Long Term Care Planning, Already?

This week, I attended two of three classes provided by a financial planner who specializes in retirement and estate planning. I've learned A LOT!!! And "A LOT" doesn't do justice to the wealth of information I've gained. In this post, I'll share a few of my favorite bits of information from the long term care insurance presentation:

• Long term care (LTC) insurance is purchased to cover expenses related to care in home, continuing care retirement communities, assisted living and nursing homes.
• The majority of long term care is paid for from Medicaid,  followed by out of pocket expenses from the customer and/or their family.
• Medicare and Medigap (health care for people age 65+ (and younger, in some cases, ex. disabled persons)) does NOT cover long-term care expenses.
• Medicaid (health insurance for the impoverished) does cover LTC expenses. For a single person (1-person household) aged 65+ years (someone who is considered to be "aged"), to be eligible in my state of residence, you cannot have assets valued at more than $2,500 and a monthly income no greater than $350.
• Policies can be purchased based on the amount of money a person's care would be on a daily basis and for how many years such care would. Additional features -such as inflation protection, age and health at time of purchase, individual and shared plans, restoration of benefits- impact the cost of a policy.
• The Federal government will enact the CLASS Act (beginning late 2012 or early 2013) to help Americans prepare for the expense of long term care. Here's a summary of the the Community Living Assistance Services and Support (CLASS) Act from AARP.
• Some states have "partnership programs" that incentivize the purchase of long term care policies.

I'm so fired up about this topic! I'm interested in learning more about this product so I can discuss it with my parents as they prepare for full retirement.

Have you heard about long-term care insurance? 

Have you talked about it with your parents/loved ones?

Do you know someone who has purchased a LTC policy? 

What was the experience like?

Is Meal Planning My Ticket?

I've been ashamed of my food spending for the past few months. I budget $50/week for food and have easily blown through more than a quarter of that budget with my work day breakfast purchases, alone.

Shout out to Panera Bread. I love your hazelnut coffee (w/skim milk) and cinnamon swirl and raisin bagels, toasted with no cream cheese or butter.

Any who, I've laid out my spending through the end of the year using my new budget template, noting that I'll be using my new rewards credit card (and maintaining the tradition of paying the balance in full), and trying to plan for upcoming expenses, such as a weekend trip to the Big Apple.

In an effort to restore my ability to "respect the budget", I know I have to do a better job of sticking to my $50/week food budget. And I'm wondering if meal planning is the way to go. Frankly, I have not been a model for eating meals that are nourishing or financially responsible. I won't go into any great detail about the $20+ I spent for lunch at the Cheesecake Factory a week or two ago...or about the beer and banana chips I ate for "dinner" last night, but I know I have to spend a reasonable amount (i.e. not $20+/meal) and it should be good for me (ex. add veggies, protein, and maybe better carbs to my beer).

This is where meal planning comes in. I've heard about it here and there, I know that it involves me making a list of stuff I want to eat for the next week, and making sure that my grocery list allows for some flexibility around core items, but frankly, I've never done it. The closest I've come to meal planning is whipping out a grocery store circular and buying only what's on sale. I wouldn't say that peanut butter, cantaloupe and pork chops constitutes a meal, but at least I spent less on such purchases =)

Have you successfully used meal planning to manage your finances and to ensure you eat balanced meals? What has worked best for you? I appreciate your insight!

Summer Spending

Tis' the season for barbeques, festivals, fun in the sun and friends! Undoubtedly, all of these things mean mo' money, mo' money, mo' money....that you'll be spending "mo' money" of course =)

As I have done in the past, I've failed to plan for my upcoming summer expenses. Namely, expenses for and round-trip travel for two family reunions. Both will take place states away and fortunately, my sister and I will drive. It's fortunate that we're driving because 1) it's much cheaper than flying and 2) since two of us are driving, the travel expense will be split in half.

At any rate, I'll be looking at a couple hundred dollars of "unusual" expenses. I better start figuring out how to make the most of what I'm working with. So far, all I've come up with is to be diligent about preparing breakfast, lunch and dinner at home (something I should have been doing over the last 8 weeks, instead of being Carefree Carrie!).

What summer-specific expenses do you have this year? If you have a regular income (and regular expenses to go along with them), how are you preparing for your seasonal transactions? Did you save for these upcoming expenses?

