You Might As Well Burn $5!

191st Carnival of Personal Finance

2009-02-09T09:54:00.000-08:00

I participated in the 191st Carnival of Personal Finance today, check it out at Dollar Frugal!

Fair Isaac is Changing the Rules, AGAIN!

2009-02-03T19:37:00.000-08:00

Just as soon as I understood how the magical elves calculate credit scores, they had to go change it up on me!

There's some good news and some bad news. No more adding a name to a credit card to boost the score of the person with crappier credit is the bad news. (Yes, this can be a good thing when done properly.) The good news is that one BIG BAD item, such as a repo or a default won't hurt you as much as long as everything else is in order.

Seriously, read more at Consumerism Commentary.

Why You Should at Least Learn to Bake:

2009-02-02T05:00:00.000-08:00

My quest for an amazing blueberry muffin recipe has been a thorn in my side for a year or two now. I try (emphasis on try) to bake something for my breakfasts every week. I don't really like cereal in the morning. I do like oatmeal and other hot cereals, but I prefer for my breakfast to be a grab and go affair. Buying pre-made breakfasts (bagels and the like) is a good plan, and when the price is right, totally affordable. But every time I buy bagels or muffins or another pre made breakfast food, I stare at the big jars of flour and sugar on my counter and sigh.

This week, I finally found an amazing blueberry muffin recipe. These are coffee shop caliber muffins. The only changes I made were to reduce the amount of sugar and flour in the topping (to 1/4 cup sugar and 1/3 cup flour) and to make 12 muffins instead of 8. If you follow this recipe, be sure to cube up the butter for the topping fairly small.

If you live in California and you step into your local Albertson's this week to purchase ingredients for blueberry muffins, here's how much this recipe would run you, per muffin. Except for the Barbie muffin wrappers part. I found those on manager's special at Food 4 Less. You could also jam aluminium foil or wax paper into the muffin pan cups. Or just forgo the wrappers completely.

40 cents a muffin! And that's assuming you haven't shopped around a little for the best ingredient prices. I did, and the batch I made last night probably came in at closer to 25 cents per muffin, meaning that a muffin and a cup of Starbucks coffee made at home runs me about 28 cents total. (We've got a friend who works at Starbucks, he sells/gives us his weekly pound of coffee.)

If I had homemade coffee and a muffin everyday for a year, I'd be paying $102.20 a year to do so. By contrast, spending $3.25 on drip coffee and a muffin at a coffee shop once a week would cost about $169 a year. Homemade coffee and muffin just once a week for a year? $14.56, for me. Which, if you're still with me, saves $154.44 a year on muffins and coffee.

And the kicker? Once again: homemade coffee and a muffin, every day, for one year, would cost me $102.20. Buying it at a shop, everyday, for a year? $1186.25. That's assuming you're buying a cup of brewed coffee, as opposed to a latte which would bring your yearly coffee and muffins total to about $1825.

And no, I didn't forget a decimal point.

I'm All for Stimulating Our Economy...

2009-01-27T05:00:00.000-08:00

But I'm a little tired of hearing about it. I realize there are people losing their homes in foreclosure. I realize there are people whose retirement accounts are now undervalued. I realize that millions are out of a job right now.

I ALSO know that in America, when you're unemployed - the government gives you a hand. I think that rocks. I'm willing and proud to help pay for unemployment. We live in a country where - when the markets tank and people are losing money and businesses are hurting - the government tries to find a trillion dollars to fix the leak. Everywhere I go I hear about the economy. I even hear about about the economy from people who don't have a savings account, much less a retirement account or a mortgage.

There are a couple million people living in poverty in this country who probably don't feel the pinch at all. They were already pinched.

What in the hell is wrong with us? Why are we still whining? Why are we so worried about whether we can gas up our cars, and why on EARTH do people think not having cable TV is a sacrifice?

My husband and I are well off. Extremely well off, actually. Insanely, insanely well off. We've got multiple computers in the house (well, duplex), two cars, multiple televisions (we need to dump one, incidentally), annual passes to Disneyland, cell phones, an iPod each, and secondary educations - albeit incomplete ones.

We eat dinner every single night, we have lunch every day, and breakfast when we wake up on time. Our cat eats twice a day. We have running water, electricity, gas, and high speed internet. (No cable TV though, that's why we have the high speed internet - oh the sacrifices we've made.)

I have 30+ pairs of shoes, and that's after selling off nearly all of my designer shoes a couple years back, so I could pay rent. See, I thought I was making a huge sacrifice, selling my way, way overpriced shoes to make rent.

My overpriced shoes could have fed a family for a year in Sierra Leone. I don't have numbers on that, but I'm not a bloody statistician. Google it, I'm sure you'll find that half a pair of my designer shoes could have fed somebody, somewhere.

Back when I had cable, sometimes I watched 'My Super Sweet 16.' For those of you who don't know - ugh. Just click the link. It's a train wreck. These girls scream about not getting a $500,000 car. I couldn't look away. I got the hugest kick out of swigging by beer, confident, nay smug, in my superiority to a bratty little child whining about her multi million dollar birthday party.

Here's the thing about that; I'm not much better than those petulant brats when you put it in a global perspective. I don't need to quote statistics. Almost anyone who's lived in the world for four or more years knows darn well that that are people in this world who live for a month on what we spend on a latte and a bagel in the morning. My household pulls in more than 50K a year before taxes and by God, we are filthy rich. Not only are we filthy rich compared to most of the world, we're filthy rich compared to millions here in the U.S.

I'm not saying that those of us who are lucky to live in the ultimate First World nation should scrap our big screens or our cars our even our luxury goods.

I'm just saying we should quit whining.

http://www.worldvision.org

Oh No, They Be Holdin' My Refund Hostage

2009-01-26T09:00:00.000-08:00

You've probably already heard the fuss about getting IOUs instead of refund checks here in California. That said, according to this, if you file early enough, you should get your refund as usual. Last year the FTB (Franchise Tax Board) processed my refund in a matter of days. As usual, I'm neither expert nor professional, but this is probably the last day to file with even a slight hope of getting your return processed before the February 1st deadline and the 30 day hold.

