Financial Check In

Every once in awhile, I like to check in with my personal finances and see how I'm doing. My last check in with priorities was about a year ago and it's time for new priorities.

I'm adding a new change to the priorities - dates. What are priorities if they are not framed by time?

1. Continue maxing out the 401(k), adjust % post bonus (August)
2. Pay off Wells Fargo 1 loan (monthly, by December)
3. Max out the HSA, contribute (January & February)
4. IRA, contribute and purchase investments (February & March)
5. Pay of CC balance at 0% (February, March, & April)
6. Calculate taxes that need to be paid, put aside and pay (March & April) 
7. Pay off Wells Fargo 2 loan (monthly, by May)
8. Pay off personal loan at 0% (monthly, by June) 

How Rich Are You Compared to the World

Want to feel better about your financial position? Check out the Global Rich List and see where you fall. Most Americans fall within the 1%. 

http://www.globalrichlist.com/

Acorns - Round Up Purchases and Invest

Acorns is a money management service that allows you to invest for retirement without noticing that you are doing it. 

Let us say that you purchase a snack for $2.45, Acorn will auto invest $0.65 in a diversified portfolio for you. This method is the simplest and quickest way to save up acorns like a squirrel if you don't have time to make an extra effort today. 

https://www.acorns.com/

Kayak Moneysaving Tip

I use kayak.com for my flight searches as they truly do aggregate well and have the cheapest options. One tip, if you also use kayak.com, is to clear your browsing history and cookies and to search again. I just saved myself $120 on a ticket! Kayak.com increases the prices of tickets  with repeated searches as the system knows that you need that ticket and your willingness to pay is probably more than someone who is simply browsing for the first time. 

Some sites also charge you more based on your location and hardware. For example, Staples.com charges people whose IP address is in a remote location more (based on a business school case I did) because they know those people cannot quickly run to a nearby store. And, some companies charge you more on an iPad and less on a PC as iPads are usually owned by the richer people in a society. So, clear your history and use a PC if you can. 

401(k) Spillover

401(k) Spillover - Some companies are including this new benefit into their retirement plan. With this plan, you are allowed to add to your 401(k) over the maximum amount allowable by the IRS ($18,000 in 2015). It is not pre tax like your first $18,000, but it can sit in your account for retirement nonetheless. 

The greatest benefit is to those who earn at the higher end and want to receive the full company match. Let's say that your income is $350,000 (congratulations on snagging this position!). Your employer will match 50% of your contribution, which can be up to 6% of your income (pretty standard). So, you contribute the full $18,000, yet that is only around 5% of your pay, which means your company match (at 50% of your contribution) will only be around 2.5% or $9,000. With a 401(k) spillover, you could contribute the full 6% of your pay ($21,000) and the company will be able to match the 50% of that contribution, a full 3% of your income, which is $10,500. You win by gaining a additional $1,500 in free money. Overall, your 401(k) funds will be $18,000 in pre tax funds and $13,500 will in a post tax portion of the account. 

Credit Card with the Highest Overall Rewards

I need a new non-AMEX credit card. And, I've found two great cards for rewards on all purchases. It's incredibly difficult to keep track which card should be used at which store or category of store. Furthermore, my boyfriend and I share expenses and have mutual bank accounts but not a shared credit card. Thus, most of our expenses like groceries are made with the bank card that has no rewards. On my to do list is to research one of us using a card that has the most benefits on our top spending categories: restaurants and groceries. 

Here are the two contenders I found for a new card for myself:

1. Citi Double Cash Back Card - offers 1% back on purchases and 1% back on all payments for a total of 2% back

2. Priceline Card - offers 2% back on all purchases plus bonus % on certain categories of Priceline purchases

The verdict: Citi Double Cash Back Card because the card itself has a better design and my boyfriend already has a Priceline card, which we use on all Priceline purchases. Diversifying the card benefits in one household makes sense. 

Minimum Viable Money Management

I've been learning quiet a bit about agile development and lean management in the past two years of the MBA program and now I am using this same methodology at my job in relation to business processes. MVPs are the new hot topic in business, discussed in more detail in Eric Reis' The Lean Startup.

