A little extra cash flow never hurts.

I’m stealing this idea from My Pretty Pennies, so I better give her credit. You rock my face off girl!

Screen shot 2009-12-16 at Dec 16, 2009, 12.21.23 AMI’m addicted to making money. There is something about being productive that is rewarding, especially when you get paid for it. When I’m not working, I’m figuring out ways I can do something I enjoy and get paid for it. I’ve been tracking my “extra” income over the course of the last year and thought I would share it with you all.

I have a couple different sources of extra income…

1) Yes, this is still embarrassing, but sometimes Momma Ninja hooks her baby boy up with some cash so he can pay down his student loan. I guess this can’t really be counted as income, since I didn’t do anything to earn it, so we will call this “gift” money instead. This article explains why I am comfortable accepting donations from the bank of Mom and Dad (no people this is not an actual bank). Wanna know how much Mom Ninja has thrown my way? $2,000!!! Holy guacamole. I don’t think I realized I got this much help. I’m totally taking Mom Ninja out for ice cream when I visit over Xmas time. That’s right mom, anything you’d like….as long as it’s less than $5 🙂

2) Interest income. Year to date, I have banked $78 from my online savings account. I pretty much forget this money exists cause it just get’s totaled in with my savings balance. I really wish I was getting a 5% APY, like a couple years ago.

3) Blogging. Boo to the Ya. I wasn’t really planning on monetizing my blog, or at least I wasn’t actively pursuing making blog money. In the 8 months I’ve been around, I’ve managed to bring in $800. That averages out to $100/month. That means you all are totally paying for my gas/water/electricity each month. I need you to keep stopping by so I don’t have to take cold showers and sit in the dark. That would not be fun.

4) Tutoring. I took a huge hit in tutoring income this year. Most of my ‘my kids’ have reached their senior year of high school and are no longer required to take a math class. In 2008, I was tutoring about 8-10 hours a week. I brought home $11,000 in extra income from tutoring last year. 2009 was not so bueno. I definitely can’t complain though because any money is good, and I’m definitely not worth the $40 an hour I charge for Algebra and Geometry. This year I made $5,000 tutoring. It’s the easiest and most fun way to make a quick buck.

All totaled, I supplemented my base salary with about $6,000 of earned income and $2,000 in gift money. 2009 has been good to me and I’m hoping 2010 will be even better. As my tutoring kids get older, I’m beginning to think of new ways to make money. What are some means you all have used to bring home some extra bacon? Do you know how much supplemental income you made in 2009? What’s the easiest way to make some moolah (that doesn’t involve anything illegal)?

Popularity has a price.

Screen shot 2009-12-15 at Dec 15, 2009, 12.08.13 AMYesterday, unbeknownst to me, I was given an invitation to sit at the “cool table” (or at least the personal finance equivalent of a cool table) with all the popular kids. I woke up yesterday morning, and as usual, checked my blog’s stats first thing. Usually I have about 50 or so visitors by 7am my time. Yesterday was a different story though, I had an incredible 1,300 visitors by early morning. I knew my post on counterintuitive frugality was not the cause of this giant boost in traffic. Checking referral sites revealed The Consumerist posted a blog about my recent 401K article. Here’s a link to their article and here’s a link to mine.

Being featured on the #1 Personal Finance blog makes me smile. It resulted in more visits in one day than I usually see in an entire month, futhermore, it also increased my adsense revenue from the typical $0.12 per day to a whopping $7.04. I’m freaking rich suckers and I owe it all to Phil Villarreal. Thanks dude for referencing my post, feel free to do so whenever you’d like 🙂

I learned something yesterday though, popularity has it’s price. While I would say the majority of the comments in response to my article were positive, there were definitely some that were not-so-positive. Here were two of my favorites….

GuidedByLemons:
“I have been so focused on retirement, I completely forgot to establish a game plan for my 30’s, 40’s, and 50’s.”
Um, how about you, like, draw a paycheck during those years? By working?