Trouble Staying Focused

I'm still sick and continue to struggle with my spelling, as I shared earlier this week. Nevertheless, I will do my best to think through my drug/sick-induced brain to share with you what has been going on.

My spending for the last two months has been kind of "free spirited". I've purchased breakfast nearly every day (Monday through Friday), eaten out almost as much for lunch, and had more take out for dinner than usual. Additionally, I've spent quite a bit of time entertaining friends from out of town or going out of town to be entertained by friends (yeah, yeah, I know, gasoline is extra stupid expensive). These things don't pay for themselves and unfortunately, many of these expenses were not part of my regular budget. So what did I do? I used money I set aside for my super duper car payments. Or, I used my credit card....and then used money from my super duper car payment to pay off the credit card balance.

I'm all for the "life is short, so you gotta have fun." Yet, sometimes, I find myself struggling to balance it all. Surely, additional income would help me "have it all", so to speak. What's most important, however, is that I develop a firmer sense of discipline to remain on track with my goals, while having a little bit of fun, as well :)

My boyfriend has a similar goal of paying off a debt sooner than later. He has diligently set aside $2,000 a month to get rid of a second mortgage on his first property. He has faced similar temptations of spending money in other places (heck, I'm likely the source for half of such temptations); in spite of them, he's on track to get rid of his loan by the end of August (congrats in advance, babe ;>).

Me? I'm repeating the same old sorry song about pushing back "the date". I haven't thought at length about what it means to pay off this debt ASAP. "I know" that it will mean I can save a super amount every month (for my $10K goal). "I know" that it will mean that I can have a chunk of disposable income to do whatever I want with (shopping and weekend trips to California have been among my latest obsessions). However, I'm not connecting what "I know" with what I should be doing. Side note: I love to see how behavioral economics shows itself in my life :).

Nevertheless, I will continue reminding myself of why I set out on this particular journey and continue to work towards my goals....in spite of many "distractions."

What do you do when you lose focus? What helps you get back on track?

In Case of Emergency...

I had the weirdest dream the other day. I found myself in a makeshift shelter (a community center or school gym). There were at least 60 beds crammed together with people of all ages on their cots. As the dream transitioned, I found myself working as a part of the staff/volunteer group/whatever responsible for coordinating people: directing them to beds, leading group discussions, and shuttling them in from wherever they came from. I don't know where this dream came from, but I don't doubt that it has something to do with the hundreds of families who have been displaced by floods and tornadoes in the South and the Midwest.

In one part of the dream, I distinctly remember a guy, propped up on his elbow, talking about how he came to the shelter. He said that he could afford a room at the Marriott but for so long. He was facing the possibility of running out money and had to find an alternative for his family.

What did I take from this dream? I started to think about my own prepardness in case of emergency, rather, my lack of such prepardness. After a quick Google search, I found Ready.gov, a campaign by the Federal Emergency Management Agency that calls on us to "Prepare. Plan. [and] Stay Informed".

Growing up in South Florida, I've had my experiences with hurricanes and their aftermath. I have memories of boiling water, eating packaged and canned food, and going to the mall and grocery stores (because they had generators and/or restored power before us...we went for the air conditioning). As an adult, however, I have to think about what I would do in case of an emergency. Where would I go? How would I get there (my nearest relatives are four hours [driving] away)? How much money would I need?

This last question really has me scratching my head because I know that I'd have to have such funds available in cash. When the power is out, that ATM machine is not of much help, neither is a check scanner.

Nevertheless, I will do my best to be prepared for -God forbid- an emergency, by combing over the checklists at Ready.gov and taking said recommendations seriously.

Are you prepared for an emergency?

How much cash would you stash in case of one?

A Wonderful Vacation!

Somebody (i.e. me) didn't post for three days. If the picture to the left doesn't make it clear, then hopefully, these words do....I was gearing up for, and later enjoying, a vacation!!!

My dear friend married his college sweetheart on Thursday, April 28th and many guests enjoyed a cruise afterward. The days prior to his wedding were fraught with shopping (What to wear to the wedding!? What to wear on the cruise and for the excursions!?), planning (They want me to pay WHAT for an excursion!? Let me deal directly with the vendor!), and packing (What can I pack in my carry-on (clothes, shoes, toiletries)... What do I have to purchase once I get to Florida (liquor, large sunscreen, liquor)...)

