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Archive for January, 2008

Something amazing happened

I went through the ENTIRE WEEK of January 14th to January 20th without spending ONE penny on dining out.

What’s more, I’m actually pretty happy with the lack of restaurant-fare.

For some, it might not sound much of an accomplishment, but then there’s me.

In the past, it would’ve been so easy to just get Chinese takeout on a Friday night and head to Chili’s for a Saturday meal. Sunday lunches might be spent at Chipotle or In-n-Out. It’s not as if I deprived myself much this week – my grocery bags were full of Haagen Dazs ice cream (3 tubs) and yummy frozen foods from Trader Joe’s.

But still. I made it one week without eating out. I’m going to try to go another week without eating out… we’ll see how that goes.

Update: It is now Thursday, Jan 24, and I still have yet to spend one penny on outside food. But enough is enough! I’m getting some juicy In-N-Out burgers and delicious milkshake this weekend.

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Buying, eventually

Even though I fully intend on owning a home -free & clear- by the time I retire, it’s becoming increasingly clear that home ownership in the next 3-5 years isn’t necessarily compatible with my future goals/plans. Unless the housing market drops 20% and I can suddenly buy condos for under $250,000, that is.

I ran an analysis on New York Time’s Rent or Buy calculator:

Assumptions:

–> Monthly Rent: $1,100 (that’s actually almost $350+ more than what I’m paying now. But I can get a one bedroom apartment for $1,100 in the area where I want to buy, whereas right now I have a roommate).
–> Home Price: $300,000 (If I buy, I’ll probably buy a one-bedroom apartment. If I buy a 2-bed/2-bath, the price will probably be around $450,000+ in a good area).
–> Down Payment: 15%, or $45,000
–> Mortgage Rate: 6.25%
–> Annual Property Tax: 2.25% to account for HOA fees.
–> Annual home appreciation: 5%. That seems like a reasonable assumption.. no?
–> Annual rent increase: 7% (a little on the high side).

Under these assumptions, buying is better than rent after 10 years. Is that.. good? I was looking for more of the 7-8 year range. If I buy a 2 bedroom ($450,000) and still put down 15%, buying will be better than renting after 20 years. That’s practically a kid.

The reasons why it wouldn’t make sense for me to buy would be: I want to travel. I might go back to graduate school. I want to preserve liquidity at this point in my life. Even though I love my area and it’s close to my parents, I don’t know if I want the commitment of home ownership right now. I don’t want to become house poor.

From an opportunity cost perspective, home ownership probably would not be the right move for me, given the assumptions listed above. There’s really no rush, right? I’m only 23. Even if I wait 10 years to buy, I’ll still ONLY be 33… which, at that point, 30s will be the new 20s.

I am still concentrating on building a cash (is king) reserve for short-to-medium term goals in my money market fund. Buying in 2 years (when the real estate market is supposed to “bottom out”) may be a good investment if prices heat up again, but I’m of the view that a primary home is not an “investment” – certainly not in the way that a well-diversified portfolio or rental property is.

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History in the making

So this is a very volatile time in the markets right now – my investment portfolio tells me that. In just a short several years, I’ve seen the tech boom (and bust), the run-up of hedge funds then private equity, the age of mega leveraged buyouts, the real estate explosion, and now… the fallout.

At first I was under the impression that these cycles of boom-then-bust are something confined to the 1990s… yeah, how generation-centric of me, right? 😉 Then I read A Random Walk Down Wall Street. There it is: booms & busts are NOTHING new. Sure, the vehicles may change, but the fundamentals don’t.

Hegel said: “We learn from history that men learn nothing from history.”

Buffett said: ““Be fearful when others are greedy and greedy when others are fearful.”

If you are (a) supremely confident of your ability to pick the next Google or that you have a broker who does OR (b) if you are taking all your money out because you’re certain that the market will crash & burn – just think about those two sayings.

As for me? I have some bonds and a whole lot of stocks, and I’m sitting pretty on my (small but growing) pile. I’m in it for the long haul, baby.

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I don’t automate savings

Honestly, I’m doing just fine.

This is more of a way to manage my cash flow than anything else. I have my entire paycheck deposited into my savings account, then withdraw to my checking as need be for rent, credit card bill payment, car insurance, student loan, etc.

Instead of automatically directing a certain amount or percentage of pay to my retirement accounts, I take the, er, more scenic route. Basically, I look at my savings & checking accounts, I mentally review my upcoming expenses, then I transfer the money. I’m not sure if it’s the most efficient way of doing things, but it works for me. There’s the tiny thrill of satisfication I feel when putting money in, for the lack of a better word – manually – that doesn’t come with automatically scheduled transfers.

I don’t think that my savings rate is negatively impacted by not automating. For January, I made payments to my retirement portfolio ($500 in 2008 Roth IRA) & money market fund ($200). I am looking to make another $600 to the MMF before the month is over. So if all goes well, the total savings for January will be $1,300.

Perhaps in a couple of months, when I have more of a handle on my monthly expenses, I’ll set up automatic transfers.

Clothing Hiatus Update: Still on it! By the way, I haven’t eaten out at all so far this week. So what if my meals consist of a couple of breakfast bars and instant mashed potatoes?

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Day by day

I laid out all my outfits for the upcoming week and labeled each pile with a post-it note indicating the day of the week the clothes are intended for. I’m not OCD, I swear. I only did this because I thought it’d help me get dressed more quickly in the mornings.

This exercise has also helped me see that I really don’t need any more clothes. Sure, there are additions that I’d like to have, but on the whole I have enough tops & bottoms to put together 2 weeks worth of business casual outfits with basically no repeats.

So – six months without shopping for clothes? I think I’m really going to try and do it. Not even for the save-money aspect, but because I’d really like to learn to be content with less stuff, declutter & simplify, and appreciate what I have instead of aimless wishing for something else. After the six months is up, I hope to have a nice little cash cushion and a more thoughtful approach to my purchases.

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I got a $75 parking ticket. I had to get catastropic insurance for the period between when I left my former job and when my new health insurance would kick in ($200+). My prescription will be $60 instead of $25 this month because the catastropic insurance doesn’t cover prescriptions.

These were expenses that were unforseen (the ticket!) and not a part of my regular budget (insurance & prescription).

It’s easy to feel frustrated at these anomalies that will crimp my spending plan – and the problem is that when I feel since the budget’s already been broken, it doesn’t really matter if I’m over by $50 or by $100 this month. I’ll wait until next month to get back on the wagon.

Knowing that about myself, though, helps me to take a breath and let go & let live – some (or not so small) things will always pop up – that’s called life happens. I don’t have to deprive myself of artisanal pizzas from Trader Joe’s or forgo my massage to “make back” that $75. On the flip side, I don’t have to let my frustrations get the best of me and throw the rest of my budget off track.

It’s a bump in the road. It’s not the first and it won’t be the last. The only thing to do is to keep going… and remember to park on the correct side of the street.

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$75 parking ticket = bad day

Yeah. It sucks.

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