As I've emphasized before, most of my readers will qualify for free file - for your federal taxes as well as your state taxes. If you're in California, I suggest you grab your W-2 and try to make the deadline.

Economic Stimulus Now, Redux

2009-01-26T05:00:00.000-08:00

A fact you may not be aware of is that if you get legally married late in the year...say, the day after Christmas - you're required to file your taxes as though you were married for the entire year. Even if you get married at 11:59 pm on Dec 31st, the IRS considers you to have been married for the entire year.

2008 is a particularly useful year for this. Remember the Economic Stimulus rebate? Single folks got somewhere between $300-600? Married folks got $1200? The amount of your economic stimulus rebate was based on your 2007 taxes, because you hadn't filed your 2008 taxes yet because the year wasn't over. You 2008 self was getting money based on what your 2007 tax return indicated about your 2008 return which would be filed by your 2009 self. Sort of. Anyway, that's part's boring. (Though there may be DeLorean joke in there somewhere.)

Point is, if you received a $373 rebate check as a single person in 2008, and then got married later in the year to a spouse who got a $600 check, the government owes you $227 - because the IRS considers you to have been married during the handout. $1200-($373+$600) = $227, for those of you who hate 'rithmetic.

If someone claimed you as a dependent on their 2007 taxes, exempting you from the rebates at the time, but no one can claim you in 2008 - the government owes you a stimulus check.

If you had a baby in 2008, you also qualify for more money.

Basically if your life changed at all in 2008, you might qualify for more money.

Where do you claim the credit, you may ask? Good thing I read the IRS website, so you don't have to:

Form 1040 - Line 70
Form 1040A - Line 42
Form 1040EZ (the one most of you will likely use) - Line 9

All of the tax forms will come with an instruction worksheet on how to calculate your stimulus credit. So if you're doing your taxes on paper using pen and ink by the light of a gas lamp, knock yourself out calculating that. Or enter "RRC" on the appropriate line and the IRS will calculate the stimulus credit for you.

If you're filing online, most online tax preparation programs will calculate this for you.

Most folks reading this blog, except maybe my mom (hi mom), qualify to free file. So please, PLEASE, don't hand a tax prep firm your hard earned money to file your probably very uncomplicated taxes for you. Don't give them money to give you a refund anticipation loan at a ridiculously high interest rate when the government will direct deposit your refund in a week or two if you file early. Seriously, you may as well - well, you know.

Everything I Can Spout About Credit Scores

2009-01-23T00:14:00.000-08:00

Ever since I started writing this blog and generally pulling ahead financially, my friends have been asking me about finances, especially credit. Specifically they want to know how on earth a credit score is calculated. I found the answer about 2 years ago in a book somewhere, and I've been spouting a vague recollection of it ever since (luckily, it turns out my vague recollection was closer to "spot-on" than "oh crap, I totally remembered that wrong.")

After a quick Google to double check my memory, I present to you the basic components of a credit score, and my completely unprofessional (meaning: don't sue me if you try this and it fails) advice for beefing up the magic number.

35 percent - PAYMENT HISTORY. Obviously any lender is going to want to know how reliably you pay your debts. Some of us got shady car loans at 18 and never did reign ourselves in so that we could pay them on time and now we have an ugly, ugly blemish on our credit reports because we were really, really dumb back then. You know, just some of us. THE FIX: For goodness' sake PAY YOUR FRAKKING BILLS ON TIME. Your payment history is the single largest piece of your credit score. Call your bill collectors (your cell phone company might be a place to start) and ask them to start reporting your payments to the credit bureaus. If you have no revolving credit accounts to pay off on time, get a tiny secured credit card (Many secured cards are total scams, so do some research. I recommend the Bank of America Platinum Visa. $29 a year, and you can secure it with as little as $300. I paid it off every month and received my security deposit back after 9 months. I now have an unsecured card that's been paid in full, on time for nearly a year. ) Credit card debt is something I've somehow (magically?) never racked up. But if you have credit card debt, start making bigger, on time payments. For advice on finding the money to do that see: the rest of this blog.
30 percent - OUTSTANDING DEBT. Some of us are a little screwed in this department - we had crappy car loans or we bounced a teeny tiny check when we were 18 and it's gone to collections and it's grown so big that we are NOT ponying up $120 for a freaking Vanessa Carlton CD. (Shut up.) Some of us fell flat on our backs in bars when we were 21 and sprained our necks - an injury we didn't even know was possible until we did it - prompting a hospital visit we still haven't paid for (though we were theoretically insured at the time, it would be awfully difficult to prove now.) Not that I did any of those things, but - you know, maybe some of you guys did. This outstanding non-interest earning debt obviously affects your overall score. More important than that old debt that is your DEBT to CREDIT RATIO - if you've got revolving accounts (credit and charge cards) just how much of that available credit are you using? THE FIXX (two Xs, like the band - hee!): First, for some freakish reason that I still don't quite understand - paying off all of your aging non-interest earning (ie, not credit card) accounts might actually dock your score in the short term. If those random debts are old enough, they'll drop off after seven years. If you're not looking to finance anything anytime soon - letting them disappear is better. As far as your debt to credit ratio, it looks good to only use a small portion of the credit available to you. If you've got a $10,000 credit limit, try to use just $2500 or less at a time. Using only 25% or less of your available credit looks good to lenders - and then they'll want to give you money if you ever want a house or something. A good way to keep your credit usage low is to use your card ONLY for paying a few bills - then pay the credit card bill every month.
15 percent - LENGTH of CREDIT HISTORY. This one is particularly unfair to younger people. If you're a totally responsible 20 year old (and they do exist), your relatively short credit history is going to hurt you - past behavior being indicative of future behavior, they don't think your two years of paying off the credit card your mom co-signed for you counts (though it should). THE FIXX (dun nuh nuh nuh saved by zero...I'm so sorry) If you have no credit history at all, get a really, really low limit card. Use it very little, pay it off every month. It takes about 3 years for your good credit behavior to "count" - that is, 3 years before the credit bureaus see your timely payments as a habit rather than a fluke and raise your score significantly.
10 percent - NEW CREDIT (INQUIRIES). Getting a new credit card, loan or other credit account will negatively affect your score for a short time. But not for very long. Even letting a lender LOOK at your credit score docks you points, the theory being that too many inquiries means you're desperate and broke and looking for a handout you'll never pay back. If you've given someone permission to look at your credit report, it's considered a hard inquiry, and it docks your score by 5-10 points. A bunch of hard inquiries within a short period of time are counted as one (to account for consumers shopping around for the best rate.) If you pull your credit yourself, it is considered a soft inquiry and does not dock your score. THE FIX: The good news is that hard inquiries drop off your report after two years, so if you've got a bunch of inquiries dragging your score down, they'll be gone fairly soon. Beyond that, just be selective about who pulls your credit and pull it rarely.
10 percent VARIETY OF ACCOUNTS. This is the mixture of credit accounts you have. Installment loans (cars, student loans) and revolving accounts (credit & charge cards). THE FIX: Lenders like to see a healthy variety of accounts, but not TOO many accounts. Generally you want 2-5 revolving accounts and 1-3 installment accounts. ( But don't quote me on that, I just remember reading it somewhere, no lawsuits if I remembered incorrectly!)

