Tuesday, February 22, 2011

Do You Keep Maintenance Records?

I went for an oil change last week and learned that my car requires additional repairs estimated to cost more than $1000. It seems like it was just yesterday that I was wigging out about the egregious amount of money I'd have to divert [from my car payment] in order to ensure I have a reliable ride. Actually, that was November 2010 when I paid  for the "check engine light" issue to go away and May 2010 that I paid for the rotor replacement (hundreds of bucks). 

If you guessed that I'd be talking about this again, your guess would be half right. Lately, I've been thinking about all of the work that I'm getting done to my vehicle. Frankly, I haven't been keeping an organized record of all services performed. Fortunately, however, I've been going to the same mechanic (at least since I've moved to this area), so they have a pretty good record of my oil changes, fluid flushes, and major repairs and whatnot. I've read a little bit here and a little bit there about the benefits of recording your vehicle's service history, the gist of the advice being that you'd be able to negotiate a higher selling price when you sell the car. I guess a record screams "LOOK AT ME!!! I'VE BEEN CARED FOR!!!"

Perhaps I'll get around to keeping a service record for my car. But I wonder, what's truly valuable to keep record of? Oil changes? Sure. Tire rotations? You bet! Car washes? Maybe not so much. 

I'll keep poking around to see what information is recommended to be part of such a record and will look to the comments in my budget for insight about the specific services I paid for. I'll keep you posted :)

Do you maintain a service record for your vehicle? 
If so, what information do you include?

Tuesday, February 15, 2011

Not So Fast....

In January, I wrote "Early Graduation from Graduated Payments?" In it, I asked if I should switch from a graduated repayment plan (incrementally increasing every two years) to a standard repayment plan (one with the same monthly payment). I misunderstood the charts I compared at the time (this one in particular):

I was under the impression that my graduated payments would start in February. So I updated my budget to reflect this change. You can imagine my surprise when I logged on to the Direct Loan Servicing website to discover that my next payment would be the same $229.21 I'd been paying for the past year.

Turns out, I'd have to pull the trigger to make the increased payment happen sooner than later. After talking to a DLS customer service representative (who didn't sound like she cared for her job much; then again I did call after 8PM<<<she probably resented missing "Glee" or something...anyway) I learned that my payment is scheduled to increase in November (exactly two years after I started repaying my loan :>). And when it increases, it won't be the above-mentioned $265.97; it will be $268.91. I decided to forgo initiating the higher payment. I was advised that if I start paying the higher amount (effective March 2011), I would pay $8,770.82 in total interest over the course of the loan term. On the other hand, I would pay $8,917.25 in interest (over the same time period), if I wait for the increase to occur in November. For you math junkies, that's a difference of $146.43.

I asked to keep things as they are and plan to make principal only payments on the higher interest loans in my portfolio of $36.76 (this is the monthly difference between what I thought I was going to have to pay and what I'm currently obligated to pay).

What do you think? Would you make additional principal payments -totaling $367.60- over the course of ten months? Would you go ahead and switch to the higher payment? Or would you sit back and stash the $36.76 each month?

Thursday, February 10, 2011

Tax Refund? What Tax Refund?

Lately, I've been coping with some "not so great" news. I don't think it's realistic for me to eliminate the car note by the end of this April. It turns out that my estimated tax return is no where near what I'd planned for it to be. Additionally, I think I might owe state taxes. I'll be turning to my CPA friend for help  =) Maybe, just maybe, the circumstances won't be as bad as I expect them to be.

Nevertheless, since reality is screaming at me not to expect a significant tax refund, I have to look at other ways to eliminate my car note and stay on track to achieve my savings goals on time. I've updated my budget to set aside more money from my "extra" paycheck in April (originally, it was $955; I plan to redirect $237 from savings to the note to increase the amount to $1192).

Assuming that I: 1) receive no additional funds (in the form of a tax refund); 2) pay an extra $1192 in April; and 3) stay on track paying an average of $1,010/month (starting May 2011), I can eliminate the car note by July 2011--three months behind schedule.

My takeaway from this planning experience is to never bank on a tax refund. If I receive anything, I should spend and save some. 2010 presented a few changes that significantly altered my tax situation, namely a new job (with a $17,000 income increase) and a new state (with higher and additional (local) taxes).

How do you plan to spend/save your income tax refund? 
Do you expect one every year?

Tuesday, February 8, 2011

I Spend Less than 75% of My Income

Lately, I've been thinking about how fortunate I am to be able to spend less than 75% of my income on necessities (housing, transportation, food, debt repayment, etc.) In fact, I am currently spending just over 71% of my income (or $1,999.46/month). The $785 left over goes towards the car payment that I obsess over (hooray for principal-only payments!). Later, it will go towards my savings goals. 

I'm happy about these circumstances for a few reasons. First, I've made some updates to my income, and throughout each update, I am able to stay on track with my "financial success plan." Specifically, when I started this blog, my net income was $1,389.01/pay period; later, because of recent and temporary changes to the payroll tax, that amount increased to $1,417.23/pay period; finally, I increased my contributions to my 403(b) thereby reducing my net pay to $1,392.23 each pay period.

