Double Standard

I have two investment vehicles established for retirement, My Roth IRA and my 401K. I don’t play favorites with these two accounts and if it was within my control, I would contribute to them equally (unfortunately the federal government puts a cap on Roth contributions). If you follow my net worth updates at all, you’ll notice both accounts perform pretty similarly. When my Roth goes up, so does my 401K. When my Roth goes down, my 401K follows suit (although to a lesser degree since the employer match helps mitigate my losses).

Don’t tell Girl Ninja, but I am madly, deeply, and passionately in love with my retirement accounts. If all goes according to plan, they will literally make me a millionaire. Ah yes, one day I’ll be sipping a non-alcoholic strawberry daiquiri on the beaches of the Washington coast with my beautiful wife (can’t travel too far otherwise we won’t stay millionaires very long).

Am I the only person kind of excited about being super old?

Even though I have equal affection for my two retirement accounts, if the you-know-what hits the fan, I’d definitely treat them differently. That my friends is called a double standard.

Girl Ninja and I have saved up some pretty serious cash over the last year and a half, so barring some major medical catastrophe, we shouldn’t have a need to dip in to our emergency fund. One day, however, we will have bought a home and Girl Ninja will likely be a full-time mom. In a few years, we probably won’t have the cash reserves we have now.

So what happens if an emergency comes along that exceeds what we have set aside (currently $10,000) for rainy days? I’ll tell you what. I’d raid my Roth IRA like a college student raids his parent’s fridge.

I like to think of my Roth as a quasi-savings account. You put money in to it (with after tax dollars) and can take those contributions out at any time without penalty. That perk alone makes it the freakin’ Swiss Army knife of the financial sector. It combines a savings account, retirement account, and emergency fund in to one sexy product. Tell me that doesn’t get you all hot-and-bothered?!!? If I pulled my from my 401K, however, we’d be faced with tax obligations AND a ten percent early withdrawal penalty. Definitely not sexy.

Have you ever thought about treating a Roth IRA like a quasi-savings account? If needed, would you pull from a Roth or 401k first? Anyone else want to make sweet, sweet financial love to their Roth IRA?

p.s. don’t pull from your retirement accounts for things like new cars, kitchen renovations, or buying a house. The point of saving for retirement is saving for retirement, not buying shiny things that give you artificial happiness.

It’s complicated


Let’s get right to the point today shall we? I go out of my way to ensure my personal finances are significantly more complicated than they should be. In fact, I’d even go as far as to say that I sleep better at night because of it. No, I haven’t lost all my marbles, I just hate the idea of automating my finances.

I know I’m probably in the minority here, seeing that numerous personal finance blogs preach the wonders of automating your finances. I won’t try to convince you my way is better (even though it is), but allow me to at least explain myself further. First, I’ll list off all of the regular recurring payments I have each month.

  1. Rent- $1,175 (all utilities are rolled in to this one payment, including cable/internet)
  2. Cell Phone- $60
  3. Car/Renters Insurance- $180
  4. Credit Card(s) – Varies depending on balance (usually around $1,500)
  5. Charitable Contributions – 10% of gross income
  6. Storage unit – $65 (storing our baby grand piano)

I may be forgetting one or two other bills, but for the most part I think that about covers it. I could theoretically set up an automatic withdrawal from my checking for each of these bills, allowing the companies access to my checking account. As the bill comes due, the company would pull the money from my checking account.

Now, I don’t know about you, but that totally freaks me out. Getting married and sharing a checking account with Girl Ninja was scary enough, I couldn’t imagine giving a bunch of random strangers access to my account as well.

I’ve read horror stories about people who thought they set up a $200/monthly payment and were shocked to find out $2,000 was withdrawn instead.

Or how about the person that had their car payment scheduled for the 8th of every month. Well it just so happened that on the night their account was to be debited, their bank was beefing up security protocols and restricted all customers accounts for a few hours. As a result, the payment never processed. But because it’s suppose to be automatic, you never think to check and make sure everything went smoothly. Thirty days later you are dealing with an angry Toyota representative hounding you for being one month past due.

No thanks. Automatic payments don’t sound worth it to me. To be perfectly honest, I actually enjoy manually paying my bills. It reminds me how much money comes in and out of our account each month, but more importantly it makes me want to continually shop around and make sure I’m getting the best deal possible. It essentially keeps me intimately involved in our personal finances. And I need not remind you, making love with money is my favorite kind of romance.