And there you have it - prety much everything I know about credit scores as it applies to younger folk.

Oh!

Catchy commercials notwithstanding, don't use freecreditreport.com unless you will definitely remember to cancel your "membership" after the trial period. You are entitled to one free report per year from each of the three major credit bureaus. Get it at annualcreditreport.com.

No Carpet Jokes, Please

2009-01-13T20:38:00.000-08:00

Why anyone buys anything new is beyond me. We got our Kenmore microwave for $7.50. We got a wicked sweet coffee table for $15. There are folks who might spend upwards of $500 or more on just those two items alone.

But we also bought a rug at a fancy furniture place for $80. It was the display model, so we had it cleaned for $49. We've got hardwood floors, so a rug was necessary. We nabbed ourselves a $400 rug for a total of $129. Which is a hell of a lot for a rug, but not a whole hell of a lot for a rug that makes your feet feel oh, so happy.

Here's the thing, I can see laying out $129 for a really nice rug, maybe even $150. A good 5x8 rug. But who on EARTH would throw down $400 for the same thing I got for $129? I "saved" $271 on our rug. I use quotation marks because I didn't save it. I don't have $271 in savings.

But we do have a rug that makes our toes happy.

Another way we might have gotten a super nice rug - and I should have thought of this, but the rug matched the micro-suede couches my now in-laws bought us for Christmas and I couldn't resist - another way we could have nabbed a nice rug would have been to call up a few dry cleaners and ask them if they had any abandoned rugs lying around. Sometimes people drop them off for cleaning and never pick them up, or they can't pay for them, hence, abandoned rugs. Most dry cleaners will donate abandoned items to Goodwill or to other charities - but if you call and ask you could score a sweet rug for free.

Or for the cost of the original owners' dry cleaning, anyway.

I Have Time for this Now, Right?

2009-01-11T14:39:00.000-08:00

Since my last post, I took 19 units worth of classes, nabbed a job as an accounting assistant, and I got legally married. And I moved.

Observations on Each:

(1) 19 units. Do NOT try this while holding down a job of any kind. Well, maybe a 4 hours a week at Starbucks type job - but certainly not a job that requires 35+ hours that you need to make rent. Also don't try to take 19 units and work while attempting to have any sort of meaningful relationship with anyone ever.

(2) New Job! I'm the right arm of the CFO at my company. I work during the day. I have weekends off. I miss the casual atmosphere at In N Out Burger, but I don't miss the cheese burns or the closing shifts.

(3) Legally married. Between my new job and the fact that Fiance - I mean, Husband - is on salary now, we feel rich. Of course, we got legally married so that we could live together in order to save money to fund the big wedding in June. (We are both just old fashioned enough that the idea of shacking up landed pretty firmly on that side of Not Cool.) So we're legally married, and saving for our wedding. Maybe not at all romantic, but completely practical as far as we're concerned.

They say that it's not what you make, it's what you spend. With our combined income and somewhat lowered expenses we are coming out far, far ahead of what I'm used to - which, if you'll recall is paycheck-to-paycheck at a burger joint. We're by no means rich, but we make just enough to feel like we can blow our cash. We try not to, and we're pretty good about not blowing huge wads of money on useless crap...except when it comes to comic books - which I have taken to rationalizing as a quality of life expense. Being frugal enough in other areas (ie, not having cable TV) to be able to afford a comic book or two every paycheck with our allowance? WORTH IT. We're 24 and 26 years old, if anyone's wondering.

I've also always theorized that this frugality stuff works much better with two people - I'm quickly learning that it does. More on that as the weeks go by, but for now thanks for reading this after such a long silence!

Hiatus for School

2008-08-28T15:13:00.000-07:00

Hello everyone!

BurnFive will be on hiatus until December so that I can take a 19 unit courseload, work nearly full time, and plan my wedding without losing my mind.

Thank you for reading and for all of your support.

I'll be back in December with all sort of tips and articles on how to have a lovely holiday season without burning through your cash. See you then!

My Coffee Conflict.

2008-08-27T11:23:00.000-07:00

A commenter pointed out to me that my blog often turns to my love affair with coffee. Specifically, how much money I sometimes find myself dumping into overpriced coffee. My struggles with laying down money for my drug of choice are indeed symbolic of deeper a conflict between myself & my money; a conflict I'm certain anyone feels, not matter how old.

Once a person has gotten themselves to the point where they're solvent - even saving a bit every month - there seems to be a disconnect. The first wave of personal finance often sends folks into a frenzy of cutting corners, doing without, and spending less. After the habit of saving a certain amount becomes second nature, we might find ourselves saying "Man, I already saved 10% of my take home pay this month! Screw it! I'm blowing $100 on x!" or more likely we find ourselves allowing $3 or $5 here and there to start adding up again.

