Are you banking on Social Security?

Are you setting yourself up for self-sufficiency? Who do you rely on for survival? Do you know what you need to do today, to have ‘enough’ 20, 30, or 40 years from now?

If you’re planning on social security providing for you, like a mother’s milk provides for her baby, it’s time to start “feeding” yourself. Here’s the steps we have already taken, are currently taking, and will take, to ensure we aren’t dependent on the government to pay our bills…

No stupid debt:

I’m not as intense as Dave Ramsey. If you want to take out a 0% car loan, fine by me. But if you are up to your eyes in credit card (or other high interest debt), then you need to get your crap together and start working your way out. The path to financial success starts with paying yourself (not Sallie Mae) first.

A reasonable mortgage:

Do you know how long a 30 year mortgage takes to pay off? THIRTY FREAKIN’ YEARS! That’s insane. I’m not even 30 years old! I couldn’t imagine making a payment for three full decades. Girl Ninja and I have no clue what the terms of our mortgage will be, but I can promise you this, we aren’t going to buy more house than we can afford. Home ownership is still a year or more away, but our goal would be to keep our mortgage payment under 30ish% of our net income. I like the flexibility of a 30yr mortgage, especially since you can pay it down in 20, 15, or 5 years if you want.

Investing/Saving:

This is where true government independence comes in. If you want to retire (aka not work anymore) you better start doing something about it. The Roth IRA and 401K are my investment vehicles of choice. By putting a few bucks away today, I plan to have a couple million waiting for me during my golden years. I don’t care how old you are, the time to start investing was yesterday. Get to it!

There are a few other things that consist of our financial commandments like living within our means or shopping around before we make a purchase, but I figured it’s best to bore you any longer. Moral of the story is this: If you are 50+, you will probably receive at least some social security benefits. If you are 50 (or younger) you may still receive some benefits, but it’s time to wean off the government teet and start feeding your bank accounts.

To those of you that are 50+, did you plan some of your retirement income around social security when you were younger?

To those that are 50 or under, are you banking on the fed financing your years in adult diapers?

Do you think there will be any social security programs when us 20-somethings retire?

What do you think the social security age will be 40 years from now?

p.s. I wrote this article one year ago and moved it to the front of the blog for relevant discussion today.

From one thing to the next.


I was talking with a friend the other day about common everyday topics ( things like: sports, money, unicorns, etc), when we transitioned in to talking about home ownership. I told my friend Girl Ninja and I were planning to save pretty aggressively so we could have up to $100,000 to use for a down payment. I then said something like “Once we buy a house, I will finally relax be more free-spirited.” Haha, yea right!

While I was punching Sallie Mae in the face, I thought becoming debt free would release me from frugality. But then came a wedding and a honeymoon, and a move so I focused on saving up for those expenses. In this season of life, I’m all about saving for a huge down payment.

But, and this is a big but, I’m officially coming to terms with the fact that there will always be something. Once Girl Ninja and I finally do buy our first place, I’m sure we will find something else to save for. A remodel, a new car, or that spaceship I’ve always wanted….

Although this epiphany could be depressing, it was a much welcome reminder that I will never have it all together.  A reminder that I shouldn’t put off having fun today, so that I can have fun tomorrow. A reminder, that I sometimes lose sight of what’s important.

I obsess over a stupid goal (in this case saving up to buy a house), and allow that goal to distract me from a huge part of the personal finance puzzle…. Enjoying our money. Life would suck if all we ever did was save and spend, save and spend. Every now and again, living outside the budget is exactly what the doctor ordered.

Last time I checked, GN and I both like to have fun. So, while we will continue to work towards our goal of home ownership, we will also make a point to enjoy our journey through that process. I’ve currently promised her a “big” vacation every year we don’t have a kid. We are looking in to Mexico, Hawaii, and Brazil this summer 🙂

What is your current top financial goal? Do you allow it to distract you from contentment, like I do, sometimes? Where is the balance between healthy focus and super awkward awkwardness?

Why ninjas are awesome at saving.

The following is a guest post (stick figure art and all). Like it, love it, enjoy it….

Crouching shrouded in darkness, patiently waiting for the right moment to strike. The ninja is focused, patient and deadly… and that’s why they would make excellent savers!

I’m not saying that the best way to invest money in savings is to sit in the dark with a handful of cash waiting to spring out at the bank manager as he opens up shop first thing in the morning – that’d probably get you into trouble.

What I am saying (I think) is that the skills required to join the ranks of Ninja and his brotherhood of ninjutsu warriors are also great transferable skills for when it comes to investing money in savings.

I’m going to labor this metaphor for a little longer, if you don’t mind, to show you just what skills and qualities I mean, so that you too can be a savings ninja.

Patience:

The ninja knows that the price of success is patience. The ninja does not rush in, but instead waits until the best possible moment to strike. When it comes to savings, patience is certainly a virtue.