You totally took my quote out of context dude. Of course I plan to draw a paycheck, but where is the harm in trying to provide extra income from short term investments? Instead of being income dependent, I’d rather have other streams of money to provide additional financial security. I’m pretty sure I never indicated a desire to lose my job and stop earning income.

Unknown:
your post is so riddled with errors, logic and factual, thats its not worth responding to.

I deleted that comment because it provided no constructive criticism and I don’t think it qualifies as English, but it did make me laugh a little bit. Some people are jerks.

I’m all for constructive criticism, in fact there were quite a few opposing views brought to my attention, but sometimes people need to take a deep breath and relax. My life is different than yours, and so are my investment strategies. I didn’t tell anyone else to reduce their 401K contributions, I simply wrote about what MY strategy was. If you don’t agree with it, that’s A-okay by me.

I think some of the consfusion comes from a misleading opening paragraph in that article. The article states I make an argument against funding your 401K up to the employer match, which isn’t true. Just to be clear…EVERYONE SHOULD CONTINUE TO FUND THEIR 401K TO GET THE EMPLOYER MATCH. I’m sure that was an unintended mistake and really not a big deal as most caught the error, but I did want to take a second to clarify.

Getting to bask in the awesomeness of being highlighted on The Consumerist was definitely the best part of my day, even though some people made their best attempts to bring me down. In the words of Miley Cyrus…

There’s always going to be another mountain
I’m always going to want to make it move
Always going to be an uphill battle,
Sometimes I’m going to have to punch someone in the face lose.

Playing with the popular kids for a day sure was nice, but part of me is definitely relieved to be dealing with my normal PF commenters and readers again. I love you all in a totally non-erotic way 🙂

Counterintuitive Frugality

Screen shot 2009-12-13 at Dec 13, 2009, 11.06.45 PMIn case ya didn’t notice, it’s Christmas time. Don’t worry though, this isn’t going to be another PF article about how to save money on your Xmas shopping. Saving money and finding deals, is something I am going to let you figure out on your own. I do plan, however, to talk a little bit about the Xmas gift experience.

I’m a pretty frugal ninja, as if you didn’t already know that. I try to cut costs by any means necessary so I have more money to save, invest, and give. I’m the guy that buys the generic brand cereals,  ketchups, and underwear just to save a little bit of money. It might not taste as good, or fit just right, but my pocketbook thanks me 🙂 While frugality may be a part of my DNA, Xmas is the one time of the year I am totally fine droppin’ some dollar bills.

I get anxiety over spending $20 on myself at the grocery store, but can drop $100 on a gift for my girlfriend with out an ounce of stress. Something about giving gifts, cancels out the anxiety of spending money. I think it can be summed up by this math rule…

Screen shot 2009-12-13 at Dec 13, 2009, 10.19.09 PM

The math clearly shows when I spend money, I can be a happy ninja, as long as a friend benefits along the way (not to be confused with “friends with benefits“).

Like most of you, December is usually my most expensive month. I personally don’t limit my Xmas spending to a certain dollar amount, probably because I don’t take the time to set aside an Xmas savings account. Some years I’ll spend $100, other years I’ll spend $300, and this year I’ll spend even more.

One would expect a frugal person to freak out after spending an abnormal amount of money, but for me it’s no problem. Do any of you experience a similar counterintuitive frugality? Is it easier for you to spend money on someone else rather than yourself? Why do you think that is? I’ve finished my Xmas shopping this year, have you?

p.s. If you are reading this via a feed reader, I recommend you stop by and actually check out my website as I put up my Xmas banner last Thursday….let’s just say I think I’ll be on the naughty list this year.

My 401K is gonna be pissed!

Screen shot 2009-12-10 at Dec 10, 2009, 11.38.09 PMI made a pretty impulsive move yesterday. I decided to reduce my 401K contributions from 8% of my gross salary to 5%. *Gasp* Yes, that does mean I am going to have less in my retirement accounts, but don’t worry, I have a ninja-riffic plan in the works. If you read my post on Monday, you know I’m flirting with the idea of living outside of my spreadsheet. As a result, my net worth come retirement may be a little lower, but I think my overall quality of life will improve.