The wedding was beautiful and the ensuing cruise was a blast! I got to spend time with friends, a little more time with my boyfriend, toured Ernest Hemingway's Key West home, parasailed, ate, snorkeled, danced, laughed, ate some more, played cards, snapped a ton of pictures, learned a "fancy" way to play Black Jack, ate again, and napped. My boyfriend ran into an old friend (and his girlfriend) and we shared a few experiences (we're looking forward to hanging out with them).

I hadn't cruised in several years and was anxious to find ways to spend less money where possible. This is how I did it:

• I read the FAQs like my life depended on it an learned that each person could bring 750mL of wine for embarkation day. Considering that cocktails on board started at $7 (plus 15% tip),  I made sure to take advantage of this opportunity: 1 bottle of pinot grigio and 1 bottle of Arbor Mist (my boyfriend likes fruity drinks) cost less than ten bucks at CVS.
• Long before the cruise set sail, my boyfriend and I explored the shore excursions we wanted to participate in. We settled on the Ernest Hemingway museum and parasailing in Key West and snorkeling in Cozumel. Had we booked through the cruise, the per person cost would have been $40, $90, and $60, respectively. I decided those amounts were too high and shopped around. I made online reservations for the Key West activities with local vendors ($11/pp for Hemingway's house and $35/pp + tax for parasailing). Once we arrived to Cozumel, we asked three vendors about their prices and settled on one for $45/pp (in hindsight, we probably could have negotiated with them). Nevertheless, instead of paying $380 (for the both of us), we paid $187.24....for the same exact thing!!!
• I printed coupons. In asking about places to go for our trip, Pancho's Backyard came up. We went to the website and printed out coupons for free lime margaritas. They were DELICIOUS!!!
• We booked early. As soon as my friend set the date, I booked the cruise (March 2010). Since then, I'd been setting aside $100 each month to pay for the cruise (which was paid for by October 2010) and spending money. A few months, I spent the "cruise spending money" on other (i.e. more immediate) fun things, but at the end of it, I still had $400 left.
• It wasn't a "way to spend less" but a financially savvy decision nonetheless...My boyfriend has a rewards credit card that earns points for every dollar spent. We each received a card that granted us entry into our stateroom and allowed us to make purchases on board (a few rum punches and mojitos, room service, coffee, and daily gratuities, for instance). Both of our cards were assigned to his card. So the $202 we collectively spent will translate into points that he can use at a later time.

Despite spending a ginormous amount of money on clothes ($700+), the amount of money we spent during the actual vacation was very reasonable. We had an amazing experience and are looking forward to our next trip! Perhaps next time, I can wear what I bought this time around and really keep the numbers in check!

I Don't Gamble, But I Understand...

Presently, I'm reading Richard Thaler and Cass Sunstien's Nudge: Improving Decisions About Health, Wealth, and Happiness. It addresses behavioral economics: how humans behave "irrationally" and what tools/techniques could be used to help us make better decisions, despite the temptations (or laziness) that lead us to be "irrational." You should read the book, because there's much more to it than I let on.

At any rate, Thaler and Sunstein discuss how one such technique that can help us perform in our best interest is betting (it really has more to do with us being loss averse, I think). They give an example of two friends who committed to losing thirty pounds over the course of nine months. If either of them failed, they'd have to pay the other $10,000. They lost the weight and extended the commitment to keep the weight off with a subsequent bet.

I began to wonder, what type of bet could I make with a friend to stay on track with my financial goals? Commit to paying off my credit card balance? Commit to only charging up to 30% of my available credit limit? Saving a certain amount of money? Making sure I periodically reviewed the performance of my investments and make changes, accordingly? Commit to earning more income through a business?

I haven't decided yet what would be appropriate for me, although the fitness goal is a compelling one.

What would YOU bet on to ensure that you would stick to your goals? 

(It can be related to finances or not.)

Thank Goodness I'm Out of School!

If, like school, my attendance was recorded on this blog, I'd probably be failing. I haven't posted in two weeks! Which is especially terrible since I post twice a week. Nevertheless, I will share what I have been up to.....spending money recklessly and not so recklessly.