"A Minimum Viable Product (MVP) is: "[the] version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort" — Eric Ries." Google

In simpler terms, an MVP is a product, for example, a mobile app, that is developed quickly and released to the customers before there is time to put on the finishing touches. Releasing the product to the customer quickly lets you learn from feedback and fail fast if you are going in the wrong direction. This process allows you to spend minimal funds on a progressively better product. You can know the biggest needs of the customer (or if the product is needed at all) before you spend money on the final logo of the application, for example. 

Viable is a key term in this phrase. Viable means that the product might not have all the features, but it is useable by the intended audience. 

The idea is that this process is efficient. No money or time is wasted, no resources are misused or idle. I love lean management and believe that efficiency is key to running a smooth machine that is a business. 

I look at myself and my money management as a small business. I have a resource (my own potential), a revenue source (my income), and expenses (rent, food, etc.). Thus, I translated the lean management techniques into personal finance and am piloting and learning from my experience. 

What does that mean? Firstly, I have decided that my job is stable enough and my paychecks are large enough that I do not need an emergency fund at the moment. I don't own a home or a car and I planned to keep $5K in my saving account for emergencies. I might not have that money at any one moment, but I can gather it within a 2 week period. Thus, now while I am trying to attack my student loans with everything I have, why keep $5K in the account idle? Remember that viable for a product means useable and for a process: doable, which means you have to be careful not to be so lean as to miss payments on credit cards due to a low cash balance. 

Secondly, I've always cleared my credit card with regularity. I would sometimes pay the card off once or twice a week just so I know the true amount of cash I had left and for simplicity purposes. Now, for simplicity in calculations, I might pay a small amount on my cards to round the amount down at any one time, but I no longer pay the full amount until the actual due date. The reasoning for this method is that if there are two paychecks between today and when a credit card payment is due, then instead of paying my credit card today (which accumilates no interest) and my student loan in a week (which does accumulate interest), I can prioritize whom I pay first from each paycheck based on the interest %. It sounds complicated and will require you to calculate how much you will have to dedicate from your paycheck that is paid out on the closest to the credit card due date towards that credit card payment, but it will save you in interest costs. If you have automatic payments set up on your student loans (or a mortgage), you can pay the amount due earlier and, usually, a second payment will not be automatically deducted on the due date. Do check with your loan provider. Why wait for the due date when you have the money today and when the money will be idle in your bank account until the payment date?

Thirdly, I'm delaying putting anything in my Roth IRA until right before April 15th. I'm generally risk averse, thus, I want to put the money in my Roth IRA because it is a smart move. Yet, instead of putting a little away every month, I'm going to stash a lump sum before the deadline from my March and April paychecks. This method allows me to put funds where they are needed today - student loans. This choice might be contentious for some. Yes, I loose out on the benefit of dollar cost averaging and of possibly making a good return in the market. Yet, the greatest value for me right now comes from decreasing my debt. That piece of mind is worth this move. 

I am also in need of a credit card that is not an AMEX, so I'm looking at options with the best rewards, but I am also seeking a 0% APR introductory offer so I can put one of my student loans that is $6K on a credit card. The reason for this move is that I would pay a small fee to pay that student loan off with a card, yet, I can focus on paying higher interest loans off with those funds instead of paying the $6K one down monthly. Overall, calculating the return of being able to snowball money intended for this loan into a higher interest loan and returning to this $6K one on the credit card before any credit card interest is due will save me close to $300, even after I pay the service fee for paying the loan off with a credit card. 

I have also raised my deductions for my paycheck. I am used to receiving a refund and because the refund is never significant, I never played around with my withholdings. Well, now I have and now I am plowing more money towards - you guessed it - student loans. I can calculate the refund or the amount due by the end of January and save up if needed through April 15th.

Overall, I've become more conscious of giving away "free money." In the past, I've paid for rent months in advance or pre-paid on other services I know I would be using like insurance. However, now, unless the service will benefit me via a discount that is greater than the interest I am paying on my student loans for not directing those funds to loans, then I do not pre pay anything. I also withdraw my Venmo and PayPal money from eBay after each transaction instead of transferring when I remember. Why give my landlord or eBay an interest free loan?

There are many more strategies where you can make the dollar work for you. It might be tedious, but if you are looking to save money on interest - these strategies could be useful and will become routine after doing it for some time. Something that has kept me motivated and swung my decisions has been an Excel I have been keeping that keeps track of the interest savings from paying down my loans first then my credit card on its actual due date. Overall, I've saved several hundred dollars in interest from a combination of these strategies. 

Comment to share any of your strategies for Minimum Viable Money Management.