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. 

Mutual Fund Alphabet

Stock tickers are based on the companies name, however, mutual fund ticker names are based on the name as well as other factors such as how much you are going to pay in fees. Here is the break down of the names:

Ends on:

A - you pay comission
N - no-load (no fees)
F - front end load
B - fund has both front end and back end fees
X - ending for most mutual funds to differentiate the ticker symbol as a symbol for a mutual fund

Fresh MBA Grad

There has been progress in my financial life. I'm graduating from an MBA program in May 2015 with a lucrative job offer to start in July 2015.

I have more than tripled my salary, but I have also more than tripled my debt. So, I need a new set of financial goals as should you anytime you undergo life changing events.

1. Contribute to 401(k) up to the match (6% of base salary)
2. Build emergency fund of 3 months (my job feels secure so this should be enough and this will be possible with part of the signing bonus)
3. Max out Roth IRA (this will also be covered by the signing bonus)
4. Pay down high interest government debt, undergraduate subsidized loans
5. Pay down high interest government and direct debt, graduate plus loans and university loans
6. Pay down low interest private graduate loans
7. Max out my 401(k)
8. Save up for a down payment (for potential 2017 house purchase)

Maximum Amount of Student Loans

The government will only give you a few thousand dollars a year in loans to pay for your school. If you are reading the Money Smart Grad blog, you are likely to be a college grad with student loans. Therefore, you know the damage that they can do. You might have some extra PLUS loans or private loans as well. You might be thinking of going to grad school, which probably means that you will need even more loans on top of what you already have.

To tell how much you should take out in loans, you should look at the salaries of potential careers you can undertake after graduation. For example, I am planning on an MBA and I am researching how much a manager or a director of a firm or a non-profit can make and what I need to land that position. If you would qualify for a listing after graduation, and the position pays $100K and that seems to be the average, you should not take out more than a total of $100K in loans in total. A good rule of thumb is to never take out more loans than you will make the first year out of college or grad school. This means that if you are going to grad school and you expect to make $100K the first year, but you already have $25K in undergraduate loans, you should only take out $75K more for a total of $100K.

Recommendation: Squared Away Blog

I'd like to recommend something that I read regularly - the Squared Away Blog by Boston College. They have a great research center and conduct regular academic studies on topics of retirement. Do check it out!

Statistic Brain

Interesting Statistic, financially and otherwise. Here is a list to the Retirement Statistics:

Retirement Statistics

Click through the financial tab on top for more fun info.

Grad School Calculator

Have always wanted to calculate if the MBA will be worth it even with a 120K price tag and loans. Here you can calculate the return on your graduate school education. Handy calculator for the grad school hopefuls!

LearnVest - Grad School Return Calculator

Generic vs. Name Brands

If you want to slash your grocery bill dramatically, you cannot be brand loyal. Almost all stores carry a generic brand or a less expensive brand. You should try buying the store brand and test if the taste is the same as the brand you are used to buying. Some things just aren't.

I don't like sodas, but I sometimes as a mixer or on a random craving, it tastes great. However, even though I can't really taste the difference between Pepsi and Coke or Diet Coke and Coke, I can taste the difference between Coke and store brand cola at most places. I've noticed that Publix makes a good soda and don't mind buying their version of Sprite or Coke. However, you must experiment. If you don't try the other brand of hot dogs or cheese, you might not realize that it is the same or even better.

Know Your Worth

The largest asset you have is you. The greatest obstacle for you moving ahead in your financial life is your salary. If you could earn more, wouldn't it be easier for you to accomplish the things you want financially? The answer should be yes if you are not going to inflate your lifestyle with your salary.

Since you answered yes, it means that you must know when to move on. You have to know when you can no longer progress within your company and you have reached the challenge level or the salary level that you can. It might be hard to make a change sometimes, your company might have a 401(k) that's not fully vested or maybe they promised a bonus. However, remember that if you've reached the limit, seeking another job now will make your future 401(k) vest sooner and you will be able to prove yourself faster to get another bonus at your future company. Therefore, make goals of what you want to make in the future and make sure you are doing what you need to, to attain these goals.

If you thought that a particular stock you are holding would not increase in value in the future, but would only provide a stable low dividend, wouldn't you want to sell the stock and buy something that would give you a regular dividend that's larger and would have the potential to increase in value? Think of your job as a stock and see if it helps to analyze it that way.

Tax-Free Holiday

Seventeen states currently have a weekend or a week where, before school begins, you can purchase clothing, school supplies, and some times other items tax-free. This is a great time to take advantage of clothing shopping for yourself as well whether you are a student or not.

See if you state offers tax-free shopping dates and figure out where they are:

Wiki - Tax Holiday

Question Their Authority

Always question the authority or legitimacy of anything you see. I love calculators that tell me how much I should save for retirement and calculators that will help me do away with debt. However, keep in mind that certain factors are assumed in most calculators that are not solely based on math.

For example, the ING retirement calculator tells me I will need $1,000 per month if I want to travel internationally. To me, this seems insane. However, I can always find a deal and maybe some people cannot. Who knows, maybe my standards of living will raise this much when I am in retirement. However, I doubt it. There is always a better way to spend money or give money away than five star hotels.

Also, note that ING and other companies want your money in their accounts because this is how they make money. Maybe they are overestimating the total needed for retirement because they want more of your money. There is such a thing as saving too much for retirement. When you are currently not enjoying life because you are socking 40% of your income into retirement, the situation has gone too far.

Therefore, always think about where your financial knowledge comes from and what is the objective of your source.

Simple IRA Roll-Over

If you currently have a Simple IRA and no longer work for yourself, you can roll-over your IRA into a traditional one. The rule - you can do it after two years have passed.

Free or Cheap Fitness Options

Here are ten places to find free or cheap fitness classes:

1. Check with the local gym for discounted community classes, rather than a membership
2. Check your local YMCA
3. See if your local or community colleges offer cheap fitness courses or free community courses
4. See if your city's park association has free fitness courses in the parks such as Yoga or Tai Chi
5. Rent a fitness video at the library
6. Hire a personal trainer with a group of friends, the discounted rate is usually a deal - negotiate it further down as prices are flexible
7. Negotiate with your HR for a free gym membership nearby so you can attend at lunch time
8. Sign up for weekly trials of gyms in your area, most gyms will give out free 7-day passes
9. See if you have a friend who lives in a community that has a gym on site that you can visit
10. Run around your neighborhood

Exercise to a healthier, wealthier you!

Scholarships

Never give up looking for scholarships. I thought that scholarships for MBAs were not possible, however, recently I bumped into a full scholarship for a local MBA sponsored by a local community. This discovery started my search and I also discovered that you can receive a scholarship to the best school in the state by achieving a 700 or above on the GMAT. That score is a long shot for many, however, if you have two years to attend an MBA, keep studying and maybe you can attain that level. Most importantly, never stop looking. Try searching for the school that you would like to attend and 'full scholarship' to see what is available. Some of the scholarships I saw are not advertised, therefore, not guaranteed, however, everyone seems to get one if they are X or Y based on the forums.