what my mom and step dad do. Whenever my step dad doesnt get what he wants when he buys something he will complain to the manager, the manager will usually ask my step dad, "what can I do to make up for this?" and my step dad will simply say, "I dont know, what can you do!" Simple yet extremely effective.

P.S. I have some videos of the house and the community, I will put them up when I get back to Austin in July

Personal Finance Thoughts: June 10

So I have been doing some thoughts on investing or paying down debt and I think I will focus more on the debt part. I have a reasonable emergency fund now and I will be getting over $600/month more in September than I had in May, so I will not be as hard pressed to think I need a bigger emergency fund.

I would still like to max out my Roth but I feel that I will be comfortable putting in a modest amount of $150/month. Assuming reasonable expenses (like me not going out on dates all the time), I should have about $600/month left when school starts and I tutor. With the extra $600/month Id rather put this into debt over saving just to get out of debt quicker.

In other news Im going to Florida on Sunday and New York the following week. Its going to feel pretty good not having to fill up my car with gas for over a month! I just need to limit eating out while visiting family and friends.

Really good video

This video is a good history on consumption. You can watch the full video here.

http://www.storyofstuff.com/




Addition: After watching this video 3 times, I feel like saving more money.

Personal Finance Thoughts: May 27, 2008

Gosh why am I getting worried about this???

I will be done with teaching at the end of the week, and I have been a little concerned that with all of the extra free time I will have that I will start spending more money (going out to eat, hobbies, etc). I was considering not investing into my Roth for the summer just to have my checking account seem on a safe level.

But I know that this would be a bad long term idea... Anything I invest now will double approximately every 8 years (at 9% interest). Also, money I put into a Roth can be taken out at any time with no penalties, so it is almost like a second emergency fund if anything.

I know I should just stay the course and max out the Roth and put the rest into debt payments, I am just wondering why this new plan came up in my head. Maybe I will work a little in the summer (subbing for summer school teachers pays well).

Raises, what to do with them?

This is more of a personal posting but Id just like some thoughts.

So I found out today that our school district is getting a $1000 pay raise next year. I will also get a $1000 bonus in December.

I am trying to figure out how much more per month I will get and I think that since I am in a 25% tax bracket I will get about $700 from each. Per month the raise and bonus comes out to about $120 more a month.

Since I am done with my certification and I will be getting paid on a 12 month schedule starting in September (I was paid in a 13 month schedule last year), including everything I will make about $700 more a month than I am now. I also will have my car paid off in 2 months which is an extra $870. An extra $870 a month when Im already putting $500 into debt and maxed out my Roth is balling (Save that for retirement and in 40 years and 8% interest is $2.9 million)

Crazy budgeting me, I will still max out my Roth and put the rest into debt. (I was seriously considering putting $2,000 into a 403b with no tax difference, but debt is more important right now). I just need to stop eating chinese buffet...

Good article from Kiplingers

Here is a really good article on how to become a millionaire if you are 30. If you are younger than 30 it would be even more than a million.

If you're 30 years old, you need to set aside $448 per month for next 35 years to become a millionaire -- if you earn a reasonable 8% annualized return in a retirement account. Don’t have $448 to spare -- or even $248? Maybe you do and don't realize it. Let's take a look at how you can come up with the cash.

Save $219 Per Month on Taxes

Here’s How: The average refund for the 2008 filing season so far is about $2,500. If you received an average refund and you are in the 25% federal tax bracket, you could be entitled to three extra exemptions worth $3,500 each. That would boost your take-home pay by $219 a month. A couple of reasons you might be eligible for more exemptions: becoming a new parent or buying a house.

More from Kiplinger.com:

• Save More Money on Transportation

• Easy Ways to Lower Your Food Bill

• Simple Tips to Save on Entertainment

Save $100 Per Month on Food

Here’s How: Bring your lunch and snacks to work. Considering that the average meal at McDonald’s costs $5 and Dunkin’ Donuts charges $2 for a large cup of coffee, the brown-bag windfall can be substantial.

Save $80 Per Month on Entertainment

Here’s How: We're talking about one fewer dinner-and-a-movie night every month. That assumes you and your significant other pay the average $33 per person for a restaurant meal (according to a recent Zagat survey) and that you spend $7 per ticket, the average price at the movies (according to the Motion Picture Association of America).

Save $28 Per Month on Health Care

Here’s How: The typical family spends $1,321 on out-of-pocket health expenses each year, says the U.S. Department of Health and Human Serv­ices. You can pay those costs with a flexible spending account, which lets you set aside pretax dollars.

Save $10 Per Month on Auto Insurance

Here’s How: The average consumer pays $829 annually for car insurance, according to the National Association of Insurance Commissioners. Raising your deductible from $250 to $1,000 can save you 15% or more.

More from Yahoo! Finance:

• Credit Card Debt: The Next Possible Implosion

• Shift Your Savings Strategy for Inflation

• Stock Up on Food for Rich Returns
Visit the Banking & Budgeting Center

Save $8 Per Month on a Well Maintained Car

Here’s How: Keep your car’s engine tuned and tires inflated to the proper air pressure. Those minor improvements can save you up to $100 on gas each year.

Save $6 Per Month on Generic Non-Prescription Medicines

Here’s How: The average American spends $185 annually on over-the-counter medications. Generics cost up to 40% less than their brand-name counterparts and work just as well.

$451 Saved in Total!

Invest the found money every month in a retirement account that earns an average of 8% return over the next 35 years, and you'll have $1 million. That wasn't too hard, right?
Copyrighted, Kiplinger Washington Editors, Inc.

Cool chart

The New York Times recently posted a cool chart showing the average spending costs for Americans. You can even look at individual items in a category.

http://www.nytimes.com/interactive/2008/05/03/business/20080403_SPENDING_GRAPHIC.html