The reckless part comes into play because my financial decisions over the past two weeks have effectively set my car payoff date back by a month. A large part of this is because I spent $1,010.31 (I negotiated this down from the original quote) to get my tie-rod and rear struts replaced (this is the "not so reckless" part of my spending). The rest of my car payment money (and then some) was spent on spa services ($188), dinner ($55), hair supplies ($20 and change), airfare, eating out (including Dunkin Donuts), and a new pair of sneakers ($44), among other things. 

Why the splurge? Why the major deviation from "the plan"? Frankly, there's no excuse, yet, I found myself justifying expenses because it was my birthday. Yup. I turned 27 years old last week. And unlike previous birthday celebrations, I did not plan for this one. No trip out of town. No dinner with my beau. Nothing. It was quite depressing. I guess that saying about money not being able to buy you happiness is true....I sure made an attempt at it (enter sad face).

Image from murlocparliament.com

Now it's time to refocus and get back on track. No more emotional spending, no more failing to plan and trying to make up for it at the last minute.

Have you ever made emotional purchases? Splurged in an effort to "fill a hole?" What was the consequence?

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?

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?

Financial Goals for 2011

In my most recent post, I shared that I'd been organizing my finances (reconciling savings plans, debt reduction plans and budgets). Naturally, the next thing for me to do was to think about what my goals are for the upcoming year and what I need to do to make sure these goals are achieved. Below, you will find my goals and the steps I intend to take to make them a reality:

• Zero credit card balance: My goal is to end every credit card billing cycle without a balance. This is one way to ensure that I don't spend above my income. I can make regular purchases, such as gasoline and groceries, with my credit card. In fact, I've been considering a rewards card to earn points for ___________ (<<that means I don't know, yet >). This year, I paid $68.21 in interest charges.  That's enough money for gas (and then some), a nice dinner with my boyfriend, an outfit, or a small contribution to my savings plan (after all, it all adds up!).
• Max out my Roth IRA: You already know that I've been kind of obsessed about paying off my car note. As such, I don't have much money left over to max out my IRA. With a projected payoff date of April 28, 2011, I have May 2011 through April 15, 2012 to contribute $5,000 to my individual retirement account. What do I have to do to make this happen? Contribute $454.55 each month to the account. With two "extra" paychecks in 2011, I may have the flexibility to reduce the monthly amount, but this requires that I'm diligent about redirecting a sufficient amount of those checks to the IRA. Knowing me, I'd like to set a few bucks aside for fun =)
• Pay off my car note: Originally, I planned to pay off my car note by June 2012, that is, until I ran the numbers on my beau's proposition of significantly increasing the principal payment amount. Currently, I am on track to achieve this goal by the end of April 2011, especially if my assumptions about my anticipated tax refund are correct. If they are less than I estimate, I may have to postpone the due date for this goal (which, undoubtedly will effect the savings goals). Let's keep our fingers crossed and hope I am at least right :)
• Generate at least $250/ month in extra revenue: Before I took the job that I currently hold, I had a steady goal of generating $3,000 in net income each month. With my deductions for my defined contribution plan, I am short of this goal by $222 each month. For the past few years, I've been toying around with a business idea that promotes personal finance. My goal for next year is to get serious about a web design and marketing plan so I can realize some income. $250/month of income to be exact. To be clear, I'm not looking to pocket all income; undoubtedly, I will reinvest into the business, but having the income will definitely provide some peace of mind.
• Accumlate $10,000 in non-retirement savings accounts by 05/31/2012: These funds would be available for immediate access and as part of my emergency savings. Why $10,000? Frankly, it's an arbitrary amount, but it's definitely a "stretch goal." There are a number of factors at play. Let's start with the not so good possibilities: what if I don't pay off my car by the end of April? What if I don't generate enough additional income? Well, my $10K goal within 12 months will be postponed (by the way, I'd redirect my "car payment" money to this goal). For me to achieve this goal, I need to set aside $833.34/month.  

If you recall, I have $1255 available as discretionary money each month. I'm comfortable spending $200 of this amount for fun stuff. So $1055 - $454.55 (Roth)-$833.34($10K goal)= $-232.89. A girl MUST increase her income to make these goals come true. Even if I sacrificed fun stuff every month (i.e. the previously mentioned $200/month), I'd still be a few bucks short! 

At any rate, these are my financial goals for 2011. What are your financial goals for 2011, if any? How do you intend to achieve them?