My rent & bills are just a little bit more than half of my take home pay per month, unless I work a lot of overtime. When I'm in school, overtime becomes a no-no, so I'm on a really tight budget to say the least. Even accounting for gas, savings, and little tiny extras here & there - I still have about $100 every month that goes out into the ether of impulse buying - which often means frou-frou coffee or fro-yo or another form of Snacking Out. Truth be told I really enjoy grabbing coffee or whatever with a friend, but when I look at my spending at the the end of the month, I wonder if I wouldn't have been just as satisfied having someone over for tea.

I've run the numbers for myself (and for you all) hundreds of times, and the answer is always the same! Cut out my impulse buying! At the same time, I don't want to cut my perceived quality of life. I think the conflict of saving for the future versus impulse-buy satisfaction is a problem for everyone. From someone like like me who feels stressed out spending $10 on something I didn't necessarily need to the person who spends $600 on a gadget and panics afterward, it is fairly universal.

How do I deal with such a nasty internal war over my spending? Sometimes, I just have to get over it. I'm into living within my means, but super extreme frugality is a goal I don't aspire to in the least. Extreme frugality for me would mean that I'd pretty much never leave the house. That said, there are a ton of ways I can cut back in little ways that make my lattes and cups of fro-yo an okay expenditure for me. Problems begin to arise when I'm NOT making the effort to cut the little corners, when I'm simply shopping stupid or not tracking my finances.

I tend to think of everything purchase I make in terms of my hourly pay, so I still find myself pausing before I spend $3+ on coffee. At the end of the day, my weekly to bi-weekly overpriced coffee outing isn't what could take down my semi-solid financial state - it's when those impulse buys become a daily unconscious habit and nothing is done to counteract them.

Aaaand, we're back!

2008-08-22T13:22:00.000-07:00

Too often, I feel as though I'm caught in between my time & my money. If I wake up at 8 and I have to be in class by 8:30, I'll skip making my own coffee - coffee that costs me less than a quarter a cup - and get Starbucks. Granted, I'll still opt for iced coffee over a latte, but I'm still paying way, way too much. Ideally I'd learn to just not depend on caffeine so much, but if there's anything being in class from 8am to 12 pm four days a week AND working full time AND trying to maintain a healthy social life has taught me, it's drink my coffee and don't skip breakfast.

When my schedule gets too crowded, I don't eat as well and I don't eat as much. This semester, I'm going to attempt to put myself on a meal plan of sorts, as much for my own health as for my wallet. If I've already got a batch of peanut-butter-and-raisin-slathered celery sticks made up and packaged in the fridge for nickels on the dollar, I'll be less tempted to justify buying an $8 chicken ceasar salad with exactly one slice of chicken that I won't even finish.

Maybe the most annoying thing about trying to spend conservatively and save my money is that sometimes I just feel like I don't have the time. I've never been willing to sacrifice people & relationships for money, so if given the choice between some time with friends or cooking a week's worth of meals in one night, I'll opt to spend time with people, which means I'm either paying for meals on the run or trying to throw them together in between work & studying. School is also a priority, but only because the silly little slip of paper is going to get me a higher paying job. I'm not willing to invest more time or money than I'll get back in higher pay post-degree. I don't ascribe to the oft touted insinuation that finishing my degree is going to make me a better human - it's just going to make me a higher paid human. While I want to finish, I'm certainly not going to sacrifice time with my friends or postpone my wedding - I hold my relationships with my family & friends higher than I do money or a bit of paper that will mean the same thing at age 25 as it would at 23. Often I'll choose to drop a class in order to be able to work a few more hours. If I make enough money to MORE than comfortably pay my bills, I'm less stressed out which means I'll do better in school, which means I'm far more likely to stay in it long enough to finish.

What all of this means is that there is a constant choice I'm making as far as where I'm expending my time & energy. Sometimes gaining an hour of time to relax is worth spending $5. Sometimes taking an extra hour to study is worth sacrificing a DIY project or two that will save me a little money. Sometimes it's completely worth it to blow everything off and spend a night with friends. As much as I like to put every purchase and every use of time into a numerical perspective, I think I'd go nuts if tried to put a price on every minute I'm awake. At the same time, they don't say "time is money" for nothing, so an hour or two a week planning out a budget for the month, a meal plan for a week, or even just blocking out time to study can save me upwards of $100 or more a month.

This summer, I spent about 24 hours a week in class or studying, 40 hours working, and somewhere in there I hung out with my friends - not a hard schedule, but definitely a grueling one. Even though I was pressed for time to write or do anything else, I still managed to take an hour or two every Sunday night to look at where I was financially and remain constantly aware of what I needed to do to continue living below my means.

Too often we lose track of our whole lives, not to mention our money, and stick our heads in the sand instead of actively trying to reign in our finances. Just one hour a week can help you plan for those times when you've got two minutes to decide whether you're going to plunk down cash to eat out or invest the time to eat in.

My Three Savings Accounts, or How I Keep My Grubby Paws Off of My Money

2008-07-14T13:22:00.000-07:00

When I started actively saving again after years of blowing my hard earned money on I-don't -know-what, I enrolled in the Keep the Change program at my bank (purchases are rounded up to the nearest dollar and the difference is transferred from my checking into my savings) - they matched the transfers 100% for the first three months and 5% thereafter. So far I've saved $102.31 this way, and I'll be receiving (so far) $42.30 when my matching funds are distributed to me in January. If your bank offers a similar program, I can't recommend it enough.

I generally keep a fairly low balance in this account, treating it as a safety net for any accounting errors I might make, causing my balance to be a little more or less than I'm counting on. I also use it for small, unexpected expenses if I don't have room in my budget for them. For example, when the price of gasoline jumped through the roof, I used this account as a buffer until I'd adjusted my spending to account for the higher cost. This is the most liquid of my savings accounts because transfers into my checking are instantly available. Once a month I transfer $25 over, which generally covers anything I may have needed 'borrow' from myself. The balance is kept fairly low (about $100) because the interest rate sucks. When the balance is over $100, the difference is transferred into my second savings account.

