M is for Money

Here is the situation: Your darling aunt Pattie has invited you out to dinner, her treat. Unfortunately aunt Pattie is a terrible tipper, thereby insulting otherwise decent servers and embarrassing everyone in the process. What can you do in this situation?

I have my own aunt Pattie. My late grandmother never left more than two singles as a tip, no matter what the bill was. Now $2 may have been a great tip back in 1955, but it certainly wasn’t come 2005. I always felt bad for the servers, it wasn’t their fault she left a lousy tip. Finally I came up with a solution, so here are a few tips, ha ha, for dealing with lousy tippers.

Option 1 – Offer to Pay the Tip

Whenever we are treated to a meal now we always offer to cover the tip, even with people whom we know are great tippers. It is our contribution to the cost and a way of saying thanks to our host. If you are dining on the dime of a terrible tipper, offer to cover the tip. They may appreciate the savings, and your concerns about an adequate tip are taken care of. Of course they may say no, they have it covered. In which case you have to go to Plan B.

Option 2 – Sneak in a Few Extra Bucks

This was my solution with my grandmother, before we left the table I would carefully slip a few dollars out of my wallet. As she got up to leave I would linger behind for a minute and slip the extra money in with the tip she left. You could also excuse yourself to go to the restroom beforehand and give the money to the manager or server directly. Either way, you have discreetly dealt with your terrible tipper and saved embarrassment all around. In group situations, you can always make up the shortfall with your own money. Sure it sucks, but either way someone is getting screwed. Just make a mental note not to dine with that group again!

Option 3 – Dine on your Own Dime

Instead of being at the mercy of a terrible tipper, turn the tables and invite them out to dine. Now the tip is in your control, just don’t let them offer to pay it when the bill comes or you’ll be the one with egg on your face!

If leaving restaurant servers with a decent tip is important to you, take control of the situation. You don’t have to be at the mercy of a terrible tipper, you are free to add your own money to make it up. Don’t call out the person on their poor tipping habits, they are likely to take offense and not likely to change. You are always free to decline the invitation if none of these solutions work for you.


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It’s that time again, time to think about the year to come and where we want to be financially a year from now. I use these financial goals to help focus us, it’s easy to get caught up in today, meanwhile losing sight of tomorrow. I use these financial goals to motivate us, each year we have a well defined challenge to meet. These goals are the building blocks of our bigger dreams – starting a family, buying a new home and eventually, early retirement. So what challenges am I setting for us for the coming year?

Wedding - $5000

The venue and date are set – Sept 18, 2010. Fortunately my parents are helping with much of the expense, but we don’t expect them to cover it all. Plus knowing my dad, it’s not certain he will actually come through with the money he promised. $5000 is our current commitment to the big day, I hope it won’t have to be more.

Cash Savings - $12,000

Our cash balance got hit hard this year, we spent nearly $15,000 redoing the electrical and plumbing systems in our house. This leaves me feeling vulnerable, without enough of an emergency fund. Hence rebuilding our savings is a major focus for next year. I was hoping we could move on to some of our early retirement goals, but instead we must deal with the problem at hand. This is how financial planning often goes, your needs are certain to change during the year. With another $12,000 added to the balance, we should end 2010 with at least $20,000 in cash savings.

Taxable Investing - $6000

My original dream was to start ramping up our investments next year, but that will have to wait until 2011. Unless our financial situation dramatically improves, my plan is to stick with our current $500 a month investment for the foreseeable future.

Roth IRA - $4000

My Roth is another victim of our cash poor status, I was planning to ramp up our investment to the maximum next year. Instead I think $4000 is more realistic, at least until the wedding passes or we reach some of our other goals. Hey at least I finally started one this year!

Work 401(k) - $11,000

In January I will bump up my 401(k) contributions by another percentage point, I plan to keep doing this every year until I reach the maximum allowed. This is the slow, steady and less painful method to increase your contributions. Since I have other retirement accounts, like the Roth and company ESOP, I don’t worry too much about maxing out my 401(k). Crazy I know.

Net Worth - $140,000

Net worth goals can be a little harder to achieve compared to some of the other goals I just listed. While I can control how much I invest each month, I cannot control the end value of that investment based on market forces. If the market has another bad year like 2008, this goal will be impossible. If we have another year like 2009, this goal should be easy.

There are some things contributing to my net worth that you don’t see in these goals, like the company ESOP. This next year I will vest in another large portion of company stock, though I have no idea what the price will be. This money along with my employer’s 401(k) match (only given once a year in the winter) will help propel us forward. This past year I went out on a limb with my net worth goal, and greatly exceeded it. Let’s hope the same thing happens next year!


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It took awhile but we finally found our wedding venue. It meets most if not all of our requirements – outdoors, beautiful setting, flexible policies and available for a daytime event. As a bonus, it includes indoor space, which will come in handy in case the weather doesn’t cooperate. But the best part of all, it is the cheapest venue we looked at. So how did we find the perfect place for an even more perfect price? We chose to get married on public property.

Before you start thinking the local public park with picnic benches, a duck pond and the crazy guy feeding the pigeons, let me correct you. Public spaces can be more than just the local park or beach, in this case the location is an old estate now owned by the city. There are formal gardens and a courtyard along with the house and guest house, and we get access to them all. No dirty park restrooms here! Even better the rental includes security to separate our private event from people coming to enjoy the public property.

Public Spaces for Every Type of Event

Your local park is only one type of public space, there are also mansions, museums, historical monuments and cultural landmarks that are available to rent. Another option - botanical gardens or arboretums, which come perfectly dressed for a wedding. During my venue search I found that many cities had a section of their website devoted to special event rentals, a page listing all of the city owned properties where you could get married. Many have special rates for city residents, although ours happens to charge the same rate for everyone. Local historical societies are another resource, I found a great page at the LA Conservancy website listing historical venues for rent around the greater LA area.

Public Usually Equals Lower Price

Public spaces are subsidized by taxpayers and donors, they do not rely on your rental dollars to stay open. They rarely advertise and do not have big marketing budgets to support. Most of all, they are not trying to profit off of your wedding. All of these factors help keep the cost lower when you rent a public place, although this is not always the case. I found some public venues that were more expensive than their private counterparts. Obviously smart cities will set their rates based on demand and will charge what they think the market will bear.

