Sign #103523 I’m getting old

Feeling sleepy before it’s 11 PM…

Time to hit the sack.

I made the bed this morning so now I have the pleasure of turning back the covers and scooting into my wonderful bed.

Why am I so tired….?

Oh right. Today I:
-Studied for 2 hours
-Read romantic novella in a foreign language
-MAXED out 2008 Roth IRA

Wow, no wonder I’m exhausted! Goodnight!

2008 Roth = SO done

Roth IRA

I remembered that I have around $300 stashed in some ING accounts… I’ve tried the separate sub-account for everything under the sun method, but it just was’t for me. Originally I decided to consolidate those funds into my Freedom Fund, but then I saw that I was this close to maxing out the Roth, and I just said screw it.

I put the $300 into the Roth IRA, added another $50 from my paycheck (in addition to the $750 automatically transfered to the Freedom Fund…things are getting reeeealy tight here), and maxed out the Roth.

2008 Roth, you are SO done.

This marks the THIRD year in a row that I’ve contributed the maximum to my IRA ($4,000 in ‘06, $4,000 in ‘07, $5,000 in ‘08). This is the only retirement savings I’ll be putting in for this year, as I won’t have access to a 401(k) through work until next year ($5,000 is a little less than 10% of my gross), and I’ve decided to priortize cash savings over taxable stock investing.

<10% isn’t super, especially by pf blogger standards. But I calculated that from 2007 to 2008, I saved around 28% of my gross income toward retirement. I’ve also put away (more aggressively this year than last) for the Freedom Fund.

Overall, I think I’m on the right track.

Freedom Fund

So now, Freedom Fund = $13,000.

Which is enough for… almost 8 months of no-income living. By the end of August, I’ll have 9 months. I think when I get to a year’s worth ($20,000), I’ll celebrate.

It’s not as if I’m in danger of being out on the streets (Mom & Dad = ultimate safety net), but it just makes me feel better that I have money in the bank. It makes me feel like I have a PLAN of action. So that if anything happens with the job, I can take a deep breath, peek at my fairly ample fund, and re-group. I wouldn’t panic.

I’d also plan on getting a retail job at night to supplement my fund, but given this shaky economy, it’s probably best to not even count on retail jobs (although I have seen numerous help-wanted signs around my neighborhood…). Also, I assume I’d be drawing on unemployment benefits.

But ideally, the Freedom Fund money is earmarked for the very expensive grad school test-taking / school-visiting / application process, and any left over will function as a mini-cash cushion. (Because by the time I get into a school… the Freedom Fund will be shrunken down to size).

Watching TV instead of studying

Is bad. Very BAD. B-A-D.

Vow:

I WILL:

-Wake up tomorrow, at 5:30 AM, and study

-Really, really study

I will NOT:

-Hit the snooze button until it’s time to get out of bed at 7:45 AM

-Say to myself “just 10 more minutes…”

-Succumb to the urge to watch youtube

Who’s with me?!

The three amigos: Stocks, Bonds, and Cash

I’ve had a couple people ask me about the difference between these various asset classes. Now, I am NOT a financial advisor, but I’m putting the definitions in plain language because I remember that before I started investing, just getting the terminology was a pain. It’s difficult to feel confident about what I’m doing when I didn’t even speak the “language” (kinda like studying for the sentence correction section. I mean, appositive noun modifiers? Huh?!)

Stocks, bonds, and cash are the three broad asset classes, or groups of asset. When people talk about asset allocation, they are talking about how to split your portfolio (pool of money) into these three groups.

Stocks (also known as equity): Stocks = ownership in a company. I am buying a share (partial ownership) of a company’s future earnings. So if I buy a stock in Google, I am in essence buying a tiny part of Google. As a shareholder, I have the right to part of its earnings.

Bonds (also known as fixed): Bonds = loans to a government entity or a company. When I buy bonds, I am lending money to a company, and the company will pay me back the principal with interest.

Cash (also know as… cash): Cash = cash or cash equivalents (i.e. financial instruments that can be easily converted to cash, such as Treasuries, or loans to the Federal Government).

Why are stocks considered riskier than bonds?

If a company goes bankrupt, it must pay its lenders (the bond-holders) before its owners (the stock or shareholders). So in a grossly simplified example, if a company goes bankrupt and sells its plant for $100, every single lender have dibs on that $100 before the shareholders would see a penny of it. Basically, bond-holders come before equity-holders if the company goes kaput.

On the other hand, as a shareholder, I would have much more “upside” if a company does well. A bond-holder at Google will receive his/her repayment with interest, but a shareholder can benefit from the share appreciation (share of Google goes from $400 to $700 - viola! you now are $300 richer because your share of Google is worth more) and capital gain (if you buy at $400 and sell at $700).

Bonds are less volatile (the value of your return is more stable), and stocks are more volatile (value of your return is uncertain).