Do you automate your finances? Why or why not?

The most comprehensive guide on “how to become debt free” ever written.

And now, as promised, The most comprehensive guide on “how to become debt free” ever written…

Spend less than you make.

-The end.

I save money without even trying.

Girl Ninja and I have made multiple intentional decisions on how we can best reign in spending and control our costs. We don’t have cable, we rent a one bedroom apartment, and we try to buy as much stuff as we can on sale. We intentionally cut costs to save money.

Last night, however, I started thinking about all the ways I unintentionally save money. Turns out, I’m even more thrifty than I realized. Here are some ways I’ve unknowingly been saving some serious coin…

Alcohol:

I only know a handful of people like myself. People that hate alcohol. This is not a religious thing, but more a I-hate-the-way-it-tastes kind of thing. It amazes me how much some people wish I drank. I swear every time I go out someone is begging me to try their glass of wine, their beer, or their rum and coke, as though, my taste buds will suddenly do a 180 and be in alcohol heaven. I’ve done a lot of taste tasting over the years and the scale in which I use to describe alcoholic beverages ranges from “extremely disgusting to moderately disgusting”. I’m yet to find a drink I legitimately enjoy. Since I’ve never bought alcohol before, I don’t really know how much I’m saving. I’ll make a completely uneducated guess and assume most other 20-somethings probably drop between $30 and $200 a month on alcohol. Is that a good guess? How much do you spend?

Haircuts:

If you haven’t noticed in the various pictures I’ve posted over the years, my head is shaved. After my freshmen year of college I decided it was time to say goodbye to my long flowing locks and get the clippers out. That was seven years ago. I haven’t paid for a single haircut since. Prior to buzzing it all off, I was probably getting my hair cut once every two months. At $20/cut that works out to a total savings of $840 over the years. The only thing I miss about going to get my hair did, was the way the stylist would massage my scalp under hot water. Can I get an amen?!

Coffee:

I must have some extremely jacked up taste buds, cause not only do I hate the taste of alcohol, but the taste of coffee (or anything with coffee in it) makes me want to projectile vomit all over a white cat (I hate cats). Girl Ninja loves her some Starbucks. It’s a good thing I don’t, otherwise we’d probably be there every day. She does her best to minimize her “Tall non-fat vanilla latte” purchases, but probably averages two a week. If I was joining her each trip that would be an additional $7/week out of our pockets, or $364 over the course of a year. Extrapolate that over the last 10 years and we are talking THOUSANDS of dollars saved by not liking the flavor of coffee. Booya for sensitive taste buds. 

Video Games:

I may have to give up my man card for mentioning this one, but I don’t really get the point of video games. I played them in elementary and middle school, but by the time I got to high school I cared more about my outfit, girls, and sports then I did about what type of gun Lara Croft used. While video game consoles are reasonably priced (most around $200), the video games are a budget killer. At $40 to $80 a pop, I don’t know how gamers sustain themselves. Oh that’s right, they never go outside and they all live in their mother’s basements. Kidding….kind of. Thank goodness World Of Warcraft and NCAA Football ain’t my thing.

Okay now that I’ve pissed a bunch of video-gamers off, it’s time I step down and give you an opportunity to share some ways you’ve unintentionally saved some scrilla (that means money for the less cultured). Do you hate sweets? Never shave your armpits? Or do use public transportation? It might take a minute to think something up, but when you do drop a comment below.

I’ll be SOOOO pissed if student loans are forgiven

I was really hoping to avoid talking about Occupy Wall Street again. I gave insights in to my stance on the movement last week and didn’t feel as though more needed to be said. That was until yesterday when I read this story on the Huffington Post…

While the Occupy Wall Street movement continues to grow and spread, there is no common call to action. I propose that the first call to action to help ease the economic stress of Americans is to forgive student loan debt. What do you say?

I say, “You sir are an idiot.”

I need not remind you (readers) that I graduated college with $28,000 in student loan debt in 2007. According to Huff Post that’s $4,000 more than the national average in 2009. So before you start accusing me of being part of the 1% let’s get a few things straight. 1) I’m not. 2) My parents aren’t either. Glad we got that settled.

Let’s talk about my story. I knew full well when I signed up to go to a private school that it was about three times more expensive than a local university would have been. I also knew that I would have to take out student loans to be able to go to said private school. I didn’t really think about the repercussions of taking on debt and gladly signed my life away. These are the facts as I see them.