My second savings account is with an online bank with a far, far better interest rate than my brick & mortar bank. This account scrapes $25 off my checking account every payday, and I often will transfer small amounts of idle cash into this account. I use it to save for upcoming major expenses, in the $200 to $500 range. These generally are not emergency expenses but they're not exactly extravagant either. The last big ticket item I used this account to save for was a plane ticket to visit my family on the east coast, an expense that I would deem a necessary luxury. I continually add to this account whether I'm actively saving for anything or not. This account is slightly less liquid than the first one, it takes a few days to transfer money back into my checking. I also receive a referral bonus if I refer a friend who funds an account with $250 or more, I receive $10 and they receive $25. So far, I've earned $30 this way. (If you're interested, email me). When the balance gets to be more than $500 or so and I'm not actively saving for anything, the difference is transferred to my third savings account.

My third savings account is actually a money market account, held at a major online trading firm. This is my Big Savings Account, the balance is kept much higher than in the others and I never pull anything out of it. Partially because I opened it as part of a promotion - if I make an electronic transfer of at least $50 a month for a year, I'll receive $100. So yeah, I leave it alone. I transfer the $50 a month, sometimes more if I can afford it. My money market account will eventually be where I keep my emergency fund, though right now a lot of it is earmarked for my wedding.

If you've been keeping track, you'll have noticed that I have received or will receive a total of $172.30 simply by being an active saver. That figure doesn't even include interest.

So if you're not saving anything, I highly recommend a tiered approach:

(1) Open a simple brick & mortar savings account, linked to your checking. If your bank offers a program like Keep the Change, take advantage of it. If not, simply do it yourself. Once you get comfortable with the idea that, yes, you CAN leave that money alone, set up an automatic transfer, something small - even as little as $5 a month if that's what you can afford.

(2) Once you've gotten used to the idea of Leaving Your Money Alone (managing to get that first account up to $100 should just about do it) start transferring any amount over $100 in your first account into a less liquid, higher interest account. Set up a transfer that will scrape a little bit off of every paycheck, and again - start small if you have to.

(3) The time between steps two and three is significantly longer than between one and two, but once you've got $500 or so in a fairly liquid, high interest account, start funding an account that's harder to withdraw on. Anything over $500 in account #2, transfer to account #3. Try to fund it regularly, about once a month. I treat my $50 transfer just as I would any other bill, it's basically an invoice from Future Me.

As you open each account, shop around and try to find some sort of promotion, especially one that will earn you money if you leave your money alone.

Right now I'm sitting on $628.76, which comes out to about $104 a month since I started these accounts up from ZERO in late January / early February. It still might not seem like a lot until you remember that I flip burgers for a living. And I live in beautiful, oh-god-the-cost-of-living-is-so-high-here, Orange County, California. If I can find $100 a month, pretty much any single twenty-something year old with a steady job and low overhead can too.

There is a Such Thing as a Free Lunch!

2008-07-11T10:27:00.000-07:00

It's July eleventh or 7-11, which means participating 7-11s are giving away free slurpees! They're probably really small, but if you want you can hit up more than one and have a day of neverending slurpees.

Also, Chick-fil-a is giving away a free combo meal to customers who dress up like cows. A partial costume (t-shirt, hat) will get you a free entree. So if you're allright with walking into your local Chick-fil-a in a blue raspberry slurpee stained cow shirt, your lunch is on consumerism today.

Free Chicken and Slurpees. Enjoy!

Bare Bones Cash Flow Management, or Pay Your Frikkin' Bills On Time!

2008-07-07T15:57:00.000-07:00

When I first began to gain control of my finances, I meticulously tracked every single penny earned and penny spent. I didn't find any leaks in my spending that I didn't already know about, but I did learn to manage my cash flow. Before I learned to manage my cash flow, I always had the money to pay everything eventually but I spent a small fortune in late fees and I was never really sure just how much money I had at any given point. Rent was due when I got paid, dammit - not the first of the month! I couldn't very well pull money I didn't have yet out of a hat, could I?

Turns out, I could. I am going to say something now that might shock a few people:

If your total income is greater than your total expenses per month, you have no excuse not to pay your obligations on time.

If you get paid bi-weekly, sometimes your paycheck is going to come long before rent is due. "It's cool," you might think on the 22nd, "I get paid on the 5th - so I can just blow this check on whatever and pay rent on the 5th!" Of course, when your check comes on the 5th you spend every last cent of it on rent, and then you end up having to dig up beer bottles to redeem at the recycling center just so you can put the eensiest amount of gas in your car.

Not that I've ever done that or anything.

So here's a quick and dirty list of tips for getting your cash-flow awareness into shape:

(1) Track your spending and income meticulously for at least three months. If you care at all about getting your finances in order, you should be doing this anyway.

(2) Pay your bills on time. As in "when they're due" not "just in time to avoid disconnection."

(3) If the gas bill is $42 due on the 8th, you have $82 to your name, and you get paid on the 11th - you don't have $82. You have $40. Don't take your bank balance at face value. Consider what that balance must pay for and treat the upcoming expenses as checks you've already written, debits that cannot be avoided.

(4) Try to pay as many bills as possible the day you get paid. Get them out of the way so that you can't spend the money for your cell phone bill on a $50 bar tab or whathaveyou.

If you track your expenses while paying on time for two months or more, you'll begin to get a feel for when bills are due relative to your income schedule. You'll also be able to fairly accurately guesstimate the amount of every flexible bill. If you get out of the habit of spending your survival money on stuff you don't technically need, you can blow the extra. Or, you know, save some so that when you really don't have any money, you have a little something to fall back on.

Coming Soon: A kick-ass Cash Flow Tracker in spreadsheet form for everyone to download.

Ways to Break My Starbucks Addiction

2008-07-02T11:19:00.000-07:00

As much as I rail against buying Starbucks everyday, I have to admit that I'm often a complete sucker for them. I went to Starbucks the morning after my friend's 22nd birthday and we ordered the exact same drink, but somehow hers cost $1.15 more than mine and the two beverages together cost over $8.00. Ouch! There's also a Starbucks across from my work, and more than once I've wriggled myself into taking a longer break by picking up coffee for one or more of my bosses - sometimes this means they cover the cost of my overpriced coffee, sometimes it doesn't.