Budgets, Holiday Stuff and Revisiting Financial Goals

...and I'm back! I sincerely apologize for being absent last week, but I'm back now =)

So, what's been going on? The usual, the not-so-usual and some more of the usual. Let's get started with the usual.

The Usual

I've been diligently tracking my expenses in my tracker housed on Google Docs. I've exceeded my allocated amount for food and car expenses: footing the bill for my sister's birthday dinner; being a bit impulsive (eating out, mostly); increasing gas prices (is anyone else paying around $3/gallon?); and regular car maintenance (the coupon for my oil change this time around wasn't $19.99 + tax :<).

The Unusual

Holiday stuff. You know, buying gifts and bringing in whatever you signed up for for the holiday party at work. Actually, the work stuff was easy. We had a cookie swap and I brought a non-cookie item to swap: brownies. Had I not been distracted by the massive amounts of sugar tempting my waistline, I would've repackaged the cookies and sold them for income =) The not so easy stuff is holiday shopping. To cover the expense of Christmas gifts without regretting it in January (i.e. financing all purchases with my credit card with no clear way of paying it off), I decided to decrease the amount of my car payment this month to $356.98 (I know, it's a weird amount). At any rate, doing so allowed me to spend $705 of "car payment" money on gifts for my parents, sisters, boyfriend, best friend and godson. Sadly, I've spent $690 and some change and I still have a few items to pick up. Fortunately, I have a few bucks in my "immediate access" savings account (this is NOT my emergency savings account) that I'm comfortable using to cover these items.

More of the Usual

Revisiting goals and planning. I spent quite a bit of time today updating my savings plan [another Google spreadsheet I use to track the balances of my savings account linked to my checking account (see "immediate  access" savings account above), my ING Direct account (emergency savings), my Roth IRA, regular brokerage account and 403(b)] and reconciling it with my 2011 budget. It feels SO DARN GOOD to account for every single penny. Did you get that? EVERY. SINGLE. PENNY. I know where it came from or where it went and for what purpose. Moments like these help me feel in control of my finances, and not vice versa...something that I occasionally freak out about. Nevertheless, I am on track to enjoy my boyfriend's birthday (I've planned a surprise trip for him), my girlfriend's birthday (we're going to be "Bahama Mamas"), a winter weekend getaway in the Poconos with a gaggle of friends, my 2nd year anniversary with the beau, paying off my car note, and my friend's wedding. And all of these things are happening in the first half of the year! To be fair, I am making assumptions about my anticipated tax refund, the bulk of which will go towards principal reduction on the note. Everything else is accounted for (i.e. planned to come from my regular income).

As I prepare for 2011 (and the end of my car note, hooray!), I'm considering the opportunities to save more, invest more, and to be better equipped to pay for travel and entertainment expenses that inevitably have a habit of "popping up." My post later this week will focus on financial goals [and concomitant action plans] for 2011.

How have you been handling expenses related to the holiday season? Did you set up a budget? Are you "winging it?" Have you started to plan for 2011 financially? Have/will you do a "2010 Year in Review" for your finances?

I Needed this LAST WEEK!

Proverbial Wallets from John Kestner on Vimeo.

I'm rather disgusted with how I've spent my money the past several weeks. Thoughtless credit card charges...countless transactions for eating out...blatant disregard for my spending plan. I've got $10 to my name (excluding all savings - easily available and not). Am I happy about it? Absolutely not. Is it the end of the world? Again, no.

So what's next? Buckle down and pay off the credit card balance and remind myself - DAILY- of why I have a spending plan. Then, make a list of things to purchase and stick to it. This should help me achieve some sense of redemption, because reflecting on the past several weeks of spending is not inspiring!

Have you ever gotten "down in the dumps" about recent spending? What have you done to reduce the likelihood of repeating such regrettable spending?

This Way or That?

The very nature of my blog highlights the point that there are often a multitude of ways to achieve one's financial goals. I wish I could say that the motivation for today's post is purely financial, but it's not. Nevertheless, there are many applications of the concept of achieving a task in a variety of ways. For example, you have read my many posts about paying down my car note. Initially, my goal was to eliminate my car note by June 2012 by making monthly principal only payments of $230.89. My boyfriend, who paid off his $30,000+ vehicle loan early, recommended that I see what areas of my budget I could make adjustments to in order to add more to this additional payment. After number crunching with loan amortization tables and a variety of savings projections, I settled on $1245/month to pay the car note (this amount includes the original $269.11 payment), this amount later became $1045/month as a I soon realized that twelve hundred bucks a month left me with no wiggle room.