There were a few things that lead to my decision to decrease my contributions.

1) I was contributing 8% to my 401K and fully funding my Roth IRA each year. At my current income ($50K) that works out to 18% of my gross income being invested in retirement accounts. If you keep up with PF blogs, news stories, and TV shows, you’ll notice almost all ‘experts’ recommend a 20-something individual save between 10%-15% of his gross income for retirement. I was contributing 3% more than the average recommendation. Obviously, the more you contribute, the richer you will likely be. But I don’t really care if I have $3MM or $4MM in my account come retirement, as long as I have enough to live a comfortable lifestyle I’ll be a happy ninja. Oh, and the government only matches 5% anyways.

2) I essentially just gave myself a 3% raise. I have contributed 8% to my 401K since my first day of work (at the ripe age of 22). I’ve totally learned to manage my money being 8% poorer than I could be. I now will be taking home about $1,200 more per year (after taxes). That’s $1,200 I can use to save for a house, take a vacation, buy a moped, or rent out an entire movie theater for a private viewing of Twilight III. Sure, most of those expenses are not necessary, but don’t forget, I’ll still be socking away 15% for my gray hair days ahead.

3) The third, and probably most important, reason I decided to reduce my retirement contribution by 3% is this: I had no plans for the short term. Sure saving 18% for retirement is great, but guess what? That doesn’t make me rich until I’m 60 years old. What if I want to have a good chunk of change accessible in my 40’s? What if I want to retire early, but don’t want to be penalized for withdrawing from my retirement accounts? Well my friends, this is where the ‘short-term’ investing game comes in to play. I have to start exploring other means to grow my money. I have been so focused on retirement, I completely forgot to establish a game plan for my 30’s, 40’s, and 50’s.

Sure, I am taking away 3% from my retirement accounts each year, but that doesn’t mean I’m going to waste it. Instead I will transfer that money in to an investment vehicle of my choosing (stocks, bonds, etc). I need to start growing money for a 5, 10, and 20 year time horizon so I can do things like pay cash for the next vehicle I purchase, move up in house as my family size grows, pay for my kids college, and basically enjoy pre-retirement life.

As long as I contribute 15% of my gross income towards retirement, I have no need need (or reason) to contribute more. I’ve realized for me, anything above that 15% mark can be better served in short term mutual funds, real estate, cash, and bonds.

If you aren’t sure what percentage of your income you should be setting towards retirement, ask yourself this question. Would you rather have access to $6MM at age 60, or access to $1MM at age 45 and $3MM by age 60. I use to think I wanted $10MM all at retirement, but I now think I’d be just fine with $3MM in retirement if it meant I had $1MM available to me much sooner.

I have a couple questions for you all, how much do you contribute to retirement (if any), how much would you ideally like to contribute to retirement (if you are currently meeting that goal), and would you rather have $6MM at age 60, or $1MM at 45 and $3MM at age 60? What strategies have you established for pre-retirement goals? What short term investment vehicles do you recommend? Do you think I’m crazy? Any helpful hints, tips, and criticism is greatly appreciated 🙂

My credit score: A love/hate relationship

Screen shot 2009-12-09 at Dec 9, 2009, 10.37.26 PMWhat’s that saying? Oh that’s right, “Damned if you do and damned if you don’t.” I’ve never really had a reason to use this phrase before, but when it comes to my FICO score, it is the first thing that comes to mind. The only way to have a high FICO score is to continually be borrowing money. This causes a problem when your blogs name is Punch Debt In The Face. How can I possibly strive to have a high FICO score, but swear off virtually all debt? Unfortunately, I’m not sure I can answer that question, but I’m gonna give it my best shot.

