I save like a G

I love today’s title because it holds double meaning. I originally meant I save like a G (as in Gangsta). If you didn’t know, I’m the ghettoest (is that a word?) personal finance blogger this side of the Mississippi Milky Way.  I love rapping, hip hop music, making beats, and learning about compound interest. If that’s not straight hood, I don’t know what is. Not only does “I save like a G” mean I’m a gangsta, but it also can be taken literally. I really do save about a G (as in a grand) each month. In fact, last month I had $1,800 in discretionary income.

Today’s blog post was inspired by a loyal reader who commented on yesterday’s post. MattyIce wrote…

What is your Percentage of Savings? Is it 15% and then that 15% is divided among your IRA, Savings, and Student Loan Payment?

Well MattyIce, here is my super-dee-duper-uber-complicated formula for my savings…

Basically what I’m trying to say is I have no savings plan. Here is how I actually decide what I do with all that discretionary income.

First, I take my baseline net income (I know each month the minimum amount of $$$ I will bring home is $2,700). Generally, I supplement that with a couple hundred dollars in side income. I also know that my expenses each month generally hover between $1,500 to $2,000 (depending on the month). Thus, I usually have about $1,000+ each month in “do whatever the heck I want” money.

Most people, pay themselves first. Meaning they treat their savings as an “expense.” Before they pay any bills, they throw X% of money in to their savings account. While I totally understand why people do it, I don’t really need to. I don’t have a problem saving. I’m frugal by nature, and frugality leaves me with discretionary income.

So what do I do with my discretionary income? It’s pretty simple, I take all of my left over moolah and throw it in my savings account. Sometimes, when I’m really feeling anti-debt, I’ll take a thousand dollars out of my savings and throw it towards my student loan. Other times, I pay minimum on the loans, and keep the discretionary income in my savings account.

As far as saving for retirement, I have 5% of my gross income thrown in to my 401K. I don’t actually use a dedicated savings account for Roth IRA purposes. Since I am able to hoard so much cash, I don’t have to set aside my retirement savings separate from my main account. Periodically throughout the year, I will make contributions to my Roth IRA, from my one savings account. There is no method to my madness, but it’s what works for me.

Essentially to answer your question MattyIce. I have ABSOLUTELY NO SAVINGS PLAN. Instead of subscribing to a super complicated method, or trying to manage 8 different dedicated savings account, I throw all of my discretionary income in one account and take from it when necessary (i.e pay down student loan, contribute to Roth IRA, buy an engagement ring).

Let’s look at a few past months to see what my savings rates were…

January 2010: 48% (of net income) saved

September 2009: 11%  saved.

July 2009: 53% saved

As you can see, my savings rate is all over the place. My “non-plan plan” is much different than a lot of methods, but it’s what works for me. How do you all decide what you are saving? Do you pay yourself first? Do you save an exact percentage? Or are you like me, and just throw all your leftovers in a savings account? Do you have multiple savings accounts for different things (i.e. new car account, retirement account, kids college, etc)?

Monthly Expenses: January 2010

If the rest of 2010 is as good as January was, I’ll be a happy camper. Tutoring really gave my discretionary income a sexy little boost and I also brought home some blogging income. These side hustles are turning out to be a wonderful thing. Here’s where my money went last month…

My Income:

Blog: I don’t plan to become an advertising whore, my primary focus for blogging is on not sucking, but I’m not gonna lie and say a little income doesn’t hurt.

Salary: This income is after tax. I’m only a few paychecks away from my $12,000 pay raise! I bring home just under $1,400 every two weeks, but it should be closer to $1,650 once that raise comes.

Tutoring: January is finals week for all my high school kids, so they are desperate for some tutoring. Being knowledgeable in Algebra and Geometry is pretty much awesome. Tutoring is the easiest money I’ve ever made.

My Expenses:

Auto: How much do you spend on gas each month? I bet it’s not under $41, like I was able to get away with. Having a work vehicle is simply amazing.

Dining/Groceries: Eating is freakin’ expensive. I have a goal to spend no more than $250 and am proud to say I managed to stay under budget. I’ve always wondered how much I would spend each month if I was girl?

Interest expense: I have been making only minimum payments on this pesky loan for the last couple months. With a wedding and honeymoon pending I’m hoarding cash and holding off on the student loan accelerated payment schedule. I do plan to pay this beast off soon, but that time has not yet come.

Travel/Reimbursement: I have an airlines credit card that I get double rewards points on when I buy airfare. Last month I bought quite a bit of airfare for my family members and so that is what the reimbursements are. I wish I was planning on going somewhere, but I’m not, I just buy tickets for other people 🙂

The other categories were too unimportant or self explanatory so that is why I didn’t cover them. The overall total at the bottom is the cash I had leftover after all my expenses. I walked away with +$1,814 in January, and that kinda turns me on. I hope I can stay in the green once I get married.