Definite Drawbacks

Of course there are drawbacks to holding your wedding on public property. Often events are restricted to non-public hours, meaning you have limited time to hold your wedding and no flexibility. If you are allowed a daytime event, public party crashers are a potential problem. Some locations, like ours, do try to keep the public away from your private event. Still you might find they have too many restrictions, like no dancing or no amplified music. Another big drawback for many brides – catering to your wedding is not that important to a public place and they may offer only limited support. Our venue is very liberal and flexible with their policies, but you are own your own to set up everything. They will not hold your hand as you try to figure out rentals and catering and vendors, while a private wedding location will likely have package deals in place. For our wedding and our plans, a public venue offers both the atmosphere we desire and a price we can afford.

Have you ever been guilty of giving a gift that costs the recipient money? I know I have done it, though at times it was inadvertent. For example, once I gave my parents a year’s subscription to Netflix. I thought they would enjoy the ease of getting movies at home, my mom loves renting movies but hates going to the video store. Of course as soon as that year was up, it was on them to continue the monthly service. Subscriptions are only one type of gift that could end up costing money.

This year we got an awesome gift, a PS3. But in order to use it we have to spend money, the new system is not backwards compatible with PS2 games. So we need to buy a few games. It only comes with a single controller, to play together we need to buy a second one. Fortunately we already have an assortment of cables to hook it up with and a wi-fi system to connect it to. But so far this gift has cost us $135.

I did give a gift that cost money this year too, my mom asked for a way to listen to music. We opted to buy her an Ipod Nano in her favorite color. Of course music isn’t free, so we also gave her a gift certificate to the I tunes store. It’s not much, but it’s a start. With a gadget like music players, it’s possible the recipient will spend hundreds of dollars enjoying the new toy. This is the danger of many gifts.

Gifts that cost money to use aren’t necessarily bad gifts, but they must be given with caution. Is this something the person would purchase for themselves if you did not buy it for them? Will they actually use and enjoy the gift? Even more importantly, can they afford the extra cost? You can also help to defray some of the expense, like providing a gift certificate to go along with that new gadget. This way they can get the accessories they need without having to dig into their own pocketbook. Next time you are shopping for gifts, ask yourself if you are doing the recipient a favor by buying them a gift that will cost money to maintain.

I hope everyone is having a lovely holiday. Unfortunately for me, it’s back to work tomorrow. I am saving up my vacation time for a wedding and honeymoon next year, so I have opted to work through the holidays. I took Christmas Eve off to get ready for the big day, I had a few last minute items to pick up. Of course I made the mistake of buying a few last minute gifts as well, even though I had already spent my holiday budget. A few things did not arrive in time and I saw some practical gifts that I knew Mr. M would appreciate. Now how to pay for all of it?

This past week’s carnivals:

-Carnival of Money Stories hosted at Almost Frugal: Multi Generational Households
-Money Hacks Carnival was hosted by Own the Dollar: Year End Tax Moves for 2009
-Carnival of Personal Finance hosted by Mighty Bargain Hunter: Money and Etiquette – Holiday Tipping


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Today I am featuring a guest post from Ask Mr. Credit Card, who delves into the world of all things credit card on his site. It's a great place to start when you are shopping for your next card, his comparison charts helped me to sort through the blinding array of rewards and features available. Also, he was kind enough to include a guest post of my own on his site today, so please stop on by and read about the process I took when I chose my latest credit card.


Hi, this is Mr Credit Card. I saw a recent post by Miss M highlighting her achievements with regards to her 2009 financial goals. Today, I would like to talk about specific "credit card goals" - or rather goals that can be achieved with the proper use of credit cards. If you're interested in getting a new card, please feel free to drop by and check out some credit card offers on our site.

Miss M recently looked backed at her 2009 goals, broke them down and accounted for whether she achieved them or not. I would like to talk briefly about how credit cards can be used to achieve some financial goals. I recently wrote a guest post here suggesting ways for Miss M to save reward points to use for her honeymoon. Here are some other tips you can use.

Do the equivalent of mortgage refinance - If rates are lower and your credit is in decent shape, the obvious advice most folks would give you (if you have a mortgage) is to consider a mortgage refinance. You obviously have to weigh the factors of upfront fees and refinancing cost, but if saves money in the long haul, it makes sense. What if you have credit card debt? Credit cards can be used that way because credit card issuers tend to have 0% balance transfer offers to entice new sign ups from consumers. If you have credit card debt, you obviously have to set up a debt reduction plan to gradually (or quickly) pay off your credit card debt. But you should always look into getting a card with a lower rate to pay off your debt faster and lower your interest bills. The extra cash can be used to pay off more principal (snowball!).

For folks who have seen their interest rate jacked up to ridiculous levels and if you still have great credit, this strategy is a no-brainer.

Save money on an on-going basis - Credit cards can help you save money on an ongoing basis? How? By simply using credit cards with cash back rewards. Every item that you charge to your card earns you cash rebate. Many couponers (as they call themselves) spend hours cutting coupons and timing their supermarket trips to get the best deals and as a result, they generally save tons of money simply by being savvy about it. Many of them stack both manufacturers coupons and store coupons to save even more. Well, you can do the triple stack by using a cash back credit card. The best cash back credit cards tend to give more than 1% rebates on things like gasoline, supermarkets etc. Just make sure you find the right card, or combine cards to save money. To top it off, many cards these days have shopping portals where you can simply login into your account, shop online with merchant's partners and earn extra cash rebates.

Another way to earn ongoing cash rebates is to put your ongoing utility bills on your credit card. So rather than paying Verizon or Comcast directly, you might as well pay these with your credit card (assuming you take the advice and get one with a reward card). Make sure you set up autopay so you will never be late for your payment. This way, you will truly earn points or cash rebates on things you would have to pay anyway.

Improve your credit score - Let's say you are looking to buy a house in two or three years time and you are saving hard for your downpayment. Well, one of your goals should be to improve your credit score so that you can get the best mortgage rates for yourself. Well, one of the ways you get actually get a higher score to increase the amount of credit that is available to you. And one way to do it is simply get a new credit card. Credit Utilization ratio is one of the key factors in determining your credit score. That is the amount of credit you use versus the amount that is available to you. So if you have a two or three year horizon, you could simply apply for a new card once every year, or simply get one card and ask for a credit line increase periodically. In fact, if you pay your bills in full and use below 20% of the available credit given to you, you might even get an automatic increase without asking. Obviously, you have to make sure you pay your bills on time and monitor your credit reports diligently.