Anyway, my point is I love big cold coffee beverages in the summer. I finally switched from obnoxiously worded lattes to slightly sweetened iced coffee, and I couldn't tell the difference. The $2 less I was burning on such a silly item was nice too.

But after just a few weeks of switching to Iced Coffees, I found my Starbucks consumption right back where it was before. Sure, I've never spent TONS there to begin with, but switching to iced coffee was supposed to make the actual monetary hit hurt a little less. Instead, I just went more often because I could 'afford it' now.

Ugh!

Finally, I came up with a better solution. I've been getting up at 6:45 for class 4 days a week, so I need coffee - dammit. It's July in Southern California, so it's too darned hot for straight up brewed black coffee (which I actually prefer, most of the time). To feed my addiction I've taken to brewing coffee the night before and leaving it in the fridge to chill overnight. In the morning, I pour it into a portable cup with a little milk, ice and vanilla syrup (bought on sale at Target a while back).

There's a Starbucks on campus, and now I can walk right by it without being tempted!

Bean Counting or Goal Setting?

2008-06-12T16:17:00.000-07:00

I spent far more on dining out during the month of May than I'm comfortable with. My spending was still well within my means, but that $64 could have filled my gas tank 1.5 times. So why did I spend so much money dining out? To begin with, my time wasn't budgeted very well last month. I spent far less time pre-cooking food for the week than I normally would. I also spent less time at home, period.

But at the end of the day, I'm not killing myself over $64. I was asked in a comment recently if I simply try to beef up the numbers in my savings account, or if I have specific goals for saving. The answer is a little bit of both - but my primary goal is to live within my means without feeling as if I'm compromising my lifestyle. I make about $1400 a month in wages, and nearly 3/4 of that is taken up with rent & bills, so stretching those last few hundred dollars can prove to be something of a challenge.

Squirrelling away large chunks of my paychecks to fund travel, major purchases, and nowadays my wedding is a major priority. Being able to afford airline tickets without compromising my rent is a big one. Taking a two week trip to the east coast that I don't necessarily need to take (though I'm sure my grandmothers would beg to differ) isn't exactly in line with the extreme frugality that I often advocate. I encourage extreme frugality as a means to an end, not as a doctrine that should be followed simply to put money away for no specific reason.

I've found that quite a few young adults - myself included until a while ago - have extreme difficulty living within their means, much less saving anything. Burn Five's goal is to present as many different means of saving and as many different reasons for saving as possible, in the hopes that twentysomethings who stick their heads in the sand when it comes to their finances will be inspired to take control and stop living paycheck to paycheck.

Network Marketing, A Pyramid Scheme in Sheep's Clothing.

2008-06-11T13:15:00.000-07:00

A buddy of mine recently got involved in "Network Marketing," which looked to me to be just a fancy term for "pyramid scheme." After a while it became obvious that some people really do make money with "network marketing," but most of them had time, money, and resources to dedicate to it in the first place. After a few months of going back and forth with me (and probably a few of his other friends) my buddy realized that a 23 year old with limited resources wasn't likely to make a lot of money using "network marketing," at least not with the group he became involved in. Here's his story, along with some advice for how to better spend the money you might find yourself paying for the privilege to maybe make a lot of money.

I recently got involved with a network marketing or multi-level-marketing company called Pre-Paid Legal. At first, I thought it was awesome, and so cool to be a part of something awesome, and even have a lawyer at 23. However, as time went on I found out that there’s a lot of information that they don’t tell you, and now it is time for me to get out. I am not endorsing or denouncing network marketing. In theory, it does make sense and it can work but for people our age it tends not to work for the following two reasons:

People our age tend to not have the network or people around us that make network marketing so successful. A lot of the people that are successful at it were former real estate agents, attorneys, politicians, or well off business people. Basically, people with contacts already. Sure there are those people who started with nothing, and worked the system and became millionaires. Those people are truly rare, but the company spins it as an everyday occurrence.
We’re too distracted or too busy to really focus on it. Not only does network marketing take some money and energy to get started, but it also takes a substantial amount of time. There are meetings, trainings, and conference calls…every week. Not only are they every week, but you have to pay for them! Sure you can write it off because you have a home-based business, but it’s a hassle, and your time can be used more productively.

Don’t get me wrong, it’s a great way to make extra money if you really really want to work it, but for us there’s a lot of other things that we can do that are both enjoyable, and help us build our wealth. So, this post is dedicated to other things to do with that monthly fee and the time it takes to work the system, and here they are:

If you’ve read my previous post, you can probably guess what my first recommendation is going to be. Save, save, save! I have reached the point where if something happened to my job, I will be able to live for about 5 to 7 months depending on how I manage my money, and if I were to stop working tomorrow, I could keep up my current lifestyle for about 3 months. If I started with $36 and saved that $36 monthly fee over 1 year at an internet bank at say…3.00% interest, in one year I will have put in $432 dollars, and will have a total of $475 at the end of one year, gaining $7 in the process all for doing nothing.
Invest, invest, invest. Or at the very least start learning. Mutual funds and the stock market are such an untapped potential especially for twenty-somethings. I’ll elaborate on these two topics on a later post, but the bottom line is that they can return greater returns than a savings account. That $36 monthly fee can be used for some very nice books (don’t buy them full price, get them free on bookmooch, or at a discount on half.com or amazon), or opening up a brokerage or mutual fund account (Note: that some banks/brokers have a minimum balance that you must meet to open an account…maybe that’s even more of an incentive to SAVE!).
Take a personal finance class or basic investing class at your local community college. I’m not sure about you, but at Orange Coast College classes are $20/unit plus a health fee or administrative fee of some kind. Most of the basic financial classes are no more than 4 units, that’s about $80/class say…$90 with that health fee. That’s less than 3 months of a Pre-paid Legal membership, and I’m sure the knowledge there is a lot more valuable than what Pre-paid Legal offers at their trainings. I’m personally going back to school for a childhood dream, and I’m using some money that I would have spent on Pre-paid Legal for it.