* Are you wondering why I post the previous month’s expenses a couple weeks late? I use quicken to track my spending and I have to wait until the end of the billing cycle before I can download these transactions. I know I could manually add each expense as it comes, but I am entirely too lazy for that. Thanks for checking in and if you got any comments, tips, or advice I’d be more than happy to hear it. *

No difference between optimism and stupidity?

I love that people use optimism to excuse stupidity. I try to avoid being labeled a pessimist or an optimist. I much rather prefer to associate with the realists. I do consider myself a positive realist, which in my opinion, is significantly different than an optimist.

Wikipedia defines an optimist as one who generally believes that people and events are inherently good. While I would love to be able to assume most people and events are “inherently good”, I’m gonna have to keep it real and disagree. I’m pretty sure there is nothing good about terrorism, Hitler, country music, Detroit, and this guys shorts…

Did you just throw up in your mouth a little after sneaking a peek at that picture? My apologies, but I couldn’t resist.

I get really frustrated when people make stupid decisions because they have “faith” everything will work out in the end. I bet we know plenty of people that live paycheck to paycheck by choice. They spend every dollar they earn on frivolous things like $300 bar tabs, flat screen TV’s, video games, etc because they know their next paycheck can get them through the upcoming month. They use their optimism (believing that their next paycheck is an absolute) as an excuse to do financially stupid things (not establish an emergency fund). Guess what buddy, if that paycheck doesn’t come, YOU ARE SCREWED!

I’ve got news for the overly optimistic: Rainy days lie ahead, bad things are going to happen to you, and…gasp… sometimes life isn’t all rainbows and unicorns.

Don’t get me wrong, I LOVE POSITIVE PSYCHOLOGY and I hate negative people, but I get sick of people that hope for the best, only to find themselves royally screwed when things didn’t work out the way they planned. I believe you should hope for the best, but prepare for the worst. Sure I plan on having a job next month, but if for some reason the crap hits the fan, I have a decent E-fund to help me survive unemployment.

While I like the idea of ending poverty, I’m forced to face the REALITY that I will never live to see the day that happens. No matter how much we attempt to level the playing field, there will ALWAYS be people that squander away everything they have, much like there will always be people that are diligent savers. I’m really not trying to open up a political can of worms with this point, but I get so frustrated when I hear someone say “We need to put an end to poverty and spread the wealth around”. It’s hard to tell someone they are stupid for wanting to end poverty, but when their solution is to further tax the rich, they are just that… stupid. Out of fear of receiving a verbal lynching, I shall end my rant here and open the floor for discussion.

Have you had to deal with some stupidly optimistic people? Do you just bite your tongue and watch them make bad decisions or do you attempt to intervene and share some realistic input? It’s tough to tell someone they are being too positive, but sometimes it’s too important not to!

Bigger isn’t always better

I love when people say “Bigger is better.” I mean, we all know the popular Texan slogan “Everything’s bigger in Texas.” We are told we need to make a BIG income, so we can buy a HUGE house, with a LONG driveway, to park our EXPENSIVE cars in. Unfortunately, success is often measured by appearance and not by personal accomplishments. Today, I make my case for a few areas where bigger is not my priority.

Income. Like every other college graduate, I was determined to enter the workforce and bring home a big salary. The grim reality… that didn’t happen. I started my job at a solid $38K/yr (quite a bit less than the $80K/yr I felt like I was worth). But now, after a few years in the work force, and a couple promotions later, I’ve learned BIG income can mean BIG problems. After a few more years, I could begin to explore the option of pursuing supervisory type positions. They make more than I can in my current field, but their increased salary just isn’t worth it.  Sure they make $15k/year more than I will, but they don’t get to work from home, they don’t get a work vehicle, and they are responsible for a whole crap-ton of issues I would never want to deal with. Yes, they make more than me, but in my eyes, the “bigger” income is not worth the increased responsibility.

Home size. Who doesn’t drive by a ridiculously beautiful white mansion with big columns and think “Ah, that must be the good life”? I know I am guilty of “mansion envy” every now and again. But when it comes down to it, I don’t ever plan on living in a house with twice as many bedrooms as people living in it. A larger home means larger everything (i.e. property tax, maintenance costs, utility bills, more furnishings, etc). I live in San Diego in a small 2 bedroom apartment with a roommate. I hate having to dust my tiny living quarters as is, I couldn’t imagine having to dust a 5,000+ sqft home. I’ll take a moderate sized home over a mega mansion any day of the week.