I've also thought about the variety of advice/information promulgated about:

Investing: asset allocations based on age, how to pick a stock, what indicators to assess when selecting a fund, how much to save for retirement, tax diversification...

Saving and debt management: what debts to pay first, saving a set dollar amount or a percentage of income, what type of savings instrument to use, how much to set aside for emergencies....

Insurance: how much coverage, term or whole life, who to list as a beneficiary or beneficiaries...

The list goes on and on. I can only imagine that as my income increases and my options within financial planning expand that this list will grow even larger! However, I am comfortable knowing that - despite how overwhelming it may seem- I am constantly learning about and taking control of my finances. Regardless of the recommendations, I am ultimately responsible for the consequences of my decisions: to save one way or another, to pick a stock or bond fund because of a certain indicator, or whatever the case may be.

Have you ever received advice about the way you should handle your finances? Was it solicited or unsolicited? Was it more helpful or harmful?

Taking Stock in....um, Stocks

Last night, I had a moment. Another one of those, "oh crap, what am I doing?" moments. This is what spurred it...at the end of every month, I take a look at my balances for my savings account, Roth IRA, and regular brokerage account. I then update the amounts in a spreadsheet I've called "Savings Plan." In reviewing my balances, I looked at the asset allocation of my Roth and brokerage account, and much like it has been for the past umpteen months, a considerable amount has been sitting useless as cash. I call it a "considerable amount" because the amounts I had in cash were close to the amount I've indicated to be "automatically invested,"  at least for the Roth....the regular account had zero cash.

To help you better understand what the heck I am talking about, I should share that I invest using the discount brokerage Sharebuilder (for both the Roth and regular brokerage account). I currently use an automatic investing plan for both accounts, whereby when certain dollar amount is available in cash, Sharebuilder will invest that certain amount in the securities that I have indicated. 

Side note: these securities include a small cap exchange traded fund (ETF), IJT, and a handful of my favorite companies: Johnson & Jonhson, Walmart, McDonalds, Pepsico, Honda, and Microsoft. Each time I purchase these securities, I pay $4 for each trade (i.e. $4 per company). 

Anyways, the "certain amount" I planned to automatically invest was $229 for the regular brokerage account (which holds one security, the index fund) and $1374 for the Roth (which holds the aforementioned six stocks; you'll notice that $1374 = 6 times $229). Why $229? Like I said before, there's a $4 fee for each trade; with that accounted for, I invest $225 in the respective securities. I wanted to be mindful of keeping my investment fees low, so my $4 fee for every $225 invested means I pay 1.7% in fees to invest. Make sense?

Well, last night I moved some money. I transferred $230 to the regular account from my emergency savings account (the savings account balance is now around $950). And I changed the automatic investment amount from $1374 to $1080 (I have $1084 in cash, about $290 short of the pre-set amount; this breaks down to $176 per stock plus $4 each to trade). I decided not to transfer any additional funds from the savings account to reach the $1374 because: 1) I am planning to use some of those funds in the next three months and 2) I don't want to be up a creek without a paddle in the event I need to access some cold hard cash. And yes, I realize that by changing the actual investment amount from $225 to $176 that I will pay about 2.3% in fees. Don't get your panties in a bunch, I'll reset it to $225 after this trade goes through. Besides, I am a bit consoled by the fact that some people pay much more in fees to trade..like those folks who are into active trading (for my account, that would be $9.95 a pop. Yikes!)

Overall, why did I make these changes? Because my accounts have been performing well and I haven't been using the cash in them. It's kind of like the lottery (which I don't play) you gotta play to win and frankly, my money isn't working for me as cash.

Would you have done the same thing? 

Or would you do things differently? If so, how and why?

Funky Credit Card Action

Last week Wednesday, I received a recorded voice message advising that I call Capital One because fraud had been detected on my account. When I checked the message, I was getting ready to take a nap, but nothing makes your mind wander -and interrupt your ability to rest peacefully- more than a financial woe. So I postponed nap time and called back. It's still not clear to me how and why my account was flagged, but as a precaution, I was asked to verify several recent purchases and to agree to a new account number and card. Fine. What wasn't so fine was that Thanksgiving was a day away, I was at the very end of a pay period and I was asked to make some unexpected purchases (bundt cake pan, anyone?)