A MacBook Air Is Going to Cost Me Four and Half Months of Wages

2008-06-05T12:41:00.000-07:00

I've touched on this before, in my article about spending $37 on a latte, and in my last post; my favorite way to control major impulse purchases is calculating just how many hours I'll have to work to pay for whatever it is I want.

I make $11.75 an hour, which after taxes and deductions is effectively $10.00 an hour. The luxury good that I currently covet the most is the new Star Trek: TNG entire series DVD set, which runs about $300 - $400. Now, I have a deep abiding fangirl love of Star Trek, but I don't love it enough to spend an entire week's wages on owning the entire series, especially since a year's worth of Netflix is $116.28 - a mere day or two of work.

Newly released CDs are about $10 (usually more), and there are very few artists that I love enough to spend an hour and half on. The same goes for DVDs, or video games. A tank of gas for my car is about $40 now. That's a half a day of work, and if that's not incentive to find ways to keep my gas mileage down, I don't know what is.

Even those of us with jobs we enjoy would probably rather have our days to ourselves than a timeclock to punch. When you consider purchases in terms of how many hours you've worked, many of your most coveted items lose their luster, and finding ways to cut down on your absolutely necessary expenses suddenly has a tangible trade off.

So the next time you're in Target/Best Buy/The Apple Store, hell, even Goodwill considering an impulse purchase, think to yourself two things: (1) Do I really need this? Or do I just want it? (2) If I just want it, is it really worth X hours of work?

Ctrl-Alt-Delete! or: Undoing an Impulse Buy

2008-06-03T09:37:00.000-07:00

My cell phone went completely haywire last night. The keypad was ignoring me, whenever the keypad would finally begin to respond - it would be interupted by an insistent prompt for me to speak a voicedial (I don't even use voice dial!). A creepy clickclickclickclick was coming from the speakers, punctuated by a prolonged beeeeeeeeeeeeep every minute or so.

I powered it on and off, removed the battery and replaced it, removed the SIM card and replaced it, left the phone alone for ten minutes, sang it a song, every quick fix I could think of. The phone remained posessed. Off to the the Cell Phone Provider Store I went.

Over the years, I've slowly upgraded my phones. The idea of downgrading is appalling to me, because I'm 23 and addicted to gadgets. I don't mine replacing my current model with another of the same, but I don't like to give up features I've become accustomed to. A weakness to be sure, but it's a weakness that only costs me every two years or so.

$121.62 later, I had one of those new-fangled music playin' phones. A Nokia whatever with red stripes and mp3 playing capability. Not all of my phone numbers were on my SIM card, so in what I thought was an exercise in futility, I put my SIM card back in my old phone, hoping the keypad would like me long enough for me to at least copy the numbers by hand. The keypad worked. It kept working. It's still working. Old Cell Phone is working just fine now.

Luckily I live in California and have thirty days to return the new phone. And to be honest, before I'd even attempted to use the seemingly broken Old Phone, it occurred to me that I'd really rather have $121.62, and that I should pop my SIM card into an Even Older Phone, and return the shiny new toy. Hopefully whatever technodemon posessed my old phone has been driven away for good- or at least until my contract's up and I qualify for a free phone. While I might try to rationalize the cool red stripey phone into a necessary purchase, it is NOT.

Dangit.

So how do I console myself, knowing that the shiny new toy is going back? Well:
$121.62 is enough to pay my cell phone bill. Twice.
$121.62 is about two and a half month's worth of car insurance.
Three tanks of gas.
About three guests at the wedding.
One month's energy bill.
Two month's groceries.

and the kicker?

Ten and a half hours of work. Before taxes.

Yeah, that thing is going back.

Giving Myself an Allowance

2008-05-30T09:58:00.000-07:00

I use an outdated copy of Microsoft Money to track my finances. It generates a lot of reports for me including a cashflow projector (which I use instead of a typical budget) and some really great spending reports. Month-end is almost here again so I've been poring over my reports. Out of curiosity I filtered out all unnecessary spending categories, just to see how much money I'd have saved over the course of three months if I could manage to radically cut my spending.

$2,622.62.

In THREE months. Mind you, that's after rent, bills, food, and gas. AFTER. I've known for a while now that if I could just figure out how to cut out frivolous spending and impulse buys, I'd be quite well off. I spend less than most of my peers, and I definitely save more than a lot of them, but I could be doing a lot better. I need to be doing a lot better.

More than once I've been told that I shouldn't fuss over every penny, and I do try not to get lost in the minutiae of every other little 3 cents. But I make about $1400 in a good month, so a certain amount of spending vigilance goes a long way for me.

Until I was about 16, I got an allowance of $7.50 every other week, which was enough to buy lunch at school. I could either pack a lunch, or pocket the money. I seem to recall having a fairly active social life and still having fun with my pocket change, so I'm going to attempt a grown-up version of the same.

Every paycheck, I'll get $20. I'm paid bi-weekly, so that $20 is my pocket money. If I blow it on beers at the bar, that's it until the next check. It will not roll over. If I have cash left over when my next paycheck comes, I'll only get enough cash to get the total back to $20. Except on days when I need to buy gas, I'll leave my debit and credit cards at home.

I already put away $125 or more a month, and if giving myself an allowance cuts my impulse spending the way I hope it will, I could potentially double, triple, or even quadruple that amount over the summer.

Dipping into My Savings

2008-05-28T15:55:00.000-07:00

Over the past few months I've gotten really good at socking money away. Next week, it's time to pay Fiance back for my half of our airfare to the east coast this summer and my half of the deposit on our wedding venue. The total is about $450. "Oh no!" I thought, going into a mild panic, "I'm going to have to dip into my savings!"

Until I remembered that the whole reason I began saving so aggressively in the first place was so that I'd be able to pull my weight with the wedding costs, and for us to visit my family on the east coast before the wedding.*

I'm fairly positive that this is the first time in my adult life that I've saved up for major purchases before making them. Before, it was my habit to just buy Whatever and figure out how to cover the costs later which resulted in a lot of nailbiting, overtime, and overdraft fees - not to mention unpaid bills, late rent, and searching the couch cushions for gas money.