Be Specific - When you are sitting down and setting your goals, I think it pays to be specific. For example, if you are planning to get a 0% intro card, doing the exact calculations as to how much you will be saving. Ask the credit card issuer what is the minimum payment on these 0% deals. Figure out the difference between your current interest you are paying and what would be your new interest rate. You have to able to say if with this strategy, you will save $X every month for 12 months and repay $X amount of principal.

Or if you are looking at a cash back card, look at your past spending and calculate how much you expect to save next year by using a cash rebate credit card. You should be able to say I plan to save $X through credit card rebates. If you are looking to decrease your credit utilization ratio, then be specific. Have a goal to getting $X additional credit lines in say two years.

Your financial goals should obviously include debt reduction, retirement savings and the usual stuff. But do not forget that the "proper use" of credit cards as a tactic can help you in your financial goals as well.

Only this is a very different tale from that last hit and run. Mr. M was driving home from Target the other day, just a few blocks from our house. Our hillside neighborhood has narrow and winding streets, with parking allowed on one side of the road. A lady was walking down the sidewalk with her back to Mr. M. while talking on a cell phone. All of sudden and without looking, she stepped off the sidewalk right in front of the Durango! Mr. M had no time to stop, he braked and hit her doing about 15 mph. He said the impact sent her flying about 10 ft before she tumbled down the road. He stopped to check on her, she got to her feet, grabbed her phone and apologized for causing the accident. She just said “I’m sorry, I’m sorry, I have to go”. She then hopped in a car, the one she was apparently crossing over to when she stepped into the road, and took off before he had a chance to react. He stood in there in shock as she drove away, in fact he was so shaken up he didn’t know what to do, so he called me. My advice – call the police and file a report.

So he called the local police station to ask what he should do. First, I should note that our local station serves a rather violent and gang infested section of the city. Short of murder, they don’t really care what goes on in their district. Your local police are hopefully more helpful in these situations. When he explained what had happened, the officer asked him why he was bothering the police. Mr. M told them he wanted to have a report of the incident, so the lady doesn’t come back some time in the future and claim the accident was Mr. M’s fault. The officer asked if the accident had caused any damage to the truck. Of course it hadn’t, when a big, hulking SUV meets a little tiny human, the SUV wins. The officer said there wasn’t anything he could do, there was no damage so there was no crime. He checked their logs and the pedestrian hasn’t contacted them, so there was nothing he was going to do. His only advice, call back in a few days and see if anyone has filed a report. If not, forget it ever happened. I fear that won’t be so easy for us.

Since the police we’re no help, I told Mr. M to record everything he remembers about the accident. Write down the time of day, conditions, the fact that she was on a cell phone and any personal details he could remember, like what she was wearing and the color of the car she left in. Memories fade quickly so it’s important to note everything you remember as soon as possible. Now all we can do is wait, hope and wonder why she took off like that? Is she an illegal fearful of attracting the police, wanted for something or was she high? My other guess was that she was horribly embarrassed, even small children know not to walk into the street without looking first. It’s pretty stupid to step in front of an oncoming car while talking on your cell phone. I wonder, how often do you get hit and run by a pedestrian? Pretty weird.


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We’ve all received gifts that simply do not suit us. For me, collectibles fall into that category. I don’t have enough space for the stuff I already have, please don’t give me any more. That doesn’t mean they aren’t the perfect gift - for someone else. This brings us the age old dilemma – when is it OK to regift?

Is Regifting Acceptable: Yes and No

Regifting can be a practical and economical solution to the problem of presents you don’t want. You have no use for it, why not give it to someone who will use it? But too often the motivation is nothing short of cheapness, a way to save a buck. Re-gifting isn’t a means to pawn off junk on unsuspecting friends and relatives. There are other ways of disposing of trash. But even when you have the best intentions, regifting is a tricky minefield to navigate.

Regifting Done Right

First and foremost, the object you plan to pass along must be unused. Anything less is cheap and tacky. An exception of course would be antiques or vintage items, which were probably used by someone. Also never give something that has been displayed in your home, the recipient might recognize that one of a kind clock the minute the wrapping comes off. Second, you should regift outside the social circle, the people surrounding the original gift giver. Otherwise you risk your aunt Jackie discovering you gave away that clown shaped coffee mug to your cousin Evelyn. Finally, the item you regift should be something the recipient will truly appreciate. Regifting is a way of passing along an object to a home where it will find use and value, not a way to unload stuff you don’t want. Goodwill is a good alternative for the things that you, and no one else you know, would treasure. So next time you receive that great for someone else gift, set is aside for that special person. Regifting done right is both socially acceptable and environmentally friendly.

While presents are nice, my favorite part of the holidays are the family traditions. Foremost – Christmas cookies. Every year my mother and I descend on the kitchen in a flurry of flour and sugar, not resting until we’re exhausted or we’ve run out ideas. The cookies are only a side light, the real treat is the time spent together in an annual rite of passage. There are certain recipes we make every year, certain roles we each take on. We’ll always mix in something new, allowing traditions to take shape and evolve with time. It’s comforting but not stale. Christmas cookie day is Mr. M’s favorite part of the holiday too, he is happy to be the designated taster. It just goes to show the best parts of the holidays, don’t have to cost a lot. Simple annual traditions have powerful meaning, making Christmas a special time of year regardless of expensive gifts and grand gestures.

This week’s carnivals:

-Well Heeled hosted a clever fairy tale themed Carnival of Personal Finance: Murphy’s Law of Personal Finance

-Len Penzo hosted a humorous Money Hacks Carnival: How Much Cash do you Carry?


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Once upon a time many generations of a family lived together under one roof. But in Modern America, such an arrangement is seen as unusual. In our society, children are expected to move outward and onward soon after reaching adulthood. Anything less is certain to invite gossip, despite some obvious advantages to sharing a house with your folks. Let me share a story.