Depending on the savings account you choose to invest in, you’ll be rewarded for your patience in terms of earning more interest on your cash. Moreover, some accounts penalize you for withdrawing cash from the account within the agreed term, making patience even more important.

Tactical Prowess:

The ninja is a tactical and strategical master, planning for every conceivable outcome. If you want to save like a ninja then you must have the foresight to know if you are the sort of person who will need to withdraw cash from their savings – and to choose an account which does not penalize you for it.

Idealism:

The ninja fights for a greater goal, follows a moral code and a set of ideals which governs the way he or she lives his or her life. When it comes to savings, this means having faith and discipline in your goals. Willing yourself to leave your savings alone in order to reap greater rewards later down the line shows great discipline, just like that of the ninjutsu. The ninja is a master of self-control, and if you want to make the most of your savings, you need to be too.

Master Escapist:

The ninja knows how to make a quick, clean exit, leaving no trace. As a saver, if you find that you are unable to maintain the account, and that you keep dipping into it to fund your day-to-day living costs, then you need to be able to concede defeat and make an exit.

First you must know what the rules of your savings account are. The ninja is a master planner, and will have already done reconnaissance to gather this intelligence. If you are able to, withdraw what is left and cancel the account, leaving no trace.

The ninja knows that personal finance is a war fought in individual battles, and must keep and eye on the bigger financial picture. You may lose the battle, but if you are willing to concede defeat you will better equipped to fight the rest of the war.

I’m bored.

While talking with Girl Ninja the other night, I uttered four words I thought I would never say. I. Like. Big. Elbows. Just kidding, that’s now what I said. What I really said was “I’m sick of saving.” ::GASP:: I probably just lost half my readers after declaring such a blasphemous statement, but it’s true, I’m sick of saving!

Usually, I’m obsessed with saving money. It’s the first thing I think about when I wake up, and the last thing I think about when I go to sleep. Okay, not really, but it IS always on my mind. I’ve been known to make spreadsheets that tell me exactly how much I’ll be able to save over the course of a year. I also love updating my net worth after I’ve been able to throw a couple grand in to my ING account.

But for at least this week, I’m over it. It just doesn’t sound appealing to me. Ya wanna know what does sound appealing though? A new bike. A 3-day vacation somewhere cool (Canada perhaps?). Giving a few thousand dollars to some random charity. Or investing $2,000 in some tiny start-up company I’ve never heard of. There is nothing interesting about the 1% yield my online savings account earns me, but there are a lot of interesting things that come with bike rides, vacations, charity work, and taking risks. Risk = Fun. Saving = Boring.

Ah, who am I kidding? I’m a personal finance blogger. At the end of the day, I’ll probably just end up putting our excess cash flow in the bank. But don’t judge me if I randomly decide to go out and buy 12 goats named David this weekend. Sometimes spontaneity is a good thing.

Do you ever get bored of paying off debt, saving for retirement, etc? Do you cave to the boredom or persevere and keep on truckin’? If you weren’t allowed to save any money (or pay down debts) next month, what would you do with it? Am I crazy?

Happy weekend.

Death to happiness

Man, just when things are going great in my life, I get an email with horrible news. I’m seriously depressed right now. Here’s the email I got from a PDITF reader…

Dear Ninja,

I have some bad news for you, as I know you are a fellow ING Direct customer.

http://consumerist.com/2011/06/report-capital-one-to-buy-ing-direct-for-9-billion.html

You should say something on your blog about it.

Let’s all share in a moment of silence as I must mourn the loss of one of my best friends ING Direct.

………silence………

You were always there for me good friend. You maintained my savings account like no one else could. And your marketing campaigns were hilarious. But now, you have sold your soul to the devil and I’m afraid our love affair will soon end. It was nice knowing you.

Was that a bit dramatic? It was? Good! I freakin’ love ING. I freakin’ hate Capital One. While I’d like to think the merge will have little effect on us customers, I can’t be that optimistic. I’m reminded of the time I opened up my online savings account with Countrywide Bank. I know Countrywide had their issues, but their savings account was everything I needed; simple and competitive. Unfortunately, they were bought out by Bank Of America. It didn’t take long for the terms of my account to be drastically changed. The last straw was drawn when BOA decided to start charging me $3 per withdrawal from my savings account. That’s right, THEY WERE GOING TO CHARGE ME FOR ACCESSING MY OWN MONEY!!!!! I quickly pulled out my $19,000 life savings, closed my account, and became an ING fanboy.

It’s time I start shopping for a new savings account. I’ve heard good things about Smarty Pig, HSBC, and Ally bank. Any of you have experience with them? Who do you keep your savings with? For my fellow ING customers, did you shed a tear when you read of their pending acquisition? Do you think you’ll stick around or jump ship? Can anyone out there email me positive news, so I get out of this deep, deep depression?!