Secondly, I am happy about this fraction of spending because it confirms that I can live well within my means. For example, I think a lot about increasing my income and how I would spend it (one of my other 'obsessions' is writing budgets of how I would spend $5,000 and $7,500 of monthly net income). Even with increases in housing expenses (assuming that I'd be a homeowner with thousands more at my disposal) and modest increases in my food, travel and miscellaneous expenses, I'd still be able to pay extra toward my student loan debt, max out the Roth AND max out the 403(b).

Finally, I think about the high percentage of Americans who live "paycheck-to-paycheck." These are folks who spend every cent they earn, leaving very little- if anything at all, for savings or additional debt payments.

Ultimately, my goal is to spend 50% or less of my income. And considering that I aspire to live a comfortable lifestyle (i.e. consistently save at least $10K a year in non-retirement/non-investment accounts, max out individual and employer-sponsored retirement accounts, and travel domestically and internationally every year), I MUST increase my income. I better get started thinking about how to do that....

What percentage of your monthly income do you want to spend? What percentage of your monthly income do you currently spend? What's your plan for achieving your goal?

Monday, February 7, 2011

What Rewards Card Do You Recommend?

One of my goals is to get a rewards credit card. For the sake of my own sanity, I've made an effort to pay my credit card balance in full each month (I'm going two months strong!). Since I'm getting more comfortable with this habit, I've decided that it's appropriate for me to start shopping around for various cards. These are the card attributes that I've decided are important:
  • No annual fee
  • No monthly maintenance fees (in fact, no stupid fees that are assessed, even if I elect not to use the card)
  • Every purchase qualifies for points (none of that fancy stuff with "select merchants" or restrictions to entertainment or dining expenses)
  • Points/rewards/miles don't expire
  • I can use points/rewards/miles on any travel purchase (any airline, car rental company or hotel) without blackout dates.
Given these requirements, I've been considering Blue Sky from American Express, Venture Rewards from Capital One, Miles by Discover, and Chase's Sapphire card.
I realize that a couple of the cards waive the annual fee for the first year (one version of the Venture Rewards card and the Chase Sapphire card, specifically), but I'm confident that I'd be able to negotiate waiving the fee in subsequent years.

I've been on credit card comparison sites such as CreditCards.com, BankRate.com, CardRatings.com and even Google's credit card reviewer, and I'm still undecided.

The APR (annual percentage rate=the cost of using other people's money) and late payment fees are not important to me, as I will continue to pay my balance in full each month (no finance charges here and I ain't the one to go jacking up my credit score with late payments). Moreover, I will use this new credit card for regular purchases: food, gas, my phone bill, and miscellaneous expenses (ex: cat stuff, airfare, entertainment).

Do you have any of the above-mentioned credit cards? Have you thought about getting a rewards card recently? What have been your experiences? What advice would you offer as I make this decision?

Tuesday, February 1, 2011

February Net Worth Update

Here's this month's summary explanation:

403(b): (+2356.90) I recently updated my 403(b) contributions from $100/pay period to $125/pay period. You'll notice that the $4300+ listed next to this account is more than double what I posted last month. Well, I finally got around to accessing my account. When I first started my current job, I received an email (which I didn't print; nor did I receive any mailed copies) of my customer ID. This ID number allowed me to access my account to view my balance, change asset allocation, and a bunch of other stuff related to employer sponsored retirement accounts. Unfortunately, since receiving that email, my work computer crashed and my laptop was later stolen. And I hadn't backed up a single thing. 

At any rate, I finally got around to calling my plan's sponsor to retrieve my customer ID. Now, I have access to my account and can see all the money I (and my employer :>) have been contributing. By the way, my job contributes up to 4% of my salary to my account, and I'm making sure to get every last penny of it!

Emergency Savings: (+111.57) I'm still not contributing funds to this account on a regular basis. However, I moved $111.17 into this account from my Bank of America savings account because I earn a higher interest in this account...and I didn't have any plans for the excess. I earned $0.40 in interest this past month (versus the typical $0.01 from BofA).

Regular Brokerage Account and Roth IRA: (+117.07) The increases in these accounts are attributed to market increases (i.e. the value of my investments increased). Starting February 4th, every two weeks I will deposit $25 to the Roth IRA. It's not much, but I figured I could cut out some frivolous spending for something of more value. I can't wait to supercharge these deposits!

Savings Account: (-24.87...and other deposits through January) I deposit $25 plus any money left in my checking account at the end of a pay period into this [BofA] savings account each month (I like to match my pay checks with "expense periods," a sort of personal billing cycle). I previously mentioned that I moved some "excess funds" from this account into my emergency fund.

Car Loan: (+300.96) I'm chugging along with eliminating this debt. I'm halfway through paying off this account in 18 months. Had I stuck with the assigned payment amount, I would be halfway through my debt in 31 months.

Credit Card: (+433.33) I paid off the previous balance using funds set aside for my super-duper car payment (just as I suspected). Hooray for no credit card interest charges. Boo for compromising the debt reduction plan for the car. I intend to pay off the current small balance with funds in my checking account and BofA savings.

Student Loan: (+98.26) Hooray for a principal reduction of ninety-eight bucks (sarcasm). I can't wait to unload this sucker, too!

Considering that my liabilities are close to 3.5 times more than my assets is a bit discouraging. At the same time, it's a reminder that I need to work harder to improve my financial situation.  

What do you think is an appropriate balance between assets and liabilities?