J is my right hand man at work, I lean on him a lot. He is about a decade older than me and never married. He also lives with his parents, but he defies all the stereotypes of a guy still living at home. He isn’t a slacker, he works hard and earns a good living. He isn’t a mooch, every weekend he and his dad work on projects together. They keep up the house and sometimes build custom furniture that his father sells . Also, he pays his parents rent each month (yes I asked, these things interest me). OK he probably qualifies as a dork, but so does everyone I work with. We’re an engineering firm, what do you expect. Today I found out the backstory.

Back in the first part of the decade, his parents asked him to move home. He is the oldest child, the only boy with three younger sisters! His parents were getting older and didn’t have the energy to deal with a wild teenager on their own. He stepped in to help raise his sister and figured he could save money at the same time. This was just before real estate really took off in California, so save as he might the prices grew out of his reach. So he stayed and stayed and here he is years later still living at home. I think he has quite the down payment saved! At this point he is ready to move out and move on, the sisters are all grown up now. But it seems like the arrangement has worked pretty well for him.

Given the obvious benefits of sharing a family household:

-lower cost of living
-sharing of household labor
-help with childcare

you wonder why more people don’t chose to live with their folks, at least temporarily as they are establishing themselves as an adult. The current recession has made such households more common, many young adults are returning home since they cannot find work. But I wonder if such a trend will last given the social stigma attached to adults living with their parents. People like my co-worker J seem to be the exception.


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To tip or not to tip, that is the question

Many people find themselves flummoxed at holiday time, it is customary to tip the people providing us services at the end of the year. It shows your appreciation for the job they do and hopefully, in turn they will work harder to make you happy. But who do you tip and how much is appropriate?

First, as with any etiquette question there are no hard and fast rules to follow. You have to go with your gut, everyone’s situation is unique. I don’t have to worry about whether to give my chauffer a tip or not, cause I don’t have one! But maybe you do, and yes you should probably tip him or her.

Who to Tip

You typically tip service providers, people like waitresses and valets. At holiday time you should acknowledge the people who make your daily life easier, especially those who get no recognition the rest of the year. Here are just a few of the people whom etiquette says should receive a tip this time of the year:

Housekeepers
Dog Walkers
Babysitters and Nannies
Day Care Providers
Personal Trainers
Doormen
Gardener
Building Superintendent
Newspaper Delivery Person
Garbage Person
Mail Carriers
Parking Attendants at work or home
Hairdressers and Manicurists
Personal Assistants

This list may or may not apply to you. Generally you only tip people who have provided you with regular service throughout the year, no need to tip the paperboy if you just moved into the neighborhood. Also, if you give your hairdresser a generous tip each time you go to the salon, it’s not really necessary to stop by in December just to tip them more. They already know you appreciate them.

What to Tip

Tips are typically given as cash, but that is not always appropriate. For example, mail carriers are not allowed to accept cash. In this case, a small gift will do. Also, if money is tight a homemade gift is an acceptable substitute. Better to acknowledge the person somehow than ignore them completely. Here is a rough guideline on what to tip each of our service providers:

Housekeepers – cash or gift equal to 1 week’s pay
Dog Walkers - cash or gift equal to 1 week’s pay
Babysitters – one night’s pay
Nannies – one week’s pay
Day Care Providers – cash or small gift to each person caring for your child
Personal Trainers – 1 session’s pay
Doormen – cash or gift ($15+ value)
Gardener – cash or gift ($20+ value)
Building Superintendent - cash or gift ($20+ value)
Newspaper Delivery Person - $10 to $20 cash
Garbage Person – small gift or cash, check your local rules
Mail Carriers – only gifts under $20 per federal rules
Parking Attendants - small gift or cash ($10 - $20)
Hairdressers and Manicurists – cost of one session
Personal Assistants – one week’s pay

How much to tip also depends on the nature of your relationship, where you live and many other factors. You should take these numbers as suggestions only and tailor your tipping to fit your situation. Also, tipping every single person on this list could get out of hand! You may decide just to tip a few of the more important people in your life rather than stretch yourself thin to tip everyone. Remember there is no right or wrong answer to how much to tip. Ask yourself how valuable that person is and the service they provide. Show the people who are important to you that you appreciate their services and they are certain to remember.


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Remember that time in college you signed up for a credit card just to get the free t-shirt? Well this giveaway is way more awesome! Ask Mr. Credit Card, courtesy of the fine folks at American Express, is giving away 10 Flip Video Cameras to lucky readers. Entering is easy:

-Go to the Giveaway on Ask Mr. Credit Card

-Sign Up for the Ask Mr. Credit Card Newsletter

-Leave a Comment answering the question "What is the savviest way you have made your money work harder for you this holiday season?”


Hurry up and get your entry in, the winners will be determined on December 21. Pretty cool.

Win One of 10 Flip Video Cameras

Last year around this time I set a few financial goals for 2009. These goals were meant to encourage us to better manage and grow our money but also to lay out the direction we wanted to head. Would we put more money towards debt or retirement? Where did we hope to be in a year? Should we focus on near term goals, or look towards the future?

So how did we fare over the last year? Here are each of last year’s goals illustrating our various successes and failures in the world of personal finance.

Debts

Student Loan
Goal: Pay off the balance
Verdict: Success!
This was an early success, I paid off the remainder of my student loan in January. This allowed us to shift focus to our other goals and freed up some cash each month.

Care Credit
Goal: Pay off the balance
Verdict: Mixed
This goal was a success until 2 weeks ago when D required an emergency vet visit. I had finally paid off the balance in November, success, when D decided to go trash surfing and ate a turkey bone - failure.

Savings

Cash Savings
Goal: add $7000 to savings
Verdict: Failure
We may have saved $7,000 last year, it would take me awhile to figure that out. But as we head into 2010 the fact is, much of that cash is gone. We just undertook $14,000 worth of home repairs without taking on any more debt. That money had to come from somewhere, that somewhere was savings.

Taxable Investments
Goal: Invest $4000
Verdict: Success!
We actually saved $4400 in our taxable investments because back in August I increased our monthly contribution to $500.

House Repair Fund
Goal: Save another $3000
Verdict: Success!
OK, well that money is all gone now. But it did get saved and subsequently spent on home repairs, so I’d call that a success.