For those that don’t know, your FICO score is basically a measure of how likely you are to repay your debts. A high FICO score, means you will probably make most payments on time, with few (if any) hiccups. A low FICO score, indicates a high probability you will make late or no payments rather frequently.

There are five main categories that make up each individuals FICO score…

* Payment History (timliness of repayment)
* Amounts Owed (available credit compared to credit used)
* Length of Credit (length of time you’ve had the account)
* New Credit (how frequently are you opening new accounts)
* Type of Credit (student loans, car loans, credit cards, etc)

Now that you know the components of your FICO score, lets talk about why it’s important. I assume most of my 20 something readers are like myself and  hope to one day purchase a home. I would also assume most of us plan to take out a loan to purchase said home (if you are planning on paying 100% cash, you need not continue reading).

Did you know your FICO score plays a huge factor in your ability to purchase the home of your dreams. Let’s run through a little hypothetical situation…

Johnny has a terrible credit score and walks in to his local bank to apply for a $200,000 mortgage on his dream home. Ninja also walks in to the same bank to apply for a $200,000 mortgage, but Ninja has a very high credit score. There is a good chance the bank is going to reject Johnny’s application, therefore crushing his dreams of being a homeowner. But let’s say they don’t. Let’s pretend they decide to qualify Johnny for that loan. The bank gives Ninja a low interest rate of 4.75% because he is not a risky person to loan money to. With Johnny however, the bank has taken on some risk by giving him a loan, so they decide to charge him an interest rate of 6%. Ninja’s total interest paid over 30 years is going to be $175K, meanwhile Johnny’s going to have paid over $230K in interest. That’s a $55K difference for taking out the same loan from the same bank. High credit scores generally result in better financing options.

Here’s the problem. The only way to have a high credit score is to be continually borrow money. You’ll notice all five components of the credit score require you to have credit available to you (aka you have to be in debt). What if you are like me and have sworn off incurring future debt, except for a mortgage, and are aggressively working to get rid of all current debt? Fortunately there is at least one way to continually be “borrowing” money, without actually being in debt.

I use my credit card for every purchase I make. By the end of each month, my balance is usually around $1,500. I then pay off this balance in full, so I incur no interest charges. My CC company will then report this information to the credit agencies. Since I made my payment on time, my credit score is going to continue to increase. It’s a simple, yet effective way, to raise your credit score, without having to pay for it.

This is the only free way to raise your credit score I know of. Does anyone else know of other ways to raise your credit score without going in to debt? Let me know ’cause I’d be very curious to hear them! At the end of the day I really wish credit scores didn’t exist, but the reality is they do, and they are frustratingly important.

Don’t call your girlfriend a muffin top…

Screen shot 2009-12-09 at Dec 9, 2009, 7.47.12 AMIf you follow me on twitter you know exactly what I’m talking about. If you don’t follow me on twitter then you’re dumb let me fill you in. Last night I was kickin’ it with the cutest girl I know, Girl Ninja. She was looking mighty fine so I thought I needed to pay her a little compliment. I put out my arms (hoping for a hug) and said “Come here, you cute little muffin top.” Whoa, hold the phone. What just came out of my mouth? Did I really just call my girlfriend a muffin top? I’m sure it is no surprise she was less than excited to hug me.*For those that don’t know, muffin top is often used as a way to describe a females love handles*

Looking back I have concluded there are two reasons I called her ‘muffin top’.

1) We went to Costco together on Sunday and I bought a dozen blueberry muffins (costco muffins are the bomb dot com!). I figure my brain had subconsciously formed a symbiotic relationship between my girlfriend and muffins.

2) The top of the muffin is the best part. Seriously, who doesn’t love a muffin’s top? What I must have meant is Girl Ninja is my favorite person in the world, much like the top of a muffin is the best food in the world.

One thing is darn sure. I was in no way implying Girl Ninja has a muffin top. She is in great shape and is seriously disciplined when it comes to eating healthy and exercising. Okay, now that I’ve clarified my stupidity, let’s move on to the purpose of today’s post…

Miscommunication can be deadly and a lack of communication can be even worse.

