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Archive for the ‘Spending’ Category

I finally got a hair cut this past weekend. It came out to be around $55 with tip, is very reasonable. My stylist, “Holly”, gave me some nice long layers and a saucy flip (though unfortunately only achievable through a professional blow-dry).

She was really chatty and friendly, and somehow the conversation turned to finances and the recession. I asked her about the business model of hair salons – apparently, some stylists work on commissions and receive clients through the salon, others are solely renters who pay the salon a weekly rent and recruit their own clients.

Holly said that she used to work as an assistant stylist in a very upscale salon in a very upscale part of town – where a week’s rent for a salon space is $800! Of course, the cut and treatments at that salon can range from $300 and upwards. On the good days, Holly said, her boss (the main stylist) would net $1,200. A DAY.

Of course, when the recession hit, bookings fell. They noticed that the clients are spacing out their appointments more and more. Instead of coming back for a trim or a new ‘do every 2 months, clients might be waiting until the 4th or 5th month mark. I also imagine that many people would bypass the more expensive treatments like hair color and perms and settle for a simple cut and blow-dry. All of this cut into their profits.

That’s why Holly decided to move to her current salon, which operates on a lower price point (think $50 per cut instead of $400+) and is located in a less swanky area. Her per-cut take is much lower, but the increased sales volume makes up for it.

Another real-life example of market pricing. Love it!

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My finances have fallen by the wayside.

The Good: *cricket chirps* I am not living above my means (just, er, very close to it). I also finally set up automatic payments to my student loan.

The Bad: Between all the costs for the apartment and the copious amounts of shopping and dining I’ve been doing, my emergency cash fund has been growing… rather slowly. For most of April and all of May I haven’t been able to save much at all.

The Ugly: Too ugly for words. Only numbers can tell the story.

Double rent for June: ~$1,700 (later I expect ~$300 back, but still!)
GMAT registration: $250
Hotel reservation for parents: $200+
Memorial weekend massage & shopping: $350
Dining out: I don’t want to look!

Conclusion: I’ve been a rather bad PF blogger, haven’t I?

The exciting news is that I will have access to a 401(k) come July. I am debating if I should aim to contribute the full $15,500 the 401(k) for 2009 – that’d be $2,583 a month, a very significant chunk of my paycheck. I probably won’t be able to save for anything else for the rest of the year.

However, given that I expect to return to school in the next few years, it behooves me to save as much as I can in an employer-sponsored retirement vehicle while I can. One year of maxed out 401(k) is $15,000+ in contributions… that can make a ton of difference later on in my life.

Maxing out the 401(k) in 6 months = a lot of money! But maybe this enforced savings is just what I’ll need to whip my finances back into shape.

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The world may be scared of swine H1N1 flu, but I’ve been struck down by a heady case of want-to-spend-money-itis.

Sounds serious? It is!

Here are my symptoms:

1. Eating out with increasing frequency (lunches, dinners, brunches).
2. Shopping on a weeknight. My haul included a silk blouse and a pair of Cole Haans. In my defense, they were on sale.
3. Paying double rent for a couple of weeks in June due to my upcoming apartment move.
4. Being overly influenced by Apartmenttherapy (planning to buy furniture from Craigslist or flea markets, but that still costs money!)
5. Booking a massage for CB and I for Memorial Day weekend ($$).
6. Planning a vacation to Vegas and the Grand Canyon ($$$).
7. Trying to hold back from purchases I want to make, all in the $100+ range.

My partner in crime enabler(!), Revanche, insists on showing me pictures of cute dresses that should NOT be in my budget right now.

Basically, I’m spending a lot of money. Despite the pf blogsophere’s general insistence to the contrary, spending that money does make me happy. Good food and a gorgeous new apartment and new dresses and vacations make me happy.

The problem is, my wallet just can’t sustain such prolonged periods of happiness!

I blame this illness on the summer.

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Are you a transumer? Don’t worry, this is the first time I’ve heard of the term. “Transumer” refers to a “consumer in transit”, and apparently, more and more people are joining the transformation.

MP Dunleavey wrote an interesting post on MSN Money (an aside – I would love to write for MSN Money. Just, um, throwing that out there if any MSN Money folks are reading! 😉 ) on the ownership model vs. the “transumerism” model.

ABC News also had an interview on the subject (it’s a 6 minute video – worth watching).

From MP’s article:

The transumer philosophy is largely based on a “leasing lifestyle,” according to an analysis by Trendwatching.com, a global trend-spotting company based in the Netherlands. Rather than spending your money on individual things, which you then have to keep (suddenly an old-fashioned idea), you purchase access to an array of objects and experiences. It can save time as well as cash: The more you own, the more you have to worry about, maintain and upgrade.

I’m of two minds on this trend. There are some things that I rent, but others – I want to own!

Car: I definitely love owning my car – it’s paid off, it’s mine. I don’t have to worry about going over the mileage limit, or getting out of my lease if I have to move, or fixing the small dent on the side of my door.