Savings Snowflake
Goal: Not Defined
Verdict: Mixed
I didn’t faithfully snowflake our windfalls, when I took on Mr. M’s credit card debt I briefly stopped setting aside these funds and instead used them towards debt. But, we did set aside $685 in snowflake savings. Not bad for money that otherwise would have disappeared into the ether.

Retirement

Roth IRA
Goal: $2500
Verdict: Failure
I’d say this is actually more mixed than an outright failure, I did set up a ROTH and I am contributing to it each and every month. But I didn’t set aside $2500, I only made it to $1500 this year.

Work 401(k)
Goal: Continue with 8% contributions
Verdict: Success
In fact, I went ahead and increased my 401k withholdings just this past month. I am now at a 10% contribution rate, woo hoo!

Net Worth

Goal: Double our net worth, have $66,000 by the end of 2009
Verdict: Success
I went out on a limb with this particular goal, unlike the others this goal required some help from the stock market. I prefer setting goals that are within my control, such as contribution amount. But the stock market rebounded this year and helped carry us over the threshold. The year isn’t over yet, but we will end up somewhere around $78,000 net worth, even after paying for all of our home improvements.

Overall

I’m happy with our progress, even though we failed at some of our goals. I actually think it is better that we failed a few, it means I didn’t set goals that were too easy. We need to something to reach for, to strive for. I think it keeps me focused, daily money management can get tedious. It helps when you have a challenge before you. Now I need to think up some worthy goals for next year.


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Taxes, love them or hate them, are a necessary evil of organized society. But that doesn’t mean you have to pay more than your fair share. There are plenty of legal ways to reduce your tax burden, but you have to act fast. Most tax moves must be made before the clock strikes midnight on New Year’s Eve for you to see the benefit in your 2009 taxes.

Send in that Mortgage Payment

Mortgage interest is deductible in the year that it is paid, so make sure to pay January 1, 2010’s bill before the end of December. This is one of my favorites, just be sure you have the funds to make the payment early.

Pay Your 2009 Taxes

In many cities your 2009 property taxes aren’t due until 2010, but if you pay them before the end of the year you can deduct them from your 2009 taxes. Plus you’ll make your city’s tax collector very happy.

Charitable Donations

All charitable donations must be in the hand of the charity by midnight on December 31. Cash and donated goods are all tax deductible, though keep in mind the IRS changed the rules on used clothing. All clothing must be in decent condition to qualify for a deduction, no more turning in your old rags.

Add to Your Retirement Accounts

Retirement accounts are one of the best ways to save for the future while reducing your tax burden today. You can increase your 401k contributions for that last paycheck of the year or open an IRA (check the rules, IRAs are not deductible if you are covered by a work retirement plan AND make over a certain income). You actually have until April 15, 2010 to fund a 2009 IRA. Also, keep in mind Roth IRAs are not tax deductible!

Get Married

Many couples will see their total tax bill reduced once they get married, usually in couples where one spouse earns significantly more than the other. So head on down to the courthouse and get hitched before midnight on New Year’s Eve, the IRS will treat you like you were married the entire year.

Have a Baby

OK, so you did have to get started on this one awhile ago. But if you have a little one due around the end of the year, you can hope they make it into the world before New Year’s Day. I’ve heard there are some things you can do to move things along, ha ha. Again it doesn’t matter if the little tyke is born at 11:59 pm on December 31, you will get the entire deduction for 2009.

Sell Some Stock

Even though the stock market has rebounded in 2009, many of us still have some losers in our portfolio. Stock and mutual fund losses are tax deductible, you can write off as much as $3000 this year, and carry forward any loss above that amount to future tax years.

Medical Expenses

Unfortunately medical expenses are only deductible once they reach 7.5% of your adjusted gross income. But if you’ve had an expensive year in the health department and crossed that threshold, you should get any other procedures or office visits out of the way before the end of the year.

Buy a New Car

This year’s economic stimulus includes some rather unusual tax deductions meant to encourage consumption. For 2009 only, you can deduct the sales tax on new car purchases even if you don’t do itemized deductions or you deduct your state income taxes instead.

Make Home Improvements

For both 2009 and 2010 there are tax breaks for making home efficiency upgrades. The amount of the deduction depends on the type of improvement.

Take Advantage of Tax Deductions

No one likes paying taxes, fortunately our system has a lot ways you can reduce the pain. You still have a few weeks left before the end of the year to deal with your tax situation, so take advantage of these deductions before time runs out. As with any government program, there are lots of rules. Check the specifics on what qualifies for a deduction along with the income phaseouts before you take advantage of one of these programs.


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I’ve been put in an uncomfortable position lately, caught between a friend and a rivalry. I’d like to preserve the friendship, but I have my limits. Let me back up and explain.

If anyone remembers, I’ve talked before about the less than ethical dealings of some of my colleagues. They own their own companies and feel they need to play dirty to get ahead. I don’t agree with their tactics and would never do anything to further their aims. One of them, H, has tried for years to recruit me. He knows I do good work. On the other hand, I know he doesn’t do good work. I don’t respect him professionally or personally, why would I allow him to profit from my skills? Even worse, I know he’s been stealing my work to use on other jobs.

One of his employees called me up a few months ago asking about certain plans. I offered to send him pdf copies, but those were not what he wanted. He wanted the electronic design files, something they have no use for on our shared project. But the company did win another project that he could use them for! Unfortunately, as a partner on our team, he has access to all of our files. I had no way to stop him. But copying my plans from this project will only take you so far – enter tactic two.

A friend of mine, C, was recently let go from the job. He is a nice guy, which is why I like him. Unfortunately he is not very good at what he does. But H went ahead and hired him - to do my specialty. C can’t even do his own specialty, let alone mine. But H’s move was strategic. Practically daily I get calls or emails from C, asking for help. Asking questions because he has no idea what he is doing. Under any other circumstances I would help C, I am not threatened by him. Even if I dumped my entire knowledge base on him, I’d still do a better job. But right now every time I help C, I put profit in H’s pocket. I want to tell C I can’t help him anymore, but he has a wife and 2 young children to support. I don’t want to be the reason he fails and gets fired. What can I do? I feel like I have no good moves.


