A (Financial) Christmas Carol

by Ninja on December 20, 2011 · 11 comments

Guest post by moneysupermarket.com

Don’t you just hate it when Christmas draws closer each year and all the personal finance blogs start with their laboured and tenuous Christmas-related posts?

You do? Oh. Well, this definitely isn’t one of those, so please read on ;)

Christmas typically means spending more time looking at your finances than we’d like to. It’s an expensive month and one where we have to make our money stretch as far as possible, in order to make it last to the New Year.

With all the furious spending and the avalanche of advertising and sales, it’s good to step back and take a look at your spending before you end up hung-over and penniless on New Year’s Day.

So, like the cautionary spirits who visited Ebenezer Scrooge in Dickens’ classic tale, I present to you the three financial spectres: The Financial Ghost of Christmas Past, The Financial Ghost of Christmas Present and The Financial Ghost of Christmas Yet to Come.

The Financial Ghost of Christmas Past

How best to make sure you don’t overspend this Christmas? Look at how you funded Christmas last year and the years before that.

If you whacked everything on a credit card and had repayment hangover which stayed with you until summer than it’s probably best to avoid using the credit card this year.

Ghost of Xmas Past

Or you could always look at the way you used the card and see if you could’ve been a little smarter about it. Did you just use the card you had at the time? Could you have shopped around for a better deal? A lower rate?

The Financial Ghost of Christmas Present

Dickens described the Ghost of Christmas Present as a jolly giant accompanied by a large feast. It’s nice to have a big meal with family and friends at Christmas, but there always seems to be a massive amount of left-overs thrown away.

Ghost of Xmas Present

Maybe think about cutting back, or at least being more pragmatic about the size of your Christmas meal this year. After all, Dickens’ Ghost of Christmas Present was able to change his size to fit into any space – so why not change the size of your meal accordingly?

The Financial Ghost of Christmas Yet to Come

 Want an incentive not to overspend this Christmas? A gaunt, towering spectre in black robes ought to do it. It was enough to scare Scrooge straight in A Christmas Carol and it might help you this year too.

If you overspend this Christmas, to the extent that it follows you into 2012, then Christmas 2012 is going to look pretty bleak. The third of Dickens’ ghostly apparitions served to show Scrooge that if he didn’t change his ways, things would get a lot worse.

Basically, when you’re spending this Christmas, think about how long you’re going to be paying it all off for and change your ways before it’s too late!

Ghost of Xmas Yet To Come

Have you dealt with any of these Xmas ghosts before? Have you done anything differently this year (spent more, less, nothing)? And just for fun, what’s your favorite Christmas movie (the correct answer is Elf or The Grinch)?

Dying sucks.

by Ninja on December 19, 2011 · 33 comments

Life insurance is arguably the most boring personal finance topic known to man. In fact, it’s so boring I’ve only talked about it once before. It’s time to try to make life insurance less miserable, and more tolerable. Are ya with me? (If you aren’t with me, this should be right up your alley).

Since Girl Ninja and I are both young, employed, and relatively healthy we have personally decided that life insurance is not at the top of our priority list. But just because we haven’t made it an uber-priority, that doesn’t mean we don’t have some protection.

Four years ago, when I started my first day of work, the human resources office shoved a bunch of paperwork my way. Without really knowing what I was doing, I ended up making some pretty responsible decisions. I began contributing 8% of my gross pay to my 401K and I signed up for not only the standard life insurance policy my agency offers, but also a little bit of additional life insurance coverage.

Ask me how much life insurance coverage I have? Wait, don’t ask me. I have no freakin’ clue what my coverage is. Ha! How’s that for staying on top of your finances? I’ve been paying for life insurance for the last four years and have no idea what I’m actually getting out of it. Let me go run the numbers.

………

Okay, I’m back. Apparently, if one of you crazy blog stalkers actually tracks me down and de-skins me, Girl Ninja will get a pay out to the tune of $162,000. Nobody tell her that, or I might end up missing tomorrow :)

Since we have no dependents and no financial obligations, we don’t plan on beefing up our life insurance coverage in the near future. Once Girl Ninja turns into a baby factory though, it’s time to man up and protect our household (literally, since we will probably own a house by that time). It’s not like I’m familiar with
Insurance Jobs UK . Insurance confuses me :)

We would likely go with a 20 year level term life insurance policy to cover myself (I don’t like whole life insurance at all). I’m thinking $1,000,000 to $2,000,000 in coverage should ensure my families well-being in the event I pay an early visit to the big man upstairs. A quick quote says a million dollar policy would cost us $35/month and a $2MM policy runs $66/month.

If I die while Girl Ninja is a stay at home mom, that puts a lot of stress on her. But if she has a few million in the bank she should easily be able to sustain the Ninja house until she finds herself a new suitor (this whole conversation is kind of morbid isn’t it?). I’d be a pretty happy person if I was able to still take care of my family even after I was gone.