Student Loans. I don’t know what clever marketing scheme the college recruiters conjured up, but they are geniuses. People are graduating from college with six figure student loans for an undergraduate degree in art therapy. WTF do you do with a degree in art therapy?! I went to a ridiculously overpriced private college, and learned my lesson the hard way. Although the school might be cool, it’s not really worth taking on MASSIVE student loans. Instead of getting $5,500/yr tuition at the University of Washington (a rather reputable school), I went to a private college that no one has ever heard of with tuition upwards of $25,000/yr. With the help of scholarships, and the parents, I managed to “only” rack up $28,000 in student loans, compared to the $120,000 loans many of my fellow classmates had. HERE ME NOW ALL PROSPECTIVE COLLEGE STUDENTS: Harvard is nice, but so is your local state school. I promise the college you get your degree from, will not be as important as you think. Bigger student loans, don’t mean a bigger income…sorry.

I could keep on going, but I think I’ve proved my point. In a culture where size matters (that’s what she said), I take a stand and say “F YOU culture.” I’ll take my modest home, slightly used car, average job, and enjoy life just fine.

How the heck as society been so clever and tricked us all in to desiring “more”? What are some other areas you can think of where bigger is definitely NOT better?

p.s .the answers to yesterdays “two truths and a lie” are both A. Good job to those who guessed right, you earn the creepy stalker award.

Two Truths and a Lie

You ever played “Two truths and a lie”? It’s often used as an ice breaking tool at social gatherings and small group meetings. Since we are all a bunch of awkward people that hide behind our blogging personas, let’s break the mother effin ice and engage in some fun.

Here’s what’s going down. I’m about two post up three pieces of information about me. You the reader, have the task to guess which two statements are fact, and which one is fabricated. This ain’t no Who Wants to Be a Millionaire, so no phoning a friend, asking the audience, or stalking me on google. Let’s see how well you, my loyal reader, know me 🙂 …

Which one is false…

A) I was arrested in Mexico for jaywalking.

B) I was on the television show Veronica Mars.

C) I’ve put a dead guy in a body bag.

Can you spot the lie? I realize anyone that doesn’t know me personally has no way of making even the slightest educated guess as to which of these is the outlier. So to make things a little more interesting I’ll post up three more financial “facts” that you can contemplate…

A) I change high-yield savings accounts regularly to ensure my dollar is always earning the highest interest.

B) I still wear jeans and shirts that I got in high school, cause I’m too stubborn to buy new clothes.

C) I only take my car to the dealership to get serviced, even though I know it’s overpriced.

Wow, thinking of three things, was a lot harder than I thought it was going to be. I tried to make them as interesting as possible, so I’m excited to see what you all guess.

In the comments below just let me know your guesses and I will post up the “lies” tomorrow (or maybe later today). Also, if you want to join in on the fun, leave your “two truths and a lie” below and we can all take guesses at them too. I bet some of you have done some wacky ‘ish.

p.s. If you have a blog, and liked this idea, feel free to steal it and post one up for your readers. And if you hated this idea, then I think you are a stupid-face.

Hypothetical questions are fun…right?

Forgive me PDITF loyalists, for I have sinned. It is way to late for me to really think of anything worth writing about, so on this glorious Friday morning, I ask a simple, but thought provoking question.

How much money would you have to be given tomorrow to go out and buy a new car?

I asked this question to the roomy and he said if he was given $200,000 tomorrow he would consider going out and buying a $50,000 car. He then turned the question around to me. I think I would have to be given a million bones before I would consider upgrading to a $30K to $40K car. My roommate and I had two very different answers, so I’m wondering how it would work for you.

I think this question is interesting for a few reasons. First, playing the hypothetical game is always fun. Second, good/reliable cars are a necessity for most of us as we spend a good chunk of time behind the wheel. But I think the most interesting piece of this question lies in the fact that cars are a depriciating asset. Wise investing says “D0n’t buy things that depreciate” but the materialist in us says “It would be so nice to have heated seats, gps, a microwave, and a wireless headset in my new car.” Cars are interesting because they are so important, yet counterproductive to our financial well being.

So here’s what I want to know…

1) What kind of car do you currently drive. (Year, Model, Street Value)

2) How much money would you have to win/inherit/steal before you would even consider changing vehicles? (Would you upgrade right away, or have to be given over $100K, $300k, etc?)

3) From that ideal amount, how much would you spend on a car? (i.e. would need to be given $500K in which I would spend $20K on a car, or would need to receive $200K in which $80K would be put towards a car, etc)

Drop your details in the section below. I suspect there will be a huge fluctuation in answers.