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Our home repair saga is almost over, only some exterior and basement work remains. So with our house finally contractor free, it was time to put up a Christmas tree. Mr. M picked one up Friday at a local auto body repair shop, yeah a pretty strange I know. But they had some nice trees at a nice price, $35 for a 7’ noble fir. This baby is fat, which brings me to our problem. I only had one little string of lights, last year we had a teeny tree. I needed more lights for this pleasantly plump tree, so we dashed on down to Target. But to our surprise, they didn’t have any! They’re completely sold out, the stocker said they were gone before the end of November. What happened to all those lights? No one I know puts up trees that early, plus don’t most people save their lights from year to year? We stopped by drugstore on our way home and managed to snag the last two boxes they had. They were on sale for 50%, obviously we are already at clearance time for Christmas lights. I wonder how many strings of lights get sold each year.

Does being frugal require a certain mindset, free energy and an abundance of time? Lately I’ve been feeling especially drained between work and the home repairs. After chauffeuring the dogs around town through rush hour traffic, all I want to do is go home and collapse. I don’t want to cook or clean or make cutesy handcrafted Christmas gifts. Right now my solution to every problem – throw money at it. This isn’t like me.

I’ve eaten more processed food and takeout in the last month than I have the whole rest of the year. I haven’t made a single Christmas gift yet, and if I don’t get my butt in gear soon, I won’t be. When you are spending tens of thousands of dollars on home renovations, wasting a bit of money seems inconsequential.

In our current state, frugality is a luxury. When you are overtired and overstressed, you don’t have the energy to worry about price and value. The irony of frugality is that while it conserves monetary resources, it often consumes more of our other resources, like free time. Since time is in short supply for me right now, frugality is a luxury I can’t afford. Hopefully the renovations will wrap up soon and I can return to our normal, more frugal, routine. Until then, frozen pizza anyone?


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Mr. M had an interesting experience a few weeks back. He was at a party, a rather wild party and since this is one of those stories where the setting will influence your perceptions, allow me to first set the scene. This is the sort of story that only happens in LA (I hope).

Mr. M has partied at that house before. I won’t mention how Mr. M met the host, a rock n roller named C. But apparently C has a talent for throwing killer parties, fueled by the requisite drugs, booze and DJs. At the previous party Mr. M had the unfortunate desire to explore his host’s cool digs. He climbed the ladder to the large upper loft, and stumbled upon a mass orgy in progress. Oops, not my scene he said, and he hastily headed back down the ladder. The guy behind him protested to keep going, but there was no way Mr. M was stepping in that room. He’s kind of a germaphobe. And at 250 pounds very few people argue with Mr. M so the guy stepped aside before scrambling up himself for a piece of the action. I thought this stuff only happened in movies.

Apparently this party was a little less wild, curious Mr. M peeked upstairs and was confronted by a less naked yet more surreal scene. A group of beautiful models playing keyboards and singing Frere Jacque? He hastened away once again. He later got engaged in a political discussion with some woman while they kicked back on the couch. Eventually the conversation turned to me and the fact that I write about finance. Apparently she was delighted, and proceeded to talk his ear off about money. As I’ve said before, he has no interest in any of this so he started to tune her out. But, at least some of her story caught his attention. She was wondering what to do with some money, quite a bit in fact. He gathered it to be a few hundred thousand at least. How to invest and preserve it was only part of the problem, how to do it legally was the other side of the question. Apparently this money currently resides outside of the system. Where does one get that kind of cash? Plus where is it now, stuffed under the mattress?

According to Mr. M, she was reasonably attractive and well spoken. My friend once told me a story about meeting her co-worker’s sister, who earned her fortune as a high priced call girl. That was my guess for the origin of the money. Mr. M suggested drug mule, he wasn’t sure the sex for money angle fit the person he met. How else does one amass six figures illegally? I have no idea, but it does make for an interesting story. And for the record, my first response was I have no idea how to launder money. Unfortunately, I’m not that interesting.


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I am cash poor, ask to see my wallet and you’ll be lucky to find a $20 inside. Usually the total will be closer to $10, or maybe only a dollar. I don’t feel the need to carry around a lot of money, I feel safe as long as I have enough for a bus ticket home. So far I’ve never been caught in a cash-only situation, but there are some good reasons to keep more money in your wallet.

Convenience – Cash is accepted everywhere, no worry about whether they accept Visa or American Express

Reliability – with credit and debit cards, when the power goes out or networks go down you are out of luck

Safety – there are times when you need cash to get out of a sticky situation, AAA will bring you gasoline when you are stranded on the side of the road, but they don’t give it to you for free

Overspending – it’s impossible to spend more than you have when you are only spending the cash in your wallet. Many people with spending problems turn to a cash only system to keep them out of trouble.

Of course I have plenty of my own reasons to stay cash-light.

Loss Protection – cash can easily get lost or stolen, with no hope of recovery. At least if your credit card is stolen you aren’t liable for the charges.

Tracking Spending – I don’t keep track of where I spend my cash, but every credit and debit transaction is logged by the bank and I can refer to it later

I know some people carry a few hundred dollars at all times, but the thought terrifies me. Would the money make me a target? Would I lose my wallet and all the cash in it? Instead I only carry around enough to buy a snack. We keep some money in the house for disasters like an earthquake that knocks out all the power, but I never keep money on me.

What are your cash carrying thoughts? How much is in your wallet?

Photo: Saad.Akhtar

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I am writing this post on behalf of humiliated pets everywhere. Who hasn’t laughed at the ridiculous sight of a dog wearing a lampshade? Those dreadful torture devices, also known as Elizabethan collars (E-collars), are imperative after an injury or surgery. But that doesn’t mean your pet will enjoy wearing one. Not only will they suffer the embarrassment of being called a cone head by their friends, the darn things are uncomfortable. You can’t see out of them and every two seconds you’re bumping into walls. Whoever came up with the invention should be forced to wear one for a few days. But there are alternatives to the plastic lampshade look.

With three wild and crazy boston terriers running around, injuries are a pretty common occurrence at our house. We have quite the collection of first aid supplies along with an assortment of e-collars. But I find the lampshades as inconvenient as the pooches, they are difficult to put on. You have to weave this plastic strap through a series of slots as your pooch thrashes around. They are obviously painful to short haired dogs, the loops near the neck dig into the skin. Instead I use an inflatable e-collar, which is much more comfortable.