Where is your discretionary income going?

funny gifs

As you all know, Girl Ninja and I are on a mission to save like crazy for a down payment. We’ve been making some pretty serious progress and are just past half way to our $100,000 savings goal. If we end up buying a $350,000 house, we would be able to put $70,000 (20%) down and still have enough cash to furnish the place and maintain a reasonable E-fund (FYI: I’m assuming we won’t pay closing costs, since pretty much all sellers are paying them now). Our plan is simple, save. save. save.

Discretionary income, if you don’t already know, is the money you have leftover after paying for your essentials (things like bills, groceries, retirement contributions, etc). Sadly, many people live paycheck to paycheck, meaning they have no discretionary income. Every dollar they earn has to be paid to someone else. Fortunately, Girl Ninja and I have been able to keep our income up and our expenses down, leaving us with about $2,000 of discretionary income each month.

For the last 10 months of our marriage, I’ve been taking that money and throwing it in a high-interest (can you really call 1.1% high interest?) savings account. The balance has been steadily growing, which makes me a very happy Ninja. Each month that passes, brings us a little closer to that $100K mark.

It’s a good thing we have a goal to buy a house, otherwise I would have no idea what to do with our discretionary income. I guess we could start playing the short term investing game, buy nicer furniture, or go on lavish vacations every few months, but none of those things seem as exciting to me as having a fat chunk of change in the bank. Yeah, I don’t care what you think. Big savings accounts turn me on….meeeeow.

So now that you know what we’re doing with our discretionary income, it’s my turn to ask you a couple questions.

1. How much (if any) discretionary income do you have each month?

2. What are you doing with it? (Saving for a car? contributing more to retirement? planing to start a business?)

3. Why can’t male politicians keep it in their pants?

How long can you survive?

Beany Babies

I’ve had $10,000 sitting in an emergency fund for about two years now. Thankfully I haven’t needed to use it yet (and hopefully wont need to for a very long time). Even though my income and marital status has changed over the last couple years, I haven’t thought twice about changing my E-fund balance.

I initially decided on $10,000 for two reasons. First, it was a nice clean whole number, and if you read my post last week, you know I like pretty numbers. But most importantly, I picked $10,000 because it represented about 6 months of living expenses for me at the time. My rent was dirt cheap ($580/month) and I was pretty frugal. My expenses were way less than 1,667 a month ($10,000 divided by 6 months).

Last August I got married. As I went from “single” to “married” every aspect of my budget increased (food, rent, gas, etc). Fortunately, Girl Ninja was makes decent money as a teacher, so even though our expenses increased, the net result was positive.

If you look at our 2011 Ninja Budget Of Epic Gloriness, you’ll see we have budgeted for about $3,900 of expenses each month. That would mean our $10,000 E-fund is really only able to cover about 2.5 months of living expenses. Nowhere near the six month reserves I recommend…or is it? dun dun duuuuuun (insert dramatic music here!!!!)

At first glance you’d think we have less than three months expenses in our E-fund, but a closer look shows that $10,000 could easily last us 6 months, and probably closer to a year! But Ninja, how do you do it? Well reader, I’m glad you asked.

The $3,900 outflow shown in our budget accounts for everything. Retirement contributions, tithing, dining out, and the like. If Girl Ninja and I both lost our jobs tomorrow (which is pretty unlikely), we could easily cut our monthly budget to almost half. Here’s how….

Roth IRA: $416 to $0 (stop retirement contributions)
401K: $305 to $0 (see above)
Tithe: $800 to $0 (no income to tithe on)
Food: $500 to $350 (no more dining out)
Gas $200 to $150 (stop using my car)
Random Things: $377 to $200 (cut entertainment, clothing, etc)

By making these cuts, our $3,900/month budget slims down to a much more manageable $2,011/mo. Which means our $10,000 E-fund can last us 5 months in the event we both lost our jobs.

But wait, there’s more!!! (I feel like a cheesy infomercial…haha)

If only Girl Ninja lost her job, we wouldn’t need our E-fund since I make enough to support our current lifestyle. If I lost my job and we decided to keep spending at current levels, we could last 10 months off Girl Ninja’s income and our E-fund. But if I lost my job and we made most of the cuts mentioned above, we’d actually be able to survive off just her income…forever. for. EV. ER. (sandlot anyone?)

So even though it may appear as though I’ve neglected our emergency fund over the years, I really haven’t. Ten thousand is completely sufficient considering the stability of our careers and the flexibility we have within our budget.

For those of you that have an emergency fund (hopefully all of you), how did you determine how much to put in it? Did you pick a pretty number like $5k or $15K? Did you set the amount based off your current monthly expenses multiplied by a specific time frame, like 6 months? Anyone treated their E-fund similar to the ninja household?