In the long run, stocks are considered to be a better bet because you have the opportunity for the “upside”, and you have the time to “ride out” the volatility of the price. In the short run, stocks are a dicey bet, because it’s very difficult (some say impossible) to predict how the direction and the magnitude of price moves.

Roommate = great!

Several weeks ago, Jonathan at MyMoneyBlog highlighted the benefits of shared living - and I whole-heartedly agree.

I share a 2 bedroom / 2 bathroom apartment with a girl I know from college, and I’m very fortunate that she is not only a great friend but also a great roommate.

The financial savings are unmistakable - I am spending AT LEAST $200 less a month on rent because I share. Utilities and DSL are also cut in half. All in all, having a roommate means I am $300+ ahead per month (probably closer to $400+). That $300, in turn, is enough to pay my car insurance and student loans.

I know many people want to live alone - quality of life issues have to be balanced against personal finances. And I’ve heard the roommate horror stories… when I really think about my current living situation, I realize how lucky I am. My quality of life is improved having my friend as my roommate. What a perk that my financial life is as well.

New reality

Filled up the tank today for $4.47 / gallon. Was very, very pleased.

How are gas prices in your neck of the woods?

Life, in sentence fragments

Took a practice test. Did a lot better on the math than the verbal (surprise!).

Just got staffed on a big project at work.

Headache all day from too much caffeine from the night before.

Retirement portfolio continue its downward spiral.

Tried not to look.

Looked.

~$12,200 in Freedom Fund, over 50% of goal for 2008 (see sidebar).

Enough for 7+ months of unemployment.

VERY excited about the upcoming weekend.

So that’s my life in sentence fragments. What’s yours?

So my rent went up + new spending plan

The 3%+ increase wasn’t unexpected, but it’s never good to see fixed expenses going up (especially during a time when energy and grocery prices are increasing so rapidly).

I’ve also put together a new budget spending plan, just in time for July! I’ve been a little too liberal with spending lately, and its time to be more conscious of what I’m spending my hard-earned $$$ on.

Spending Plan v 2.0
Rent / Utilities / DSL = $820
Eating Out / Groceries / Starbucks = $210
Medical co-pays = $40
Gas / Parking = $160
Car Insurance = $120
Car Repair = $80
Entertainment = $125
Personal Care = $50
Clothes & Accessories = $50
Laundry / Dry-Clean = $15
Student Loan = $160
Miscellaneous = $50
Gifts = $25
Travel = $120
Total = $2,000

I’ve decided can wait until next year are a new computer (eliminated computer budget), and since I’ve paid for all the test prep I’m going to take this year, the education budget has been eliminated as well. Next year, though, I want to take some classes at a local college, so I’ll have to set aside money for that purpose.

This spending plan is not set in stone… if CB gets a job out of state or out of city, I’ll have to plan on getting a new computer with web-cam and split my share of air plane tickets. But I think I have enough flexibility built in to my spending that an extra $200 a month won’t seriously derail my savings.

American Girl

Does anyone remember American Girl? I first received the catalogue from Pleasant Company back in the mid-1990s (before Mattel acquired it), and fell in love with Samantha.

Now there are so many characters I couldn’t keep track of them, but the ones that were in my catalogue were Felicity, Kirsten, Addy, Samantha, and Molly. I guess that’s why no matter how many more dolls are added to the collection, those five will always be my idea of the American Girls.

But the dolls cost $80, and clothes, furniture, and accessories cost more than what I spend on myself (true to this day!). I knew there was no way that Mom would ever spend $100 on a doll, so I never bothered to ask (yes, even as a kid I was realistic), but I loved that catalogue. I think I’ve gotten more joy out of flipping the pages, and looking at the pictures, and making up stories in my head that I could’ve with an actual doll (or at least that’s what I kept telling myself…).

I actually considered ordering a catalogue now, just for a walk down memory lane. But I refrained. I mean, it’s not like I want to PLAY WITH DOLLS at my age. You know, now that I’m an adult and all.

(On second thought, I’m just tryin’ to keep the child in me alive.)

Gas. Hurts.

For the month of May I spent over $200 on gas. This month, on top of the gas expenditures, I have to take my car in the shop for an oil change and minor repairs (~$120?).

Like most Californians, I’ve adjusted (slowly and reluctantly) to the painful reality of increasing gas prices. I am mentally preparing myself for $5/gallon by the end of the summer.

What can I cut? Well, the first answer is… gas. But, I can’t take public transportation to work, and on the weekends, I just want to go where I want to go! I figure I usually drive around 150 miles a week, which for my area really isn’t that much at all.

I’m guessing the first things to go would be things I’ve considered: no more trips to Ross, fewer dinners out, fewer groceries. Fortunately, Mom keeps me very well-fed by giving me loads of frozen and prepared food every time I go home. Yes, I am blessed. No, I don’t feel like a mooch. Is that bad?

Anyhow, I am hoping that 1. my rent won’t go up, and 2. my car stays “healthy”, and 3. I have more self-control over spending!