We will likely take out a $500,000  to $1,000,000 policy on GN. That way, if something happens to her, we can use this money to subsidize the new childcare expenses we’d incur as I continued to work.

Okay, enough about talking about hypothetical death. It’s depressing. BUT HOLY COW! A million dollar term policy is pretty stinkin’ cheap. I think I’m paying something like $22 a month for that $162,000 policy, so I should probably cancel it next open season and just buy my own million dollar policy for ten extra bucks. Time to quit being lazy, and start protecting my family.

Do you have life insurance on anyone in your household? If yes, how much. If no, why not?

If you like whole life insurance over term, tell me why.

Why is life insurance such an incredibly UN-sexy topic?

Are you banking on Social Security?

by Ninja on December 19, 2011 · 36 comments

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.

Lifestyle inflation

by Ninja on December 16, 2011 · 31 comments

In a little over month I will receive a small raise at work to the tune of $2,447. While I’m stoked to be getting any raise at all, let’s be real, it’s not a life changing amount. In fact, it only works out to about a $75 net gain each paycheck. Big Macs on me tonight guys. Wait… too expensive, ninety-nine cent Jack in the Box tacos on me instead :)

Since Girl Ninja and I are already able to put a good chunk of our discretionary income into savings each month, we decided to be responsible and increase our retirement contributions. Instead of throwing 5% of my gross income in to my 401K each month, we increased that sucker by another 3%, for a total 8% contribution. My employer matches 5%, so in total 13% of my gross pay will be going in to my 401K plan. Is that hot or what?

So I get a $2,447 raise, and before I even have a chance to see it in my paycheck, we decide to throw $2,200 of it in to our retirement. If that’s not keeping up with the Joneses I don’t know what is. SIKE! I hate the Jones family and everything they stand for.

Since I’m a self-proclaimed PF nerd, I thought I’d run a quick calculation…

If we keep throwing that $2,200 in to our 401K plan for the next 40 years, do you want to know how much extra we’d have come retirement? This example assumes an 8% rate of return.

$765,651.82

You can see the decision was easy. Get $75 extra in each paycheck? Or have an extra $765,000 waiting for me when I’m older? I don’t know about you, but I’m picking the latter every time.

Lifestyle inflation is cool and all, but if we are already content with what we have, what else is there to inflate besides our savings, retirement, and charitable contributions? I’m not going to go run out and buy another TV or laptop just for the hell of it (pardon my language).

Last time you came in to a little extra money, what did you do with it? If you had to inflate your lifestyle in one aspect how would you do it? (We would probably dine out a little more, or maybe pay for a maid service).

We are getting shut down!!!!

by Ninja on December 14, 2011 · 19 comments

If you’ve been following the news lately I’m sure you’ve heard the federal government is due to shut down on Friday at midnight as the stopgap funding runs dry. If you’re not familiar with a shutdown, it basically means all “non-essential” operations of the federal government would cease immediately. 

That means most (if not all) National Parks would be closed. It would be darn near impossible to apply for a passport. And it would make visiting offices like the Social Security Administration a nightmare due to limited staffing. The last significant government shutdown occurred during the transition from 1995 to 1996, lasting 21 days total. For 21 days federal employees were furloughed and forced to stay at home.

What are my feelings on the shutdown? I guess if the government can’t afford to continue operations it should probably be forced to reduce its financial obligations. Just like any private business that can’t afford to pay its bills must make take drastic measures to reduce spending, the government should be no different.

I guess the scariest thing about a shutdown is you don’t know how long it will last. If you aren’t working, you aren’t getting paid. That could put a serious strain on federal employees that don’t have adequate savings established to cover their expenses for a few weeks.

How will the shutdown affect me? Fortunately (or unfortunately depending on how you look at it), my position is considered mission essential and therefore even if the government shuts down, I still have to work. I do get paid for that work though, so it’s all good.

This might make a bunch of you angry (and rightfully so), but the reason I wouldn’t mind being furloughed is that during every other shutdown in history, Congress has always authorized back payment to all the furloughed employees for the time they couldn’t work. Do you know what that means? They basically got free vacation! That’s depressing to have to keep working, when you know others are kicking back, relaxing all cool, shooting some b-ball outside of the school…and will get paid for it.

I’m thankful I have a job. Thankful my position is important enough to keep around even in the event of a shutdown (job security). And thankful that the government has to figure its stuff out before it can keep writing checks. Just like I wasn’t complaining when our salaries were frozen, I won’t complain if the government shuts down.

Do you have any opinions on the government shutdown? How long do you think it will last, do you think employees will receive back pay, etc? What cut backs (if any) have you faced at your work over the last few years (reduction in force/hours, elimination of some benefits, salary freezes)?

p.s. I’m doing my best to coerce Girl Ninja into writing a guest post during her Xmas vacation. You all should totally peer pressure her in to doing so in the comments below :)

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