Wanna know just a few ways banks make the ridiculous profits they do? They intentionally miscommunicate things to you, the borrower. Here are two examples…

1) Bank XYZ offers you a 0% credit card offer. Sweet, can’t beat 0% right? Wrong, you better make sure you read all the fine print. Did you know your 0% offer is only good for a defined length of time, usually 3, 6, or 12 months? Did you know if you are late just one day on a payment, your account will be considered ‘in default’ and your 0% APR will now be 30%? Did you know some banks only offer you 0% interest on a predetermined amount of money, like the first $1,000 charged. Banks hope you will be enticed by the big number zero and they pray you don’t take the time to read the credit card contract to see what you are actually signing up for.

2) Bank of America and I had a huge miscommunication  a few weeks ago. I use to have my online savings account with Countrywide. I could deposit and withdraw money from the account at no cost to me. Earlier in the year, BoA acquired Countrywide and I became BoA’s newest customer. I had no issues with them until I went to make my first withdrawal from my savings. BoA was going to charge me $3 each time I withdrew money from my savings account. WTF? You are gonna charge me to access my own money? Apparently BoA had switched the countrywide policy and was including a $3 fee on all withdrawals. I definitely don’t remember that being communicated to me. I went down to the local BoA branch, took all my money out, and am now a proud customer of ING. I hate you Bank of America.

Here are a couple pictures in which harmless messages became rather hilarious, due to a little miscommunication…

epic-fail-banner-fail

epic-fail-g-spot-fail

See what a lack of communication can do? I don’t really think the first banner intended to say “Up yours” to the entire community and I definitely don’t think the kids club in the second picture was trying to educate little ninjas on the G-spot (whatever that is ;)). It’s imperative that you make sure you understand the coverage that comes with your renters/homeowners insurance, that you understand the terms and fees associated with your credit card, that you know the history behind the guy that manages your mutual fund.

I was a total unintentional douche to Girl Ninja last night. Has anyone else ever been a victim of miscommunication? Any bank ever tried to screw you? Ever signed up for something and were promised one thing, but ended up getting something completely different? Ever insulted someone, when you meant to give them a compliment? I learned a valuable lesson last night, hopefully my male readers wont make the same mistake I did with their significant others 🙂

Punch Debbie In the Face

Screen shot 2009-12-07 at Dec 7, 2009, 11.33.55 PM
Now I’m not one to support physical violence towards women, but I’ll tell you right now if Debbie Downer ever finds her way around my neck of the woods, I’m gonna knock her out. For those of you that don’t know Debbie, let me introduce you to her. She is the person that points out the one stain on your carpet after you just cleaned your whole house. She’s the girl that that  reminds you of your love handles after you just got back from a run. Debbie is a professional mood killer. Debbie is a downer.

I’m a huge believer in the power of positive psychology. Penn State defines positive psychology as the scientific study of the strengths and virtues that enable individuals and communities to thrive. I define positive psychology as an inherit desire to be AWESOME. I consider myself to be a pretty positive ninja. For example, I’m positive that I hate negative people.

I have a goal to have $6MM in my bank account when I retire. I can’t tell you how many people say “It’s nice that you ‘think’ you’ll have that much, but what if….you lose your job…. your accounts don’t provide the returns you anticipate… you have unforeseen medical issues ” Umm excuse me, don’t be bringing your “what ifs” around here, I don’t need them. Maybe the stock market will crumble, maybe I’ll lose my job, and maybe I will contract gonorrhea of the mouth, but I’m sure as heck not going to live my life waiting to see if those things happen.

Look here Debbie Downer, I have goals and your negativity can’t keep me from reachin’ them. Do you all know someone that seems to be a professional mood killer? Someone that always finds something to complain about?  How do you deal with them? I just don’t have the patience to tolerate it and I just tell them if they want to be negative they need to go do it somewhere else. Life’s too short, don’t be a Debbie Downer.