To be fair, there is still some humiliation involved. The thing resembles a life preserver. C has heard his share of Titanic jokes the last few days, but he doesn’t seem to mind. The collar acts as a built in pillow and doesn’t get in the way of his everyday activities. I originally bought it for D, who was traumatized by the lampshade. He too enjoys the cushiony goodness of the inflatable collar. There are other options, equally silly.

There are soft collars, stuffed with pillowing or foam, that look like a frilly lion’s mane. I don’t have personal experience with that style, but the idea is sound. There are also soft lampshades - same conehead look, less torture – made out of fabric and foam.

Of course any Elizabethan collar has its limits. There are dogs capable of removing them or getting around their defenses. Fortunately my boys are not that determined, they tend to leave their wounds alone. These e-collars are a bit more expensive than the hard plastic lampshade, but they are easier to store and reuse. And since you won’t feel like a monster for making your dog wear one, you are more likely to use it.

Photo: ldpedersen


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For every two steps forward, something will come along and shove you one step back

In November I paid off the last of our pet’s medical debts. The previous year has been an expensive one for pet ownership, with each of our three dogs requiring either surgery or hospitalization. To help cushion the blow I took advantage of our Care Credit account, which offers zero percent financing on medical expenses. Despite the low/no interest, I wanted to erase that balance before the end of the year so we could move onto new goals. But as Murphy’s Law dictates, something happened along the way.

We’ve been to the vet twice this past week, for two different dogs. First D dug into the trash – and what would the world’s most finicky dog be after? A discarded turkey bone, the leg to be precise. He had gnawed off the end before Mr. M discovered the naughty pooch. Poultry bones can be very dangerous, they are sharp and splintery. But I’ve had dogs eat them many times before without harm. We took a watch and wait approach. Well he threw up the whole day, so off to the vet we went. $650 to find out he’ll be perfectly fine, the x-rays revealed a few bone shards in his tummy. They should break down on their own, he just had the mother of all tummy aches.

When we got home from the vet with D, we noticed C squinting his right eye. There is a lot of dust and debris due to the construction, so we figured his eyes were irritated. We rinsed his eye out with saline and kept an eye on it. Well, Murphy was still in control. Come Saturday he was still squinting that eye, so we made a vet appointment. Apparently his eye has two tiny scratches on it, he needs eye drops and the dreaded cone for a week. Oh, and a follow appointment up on Tuesday. At least this has been cheaper than Turkeygate.

I put D’s turkey bill on the Care Credit card, which had finally reached zero. I already adjusted our budget to increase our retirement savings, my original plan for when I paid off that Care Credit balance. I don’t want to go back. I’ll keep the increased retirement contributions and take the money from somewhere else. The balance is zero interest for a year, but I’ll be certain to pay it off before then. There are some important lessons in this experience.

1) Setbacks are an inevitable part of the journey

When it comes to debt reduction, there are times when that the balance will move in the wrong direction. You can’t let it discourage you, you have to work through these setbacks. They are inevitable, don’t take them as a personal insult.

2) Flexibility is the key to success

Even the best laid plans need to be changed when circumstances change. When setbacks happen, you have to react. Maybe you can continue on your original path, or maybe you need a new budget and new priorities. A rigid budget is bound to fail.

I had a lot of goals and hopes for the next year, but in the months since I started planning the future our current situation changed. Now I need to save for a wedding, rebuild our emergency fund, and once again pay off the Care Credit balance. Some of our early retirement milestones will have to wait another year, while we deal with our immediate needs. As Murphy’s Law says, setbacks will happen.


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I still haven’t found a wedding venue to replace the one I lost. I’ve looked at several and only found one I actually like. Unfortunately, it’s popular and well known and hence – already booked up. If we have to, we could push our date back into 2011 to hold it there. We’ve been together for so long already, what’s another year. But at the same time I’m ready to make the plunge and don’t want to wait any longer. So for now I’ll keep hunting and hope I find another place I like. The decision to delay can be made later.

This week’s carnivals:

My pal Revanche hosted this week’s Carnival of Personal Finance at A Gai Shan Life: Saving Up for Christmas

Photo: Lolas Big Adventure

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Like a lot of underwater homeowners, I keep an eye on the local housing market and where it is headed. At this time last year, it looked like the worst was still to come. Buyers had vanished and inventory was piling up, downward was the only way forward. But lately the situation has shifted, is it a sign we have hit bottom?

I’ve followed our local real estate market since becoming a homeowner nearly 5 years ago. The current number of for sale listings is the lowest it has been in that time, roughly half the number of homes that were for sale a year ago. Most of the listings are for distressed properties, foreclosures and short sales. Only those that have to sell are trying to sell in this market, keeping inventory down. There are also a lot of homeowners in my position, able to afford the house while unable to sell it because we are underwater. Our homes will be off the market for years to come.

Meanwhile demand has returned to the scene. Last year there were many homes for sale, but almost no buyers. Based on the number of pending and recent sales, buying activity in my neighborhood has increased 2-3 times over what it was last year. There are a lot of reasons that demand has increased:

- government incentives for homebuyers
- low mortgage rates
- lower home prices

So supply is down while demand is up, which should signal a turning point in the housing market. But is this really the bottom, or merely a temporary leveling off? What are your thoughts?

I can’t explain my love of old houses. It’s certainly not a rational, reason based type of affection. It’s entirely an emotional response. Old houses are like people – they all have issues. And like people, often their flaws are a large part of their charm. Each is unique, reflecting the forces of time as each generation is born, grows old and passes away.

Our recent remodeling efforts have allowed me to peer into the bones of my house, to reconstruct some of its history and the forces that have shaped it into the structure it is today. But first, the legend:

The house was started in 1925, built over a period of years by the original owner. As a result it has a hodge-podge of stylistic elements – craftsman, Spanish and Art Deco. He occasionally had help and paid those workers in Prohibition liquor. So my house was built on illegal booze. Given how crooked the structure is, it appears they took their pay on the job!

The neighborhood’s fortunes have risen and fallen with the decades and the house has never received the love and care it deserved. Maintenance was delayed - we are dealing with issues that should have been addressed long ago. Cheap repairs were made – we are dealing with those too. So how does an old, neglected house still stand?