Ordinarily, I would have made such purchases using my credit card, but that sucker was out of business. With just over nine bucks in my checking account, I transferred $50 from my savings account so I could go shopping. Luckily, the total of the items I purchased came under $50, so I transferred the remainder back to my savings account (after my direct deposit cleared, of course).

These events made me wonder....should I keep a buffer of $100 in my checking account (or some other amount; frankly, $100 is an arbitrary amount). In doing so, I wouldn't have to use my credit card to make purchases [and dip into funds set aside in subsequent pay periods/spending plans].

Do you have a cushion or buffer amount in your checking account? Or do you access funds from your savings account as needed? Have you ever experienced fraud on a credit card account?

Too Soon?

Lately, I've been obsessing over what my budget will look like once I pay off my car. Assuming that I remain on track, this new budget will take effect May 2011. Nevertheless, I've plotted out what to do with the $1055 I would NOT be spending on a car note. So far, I've come up with a combination of the following expenses:

• Increase the amount I pay on my student loan from $230 to $350 (the standard repayment amount; currently, I am on a graduated payment plan) .
• Increase my student loan payment to $400
• Increase my student loan payment to $500

• Set aside $810 in my ING Direct account. In addition to the $25 I set aside in my Bank of America savings account, a total of $835 towards savings accounts will yield  $6680 by the end of 2011, and $10,020 over the course of 12 months. One of the goals I've set for myself includes having $10,000 in emergency savings.

• Set aside $625/month (from May to December) to max out Roth.
• Set aside $200/month for Roth.

• Set aside$200/month to travel.
• Set aside $100/month to travel

• Set aside $258/month for miscellaneous expenses which may include Roth, fun stuff, additional savings, additional principal payments for student loans, and who knows what else.

I'm sure it would be helpful to see the variety of scenarios I've plotted out, but I assure you that that's an exercise in futility. You see, I've drafted more than 15 of the various budget scenarios, some in my handy-dandy composition notebook, others on index cards, backs of envelopes, and other random pieces of paper. The recurring themes, however, are that I set aside a hefty chunk for savings (especially since I haven't been doing so while eliminating this car note) and paying more than the $230 currently requested of me to pay my student loan. By the way, I my current payoff amount is $30,801.65. Yikes!

What would you do with the "new" budget?

Why Aren't People Planning?

Have you ever had a financial premonition and were scared poopless? What were the circumstances and how did you deal with it?

I had such a moment when I participated in Dave Ramsey’s Financial Peace University at a local church (the first of 13 sessions). There were about 20-30 people in attendance, quite a few couples and only a handful of folks under the age of 30. We were asked to share our names and why we decided to attend. Stories poured forth about middle-aged individuals coming to the sudden realization that they had to find a way to pay for their 17 year old’s college education, prepare for a dignified retirement or dig out of mounds of consumer debt. In those moments, I thought to myself that there is no way that I would want to be in a similar conundrum. What’s more, these folks could have been in better [financial] circumstances if they had done one thing: plan. I recognize that recent market activity has wrecked havoc on retirement accounts, savings and other investments (I hear my family discuss how such activity has impacted their plans). I am not naive to the reality that folks have been losing jobs, either. In fact, my godmother has been through a few temporary employment stints in the past two years and she still hasn’t procured a permanent position.

I contend, however, that the individuals who planned (and executed their plans) fared better than those who did not plan (and execute) at all. Sadly, my observation about the company I was in during this class was that most of them failed to plan, altogether. Further, I find myself frustrated with individuals who find themselves in the "sudden" predicament of having to make a big purchase....and they haven't prepared for it.....and they're still spending money on random things (oh yeah! we just decided to go to Atlantic City this weekend to gamble and go shopping). So this forces me to ponder, how much time do people think they need to prepare for major expenses and how much time do they actually need to prepare for such expenses? Major  expenses = buying a home, paying for college, preparing for retirement, eliminating debt, etc. From my perspective, there are many people who are slacking on the finances, however, I could be overreacting. ..like this dude:

What do you think?