Starting at age 18 and continuing (I imagine) until just before you die, there are a lot of "I'm a real grown-up now!" moments; buying a car, paying a bill, moving out, cooking your own dinner, getting married, buying a house, having kids - they run the gamut from seemingly mundane to obviously life-changing. I think putting a deposit down on a wedding venue with money I saved up for the cause is a pretty notable "I'm a grown-up!" moment.

To balance it out, I think I'm going to watch Star Wars while playing with Legos and gorging myself on sweets.

*and the Pacific Northwest.

Collegiate Level Dumpster Diving

2008-05-27T09:51:00.000-07:00

In Southern California, you don't have to physically dive into a dumpster to dumpster dive. People are constantly leaving furniture and appliances at the end of their driveways or just outside of dumpster areas in apartment complexes. People love to throw perfectly serviceable items away.

Last week Fiance and I went to a buddy's graduation at a small private university, and we discovered on accident that dorm dumpsters on move out day are pretty much treasure chests. There were 6+ couches, 2 or three futons, computers, monitors, televisions, printers, speakers, stereo systems, a keyboard (as in casio), fancy calculators, cds, dvds, clothes, laundry baskets, and probably a lot more. Had I not been in heels, I might have dug a little deeper into the pile of electronics. As it was, we came away with a TI-84 calculator (he's going to sell it on ebay), a printer-scanner combo (though we have 6 printers in this house, not one of them is my printer/scanner, which disappeared two apartments ago), a card for free frozen yogurt at Golden Spoon, a nice document organizer, a hole puncher, season one of the UK Version of The Office, and twenty four cents.

There were a few funny looks from the kids moving out, but really - if these kids are dumb enough to be throwing away hundreds of dollars worth of stuff, they're too stupid for me to care what they think of me. As usual, I'm somewhat mind-boggled by what people will just throw away. Even more disturbing was that a lot of this stuff had clearly been broken as it was discarded. Another printer/scanner combo had obviously just been chucked onto the concrete and shattered. Same thing with a television. The glass shards from both were all over the area (another reason I didn't dig too deep.) I can understand not wanting to schlep a television, or even just a printer, back to mom & dad's, but why destroy the thing when you throw it out?

Either way, I'm going to be making a point of swinging through the local universities at the beginning of summer from now on. I might never have to pay to replace a printer again. And maybe next year I'll nab season two of The Office.

Carnival of Personal Finance #154

2008-05-27T09:46:00.000-07:00

This week's Carnival of Personal Finance is up at The Canadian Dream: Free at 45!

My two favorite articles were:

Budgets are Sexy on the Four Stages You’ll Encounter during a “No Spending” Challenge.
Five Cent Nickel on The Social Acceptability of Frugality.

There are many more great posts though, so go check out the Carnival.

My Monthly Trade-Off: Extreme Frugality in One Area, Overspending in Another

2008-05-22T15:55:00.000-07:00

Every month, after most of my bills are paid, the groceries are bought and the last thing that I must pay for before the month ends is a tank of gas, I start reviewing my income and spending. It seems that every month I manage to scrimp and save in one area while I spend more in another. In April, I spent very little on food, but a ton on leisure and entertainment. In May so far, I've spent very little on leisure, more on food than usual, and quite a bit on travel (a weekend in San Diego for Fiance's birthday.)

I already save about 10% of my wages, and by month's end I've usually got some extra income that I can also throw into savings - I'm doing very well in that regard. If I exercised some serious self-discipline, I could easily be saving another two to three hundred a month. Most of my friends consider my ability to hang on to my money something of a feat, but I still look at my ledgers at the end of the month and think "Damn! I really shouldn't have spent $X on Y!"

At the end of the day where I spend and where I save in any given month comes down to a value judgement. In May it was "Do I want beers out at the bar & a bunch of new books or do I want to spend a nice weekend with my boyfriend in San Diego?" I chose San Diego, which turned out to be a great idea. In June, I'll be paying for my share of Fiance & I's plane tickets to North Carolina. I'm a displaced Southerner who hasn't been home in four years, so obviously my $266 round trip ticket is well worth drastically curbing my spending in another area.

As the trip to Carolina, the wedding, and eventually married life come closer, I'm sure I'll need to start exercising the willpower to be mega-frugal in more than one category at a time. So here's my game plan:

(1) Leave my debit and credit cards at home. I already leave my credit card at home most of the time, but unless I need to buy gas I really don't need to bring my debit card to work with me. Sometimes the Starbucks across the parking lot calls my name a little too loudly, especially on my morning shifts.

(2) Make sure I'm setting aside time to pre-cook meals and snacks. For the most part I'm pretty good about this, but this summer I'll be in one pretty intense 4 hours four days a week class, an online class, working full time, and planning a wedding. I won't be able to just throw something together when I feel like it. Also, I'm likely to be pretty stressed out. When I'm stressed I either stop eating altogether, or I overeat. If I've got healthy food readily available, I'll be less likely to cave and make a beeline for Chick-fil-a.

(3) Write notes to myself. For example "If you spend $30, you have to cross out one wedding guest!" or "You need this for RENT!" I'm so disciplined most of the time that I generally have $5-$25 to burn if I feel like it. I can sometimes be flippant about spending a little here and there. Most of the time I fight the urge off, but sometimes I fail. Hopefully having visual reminders in my purse, checkbook, and taped to my debit/credit cards will help.

(4) Keep Fiance in the Loop. The fact that he & I are fairly minimalist frugal mostly-vegetarians bodes well for our marriage. The more in the loop I keep him, the more he can help out by saying, "Ummm, honey are you sure you need ANOTHER wedding planning book?"

(5) Stay home more often. Just walking out of the door and starting up the car is spending money. If I stay home I can cook, keep my room organized, post to BurnFive, do surveys, tons of productive stuff- most of which will save or bring in money, as opposed to spending it.

Hopefully in June I'll be able to keep all unnecessary spending to a minimum, instead of just some of it.