To be perfectly honest, I was shocked to see the total balance of my student loans upon graduation. Twenty eight thousand dollars is a big scary number, especially when you have no employment lined up. I did what most grads do, I consolidated my loans and deferred them for six months.

What I didn’t do was complain that the college tricked me in to signing up for the debt. And I didn’t expect my Alma Mater to find me gainful employment upon graduation. I knew I got myself in the mess, and I was the only person that could get myself out. I accepted responsibility for my ignorant actions.

So guess what I did? I got a job and started making my minimum payments. I then got a second job, and a third job, so I could make accelerated payments. After 2.5 years, I was debt free. I didn’t expect the government, big business, my college, Sallie Mae, my parents, or you, to pay off the loan I voluntarily signed up for. I accepted my situation, and worked my a$$ off to improve it. Sending off that last payment was incredible.

Do you know how frustrating it is to work so hard (as I chronicled in many blog posts) to accomplish a goal, only to have it marginalized by a group of people who want the same thing, but aren’t willing to go to the lengths I did to achieve it. I was EXACTLY where you are now, a few years ago. The difference was I didn’t go Occupy Wall Street, I occupied multiple jobs.

If Joe starts eating healthy/exercising more and loses 50 pounds as a result, do I suddenly have a right to demand the local plastic surgeon give me free liposuction so I can have the same results as Joe? Even if I have a genetic makeup that makes it much more difficult for me to lose weight? Fat chance (pun absolutely intended).

I can only think of one situation in which I would entertain the idea of allowing student loans to be bankrupt-able/forgiven: If and only if the individual would relinquish all credits and degrees earned. The worse thing we could do is forgive the debt and let them keep their degrees. Hell, I’d take a few dings on my credit score if it meant I got a “free” degree out of the gig.

Lastly, if you really are pissed off about the whole student loan/cost of college issue, you should probably go protest your college, not Wall Street.

I’ve already paid off my student loans. Don’t force me to pay yours off too. Unleash the hounds.

p.s. Just to make a few things clear. I am not saying the lending practices associated with student loans are great. And I’m not saying the exponentially increasing cost of college is acceptable. I’m all for reforming tuition rates and lending practices. Student loan forgiveness is not reform, it’s a lame solution that doesn’t solve the much more complex problem.

Seriously conflicted about the iPhone 4s

I’ve been tracking the delivery of my iPhone 4s like a hawk. In fact, it should be getting dropped off at my door in the next few hours. I’ve been rockin’ the iPhone 3G like a boss for over three years now — longest I’ve ever had one phone — and it’s time for an upgrade. The 3G is more frustrating than it is helpful, it’s that slow. I’ve been drooling over the 4s ever since it was announced, but now I’m sitting here thinking I should return it.

Although I often second guess myself (due to extreme bouts of frugality) that is actually NOT the reason I’m conflicted today. No, it’s something much worse. I was reading the news yesterday and happened upon a story about how/where iPhones are made. I. Was. Shocked. Here’s the first few paragraphs from that story…

Normally, the launch of a new Apple device such as the iPhone 4S would make Mike Daisey salivate. But not this year.

Daisey, a monologuist in the vein of Spalding Gray and a recovering “Apple fanboy,” has not upgraded his phone since flying to China to investigate how those smooth, beautifully designed hand-held gizmos are made.

What he found was horrific labor conditions, impossibly long hours and the use of crippling, repetitive motions. He met very young factory workers whose joints in their hands were damaged because they performed the same action thousands of times a shift.

“I was woefully ignorant most of my life. Even though I love the devices deeply, I never had any idea how they were made and never thought about it in the least,” says Daisey, who had assumed robots put together his iPad and iPhone.

Seriously!? I mean just yesterday I said these exact words in my post about Occupy Wall Street: “You think Bank of America is going to stop charging that $5 debit card fee if you say “I hate you Bank of America” while you’re swiping it at the grocery store? Not a chance. You have to say “I hate you Bank of America” and start banking somewhere else. Empty threats are a waste of oxygen.”

Here’s what that statment should look like today: “You think Apple is going to stop engaging in unethical business practices if you say “I hate you Apple” while you’re tweeting from your iPhone? Not a chance. You have to say “I hate you Apple” and start tweeting somewhere else. Empty threats are a waste of oxygen.”