REDWOOD

Yep, much of the house appears to have been constructed with redwood. We’ve uncovered the original siding and even it is redwood. Only one portion of the house, a back wall that appears to have been replaced, is not. That section has extreme pest and rot damage, unlike the rest of the place. My house embodies the statement – they don’t build them like they used to! Can you imagine the cost to build a house from redwood today, you’d have to be insane.

A Victim of the 60’s

My gorgeous 1920’s house fell victim to the 60’s, when the current owner remodeled the place. The back section of the house does not match the front section, I often wondered if it was built later. While the front of the house has gorgeous textured plaster walls and hardwood floors, the back section has wallboard and cheap flooring. The front of the house has the original wood framed windows, the back has aluminum ones. The back wall was clearly replaced, with structural elements not found before the 1960’s. But I now know that the current footprint is original.

Underneath that wallboard lies the original lathe and plaster, like the rest of the house. I don’t see any evidence of a fire or flood, my guess is the house sustained earthquake damage. The rear wall had to be rebuilt and rather than repair the plaster walls, they covered them up.

If These Walls Could Talk

My house holds over 80 years worth of memories. It has shaped and been shaped by the people who lived there. More importantly, it has finally found someone who loves it enough to erase the years of neglect. Someone who cherishes its history and finds its quirks both irritating and charming. In a few years, when I’ve saved up enough money, we’ll address some of the remaining issues. Maybe we’ll even rip down that wallboard and restore her to her former glory.


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Photo: Warren Brown Photography
Photo:

How do you find money to save for retirement when you have so many needs today? There are bills to pay and kids to feed, these concerns are concrete and immediate, not decades away. Unfortunately, ignoring the future won’t stop it from arriving. In fact the pain will be much greater the longer you delay. It is best to start now, even if you can only save a modest amount. Once you start, there are many ways you can increase your retirement savings.

Raises

Most of us get regular raises, but have little show for it. Our spending increases to match our new income and we never seem to get ahead. It’s time to take a new approach, use some of that raise to fund your retirement.

Say you get a 3% raise next year, why not take 1% and put it towards retirement. You’ll never miss that money, so it’s a painless way to increase your savings. Even if you have nothing saved, start today with just 1% of your salary and increase your contributions by 1% each year. In 10 years, you’ll be saving 10% of your salary – enough to start a nest egg without sacrificing today’s needs. This slow and steady increase is a pain free way to ramp up your savings.

Found Money

Do you have money coming into your life beyond your regular salary? It could be cash gifts you receive, rebates and refunds or side income from a hobby. If you can’t find any way to save your salary, or you are not saving enough, you can use this extra “found money” to build up your retirement funds.

Debt Payoff

Like a lot of people, I’ve dealt with debt. I know how hard it is to save, especially for retirement, with debt hanging over your head. But, once you’ve paid it off you are free to put your money to better use.

Recently I paid off our dog’s medical debt, I then turned around and increased my 401k contributions by 2%. Without that bill, I can save more money and still have more to spend. Whenever your situation changes, either a debt is paid off or your expenses are reduced, use that extra money to save for retirement. Don’t allow a new expense to take its place.

Increase Your Retirement Savings

Our financial lives are fluid and dynamic, your income and expenses will change with time. Along the way, you will have the opportunity to adjust your spending priorities and increase your retirement savings. It’s all about finding those opportunities and using them.


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I’m delaying the pain. Our home repair bill has topped $13,000, but I’ve only paid a portion of it so far. The plumbers and new light fixtures were charged to the new travel rewards credit card, giving me a few more weeks to pay the bill. In the meantime, I’ve emptied the house fund to pay the electricians and taken $2000 from savings to pay some of the big American Express bill. That leaves me with $6000 more to pay off. Our “savings” accounts, the money we set aside for this sort of expense, are tapped out. The only remaining option is to tap our long term savings/emergency fund. This will happen next month, before I get hit with interest charges on the AmEx card. But in the meantime, I will continue to bask in a rising net worth. Next month I’ll face the music, next month.

Here are the numbers:

Savings – Say bye-bye. Next month this will get chopped in half. We still have the bulk of our money in a FNBO savings account, rates are generally low across the board and I haven’t found the motivation to move it.

Bonds – After a hiatus of a few months, we are once again contributing to our snowflake bonds. A little here, a little there.

Sharebuilder – No trades.

T Rowe Price – We’re sticking with a $500 a month investment spread across a variety of funds. Finally we can start building that nest egg.

Lending Club – We have a small amount invested with Lending Club, but it will never be a major component of our portfolio. We’ve had problems with two investments (loans) in a short period of time.

Fidelity 401k – from a former job, I no longer contribute

Wells Fargo 401k – I save 8% of my salary and will bump it up to 10% in December

Company ESOP – our company stock is structured as a retirement plan

Roth IRA – I finally opened my Roth IRA at Vanguard and currently contribute $100 a month. Increasing our monthly investment is on my to-do list.

Savings Accounts – this is where we set aside money for future expenses. Since I know we will spend this money eventually I do not include it in the net worth

Property Taxes – In the interest of big goals, I’ve dropped our monthly self escrow to $400 as a result of our property tax reduction.

Dog Fund – This should be the last month at zero, the Care Credit balance is finally paid off.

Misc Fund – used for irregular or unexpected expenses

House Fund – Drained! Nothing left, in fact it’s about -$8,000 currently. I will need to rebuild this fund, after I rebuild our savings.

3 Month Fund – this fund is part of my plan to smooth out Mr. M’s irregular income. I will try to rebuild this fund in the coming months.

Mr. M Tax Fund – we’re setting money aside to pay taxes on Mr M’s independent contractor earnings, but I decided to use the money now and deal with any possible tax bills later.

Wedding Fund – planning for August or September of 2010, if I ever get my act together.

Christmas Fund – I set aside money to cover the cost of the holidays, presents, decorations and more. I just added some more to this fund when it became obvious I was going over.

Care Credit – Paid Off!

On the whole it was a decent month, though obviously our net worth will drop next month when I have to pay the remaining $6000 repair bill. Hopefully another good month on the stock market will help cushion the blow.

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