Housing: At the same time, I love renting right now. I am not ready to assume hundreds of thousands of dollars worth of debt at this point in my life, so I will happily rent until I am financially and emotionally ready for the responsibilities of home ownership.

Purses: As for a bag – while I admire the ingenuity of companies such as Bag, Borrow, or Steal, I have to say that I would get more enjoyment out of a bag that I OWN, as opposed to one that is only mine for a week or two. I’d rather save my money and splurge on one bag that I know I will love (and have for years), rather than have to give back my bag at the end of the weekend.

Books/Movies: I like borrowing books and movies. But the books and movies that I really love? I want to own.

Another thing I realized is that in the ABC interview, there is a lot of emphasis on “not giving up your lifestyle, but living on a budget.” Is it just me, or does this sound an awful a lot like the monthly mentality? Just because you can “afford” to make a payment of XYZ every month doesn’t mean that it’s a wise financial decision.

What do you think of this trend? Are you a transumer?

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For several months there, I’ve been able to save $2,000 per month (over 50% of my net income).

Those days are over for a while. I’ve made a conscious decision to spend more money on the things that are important to me (of course, a less charitable characterization would be that I’m inflating my lifestyle!). Namely, they are:

1. My own place. Living alone will definitely be a luxury – I pay $750 to share a 2 bedroom apartment, but a studio or a 1 bedroom will cost me $1,000+. But I’m really excited in the apartment search, and it’ll be so nice to finally experience living on my own.

2. Dance classes. For the longest time I’ve put off taking salsa and tango because I thought the money is better served going into my emergency fund. But dance is just about the only form of exercise I can enjoy doing for long periods of time (unlike, say, the treadmill, when every. single. minute. crawls at a snail’s pace.), so I view this as an investment in my health.

3. Fun + travel. I’m going to try to squeeze in more weekend trips. Despite having lived in California for years, I really haven’t seem much of the area at all. I’ve been to more COUNTRIES than I have to the different locales in the Golden State. This oversight must be remedied.

4. Applications. I am gearing up to retake my test and apply to graduate school. School visits, interviews, application fees, etc. etc. all add up. But that’s okay. I’m not going to worry about that expenditure too much. Money that must be spent, must be spent.

For now, I shall put out of my head the $100K tuition bill. I hope, if I get a good enough GMAT score, I can ‘score’ some scholarship money. Too bad there’s no Foundation for the Advancement of Bad Puns! Har har har.

At the end of the day, like Mom said, money’s meant to be spent on the things that matter.

Speaking of Mom, I’d like to give my parents a trip to Santa Barbara or Solvang (perhaps this summer for Dad’s birthday?). My uncle said that my mom has been telling all her relatives about my Vegas present to her. That makes me happy, because that’s how I know she really appreciated the gift (or more importantly, the sentiment).

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Last night, on a lark, I decided I want to go out of town for a getaway this weekend. I thought it’d be a good way to get some R&R and go on a little adventure.

I bought up the idea to CB, who did not share my enthusiasm. Part of the reason is that I currently have more discretionary income than he does, and part of the reason is that I tend to do things more spur-of-the-moment than he does (but I still google for coupons, no matter how spur-of-the-moment! 😉 ).

To be honest, I was disappointed. There goes the romantic weekend escape. I try to think about how I’d feel if the situation were reversed. Might I feel uncomfortable that my significant other offered to pay for the bulk of the vacation? Might I feel that the trip, on such a short notice, wasn’t well-thought out?

I might, and CB probably does.

The rule of personal finance is that you can’t have everything you want, every time you want it. The rule of relationships is that you can’t have everything you want, every time you want it. (Hey! They sound suspiciously alike…).

So, I’m trying to deal with this situation, well, in a constructive manner: acknowledge my disappointment, empathize with his situation, work out a suitable compromise that will be fun and budget-friendly, and then move on.

After talking about it, we decided to go for a day trip instead. The good thing is that this weekend just got MUCH cheaper. Still traipsing around the beach. Still kayaking. Still having fun in the sun. Just minus the two nights of hotel and the additional food expenses.

This little exchange just clarified what a messy topic money can be in relationships. And this is only one weekend that we’re navigating.

How do people do it with much bigger decisions – Should one parent stay home? What sort of protection will the primary caregiver receive in exchange for giving up his/her earning ability? What house to buy? Which set of in-laws will get more help? How should inheritance be treated? Should there be a prenup? What’s a fair way to set up a prenup? So many questions. So many minefields!

Share your experiences on money and relationships in the comments!

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I can see clearly now

Today I had an eye exam and picked out frames for my new glasses.  The exam, frames and materials came out to $140 (and that’s because I selected a pair of frames that was 100% covered by insurance).

I’m not complaining about the price, by any means (without insurance, it would’ve been an additional ~$300), but this just made me wonder how much my parents spent on my vision care through the years.

I’ve worn glasses since I was young, and for a while I got contacts. So assuming it’s $200 a year, for 12 years, comes out to $2,400. I wonder how much they spent on health and dental.

The more I learn about the expenses of “life”, the more I realize that being parents is a very expensive (but hopefully joyful) proposition!

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