How the hell can I in good conscience buy an iPhone? If I do, I am essentially enabling/encouraging Apple to continue doing what they’re doing; contracting work out to sketchy technology manufacturers. The only way to make it clear that I don’t support unfair labor practices is to vote with my dollar, and not purchase Apple products.

But I love Apple products. In our house alone we have two iPads, two Macbooks, a Mac Mini, two iPhones, and a handful of old iPods. The iPhone 4s is arguably the best phone to have ever existed and I would want nothing more than to own one. But at what cost? At the cost of someone’s well-being? No, I guess I don’t need a new phone that bad.

I want to keep the iPhone so, so, so bad, but after reading this article can’t figure out a way to justify the purchase. The worst thing I could do is say “Man, Apple is involved in some shady business, but the phone is cool enough I’ll pretend I never heard the bad stuff.”

Am I the only person that’s just now hearing about these inhumane work conditions? Why are people willing to compromise their moral/ethical beliefs just so they can have a cool phone? If you are getting (or already have) an iPhone (or similar device), how do you reconcile the information from this report with your desire to own an Apple product? (I seriously believe everyone that has an Apple product has a moral obligation to answer those questions)

 

p.s. on a much less depressing note I had my first media mention in a published media outlet. If you head to your local grocery store and pick up a copy of this month’s Readers Digest, you’ll notice on page 55 there is a brief reference to myself and my blog (so what if the article is about foam mattress toppers). I found out last night, Readers Digest is the fifth most circulated publication in the world. Pretty sure that means it’s time for me to write a book… right? Took a pic of the article ’cause I was so excited….

 

Are you hardcore?

A week or two ago, I wrote an article titled “You’re not debt free if you have debt.” It was a relatively successful post, receiving just shy of 70 comments. I’ve been meaning to address one of the comments left in the article….

My Rebuttal:

Stu, you sir are a Dumb-Dumb head. I can’t really argue with your logic since I see no flaws, but I can call you all sorts of hurtful things, like booger face, so I feel better about myself.

Even though I pay my credit card off in full each month, it’s still a debt. We’ve talked about “good” debt, and “bad” debt, but we haven’t talked about how YOU specifically use (or avoid) debt in your life. So today, I thought we could do just that. I’ll go first 🙂

Credit Cards:

I, Ninja, will continue to use my credit card as long as I pay the balance in full each month. I’ve made a personal commitment that if I ever miss a payment (yes, even by one day) I will immediately pay my balance off, cancel my card, and switch to a debit only system. Credit cards, if used responsibly, are a great tool.

Vehicle:

As for a car, although I don’t plan on buying a brand-new car anytime soon (never say never right?), I would be open to the idea of taking out a loan if I did. The loan’s APR would have to be less than the interest I earn on my personal savings (basically looking for a 0% offer). If I either had to pay $20,000 up front for the car, or could pay $20,000 back over the course of five years, I’m taking the 0% loan every time. Remember, liquidity is king, especially when it doesn’t cost you anything.

Home:

Although I am no home owner yet (praise the Lord), I do plan to be one within the next few years. Girl Ninja and I are plugging and chugging away at our goal to save $100,000 before we buy a house. We don’t know if we’ll end up putting $10k down, or $80k, but we sure as heck like the flexibility a big cash pile affords us. Ultimately our down payment amount will depend on our income, purchase price of the house, and interest on the loan (none of which we can predict at this point). I can tell you this though, unlike some PF gurus, I am totally comfortable taking out a 30 year mortgage. I’m also open to the idea of paying it down much, much sooner than that. I don’t have a firm “Our mortgage will be no more than 30% of our net income” policy like you might. All I know is I do NOT want to be one of those home owners that ends up hating home-ownership because it becomes a financial burden.

And that pretty much sums up what debt I personally find tolerable. I’m not a fan of second mortgages. I would never borrow money to invest it elsewhere. I would never take out a loan to start a business. I would never finance a luxury item like a boat, motorcycle, or vacation. I will never take out another student loan again. And I will never co-sign a loan, or lend a substantial amount of money, to a friend as long as I live. Never. Ever. EVER.

How does debt fit in to your life currently (what types of debt do you have)? What types of debts do you plan to continually utilize (auto loans, responsible CC use, mortgage)? What types of debts have you sworn off for good? Anyone sworn everything off?