Tarraguña's Blog

As children when we receive money as allowence or cash birthday presents we tended to save enough to buy something we wanted.  We focused on our wants because our needs like food, shelter and clothing were taken care of by our parents.  At least that was the situation for those of us lucky enough to have caretakers that took care of our basic needs.

As we enter High School and develop through our early twenties, we have to start taking on the responsibility of taking care of paying for our own needs with money we earn from a job.  Hopefully by our mid twenties we have figured out how to pay all of our basic needs and also have some idea how to save up for our wants.  Not all of us get to this point. Ever.  Some blame it on the credit card they receive their freshman year of college and others just live paycheck to paycheck regardless of how high their income rises.

Growing up as far as personal finance and money is concerned we tend to figure out the difference between spending money on our wants versus our needs.  What is more subtle and thus harder to realize or figure out is how money, at its best, is a resource.

The most essential resource and the first thing necesary to establish once you start earning money is an EMERGENCY FUND.

How to Start an Emergency Fund

• Look at your spending, determine what is a necessary expense i.e. what you would still have to pay for after you lost your job, and add up those expenses for the month
• Suze Orman recomends that you have 8 months of living expenses saved.  That is definatly a good start in this market.  So say you need about $2,000 a month to live off, just multiply that by 8 and you arrive at $16,000.  And thus you should stash 16,000 in a savings account that you can access easily but you only use for emergencies; like getting laid off.
• Realize that it will take time to save up that initial amount for the emergency fund.  The best advice is that you live on the minimum amount you can, delay buying a new iPhone or computer or anything else unnecesary to survival, and stash everything left over each month into that emergency fund savings account.
• Enjoy the fact that you have established an emergency fund.  You are using money like a resource instead of it working you over.  If you lost your job tomorrow, you would have 8 months to find another source of income.
• Remember to replace any amount of the emergency fund that you use for emergencies.

Once you have established an emergency fund, you should feel that stress and tension leave your body.  You have just given yourself 8 months; time to look for another job, or come up with an alternate plan or develop additional income streams.  Had you not had the emergency fund, and you lost your job, everything you had would come falling down like a house of cards.  Aside from losing all those things you had accumulated, you’d now have to worry about where your next meal would come from.

Do yourself a huge favor and maintain an emergency fund.

As we are expecting our first child in March, we have begun to think about ways to save for our children’s college education.  I would like to be able to help them a great deal if they decide to continue their education.  After doing some research recently I don’t find myself any closer to making what I feel to be an educated decision.  Eventually, of course, I will decide and then start putting money in the account monthly because if you don’t make a decision at all then you won’t save anything.

I do know that there are two options: a 529 prepaid tuition plan and a 529 savings plan.  The prepaid tuition plan allows you to buy future education units at today’s price.  The savings plan allows you to invest money and hopefully watch it grow.

The parts I am not 100% sure on are: the prepaid tuition option only covers state universities and as each 529 account is administered by a state the prepaid units are only good in that state.  Like now we live in Florida and if we opted for the Florida 529 option our child could attend any public university in Florida using those prepaid units. If they went to another state university like Indiana University, they may or may not be able to transfer those prepaid units.  If they went to a private university like Notre Dame those prepaid units may also not be transferable.  But the prepaid option does seem to be the less risky option.

With the 529 savings plan option you could loose everything you invest as you are just investing in the market.  But you could also earn a higher percentage on your investment.  It is also the most transferable option.

So you have to choose either a prepaid option or a savings (investment) option and the the next choice you have to make is what state will administer the 529 account.  Some states are better than others at growing your money.  I did remember reading in one article about how some state have very high fees associated with the accounts.

In 33 states the amount put in the 529 account can be claimed on your tax refund for the state return.  It is currently not able to be claimed on the federal return.

This will definitely not be an easy decision.  I have thought about starting one of each, a 529 prepaid and a 529 savings.  That way I could have both options covered.

On a side note, I have noticed that everyone seems to ask if we know what gender our baby is yet.  When I tell them that we are choosing to be surprised, the majority of them can’t understand why we are not finding out the gender of our unborn child.  To be honest, we had not been that concerned about it.  We had been thinking about preparing for the arrival, buying some necessities, getting life insurance, setting up an effective budget, saving more in the emergency fund, starting to save for the baby’s college, taking care of ourselves physically and emotionally, choosing the right birth plan for us, all while hoping for a healthy baby.  The gender of the baby was actually one of the last things we had thought about.  I mean, they are the gender they are.  It is not something I need to make a decision about or adjust for.  Whatever gender they are, it will be the perfect gender.

So some people seem to be concerned about what gender we are having and think we are crazy for not finding out, but no one seems too concerned with talking about ideas for saving for college: interesting.

I did it. I put some advertisements on my blog. I am so intrigued by other people claiming that they make money from using Google Adsense on their blogs. We will see if any money rolls in.

I will always place them in the sidebars and not in the middle of a blog post entry. I hate when people do that on their blogs. It really messes up my flow when I am reading.

I also launched a new site where I will do a monthly project and write about it. The only qualification for deciding on a project is that it has to involve me learning something new. For example this month I am working up how to prepare for a vacation. I chose an easy one since I started the site mid-month (Nov,11) and I will be traveling to Tucson, AZ at the end of the month. The URL for the new project is http://tarraguna.com/monthly-project.

2008 will no doubt be recorded as a historic year.  I feel so overwhelmed by all of the bailouts, the financial mess, the election and the fact that my 401k is down 53% and my traditional IRA funded with index stocks is still down 30%. 

I wish I had some hope for the upcoming election but I feel that regardless of whoever wins it will be more of the same.  I feel as if when I am trying to decide who to vote for I am mereley picking the lesser of two evils. 

I really enjoyed  Xin Lu’s (her profile) article at Wise Bread.  I espcecially loved the last paragraph,

“Finally, the scariest thing about these bailouts is not just the amount of money they will cost American taxpayers for generations to come, but that these bills were passed with haste and little concern for the voice of the people. In this video, Senator Diane Feinstein states that she received 91,000 phonecalls of which 85,000 were against the $700 billion bailout, but that she believes that these angry citizens do not understand the good the bailout will do. Is a democratic government really democratic if most of the elected officials do not serve the people that voted for them?”

you can read the full article here.

I get paid twice a month, so as a routine I look over all of my accounts twice a month as a way to keep track of them and keep an eye out for anything unapproved going on. Below is the routine I go through.

1. Check the cash accounts i.e. those account that have cash in a brick and motor bank where we have my checking account, my savings account and our joint account. These accounts we use for the bills and budget that we need to pay every month. I really don’t use the savings account as in I don’t extract money from it. That is the account that all of the procedes from selling my books on half.com go into.

2. Check the online statments of all of my credit cards. The majority of them show a zero balance and I am just checking to verify this. I do pay for gas with my discover card as to earn cash back bonus money that we then turn into free rentals at Blockbuster. Credit cards can be like a speeding bullet train and it feels great to be out of the way of it.

3. Check my high yield/ interest savings accounts. These I use for longer term savings as these are funds that it could take up to 3 business days to get to the money. It makes it just out reach to avoid impulse/ unnecesary purchases but close enought that if I really needed the money I could use it. I also earn a higher interest rate on it rather than just keeping it in my bank’s savings account. With ING direct I earn about 3.5% and with E*Trade I earn about 3.0 %. I really like ING direct’s online interface there are multiple layers of security. I have also started to use SmartyPig which is great if you have a specific savings goal in mind. You name the account, fund it, structure monthly automatic deposits based on you total goal amount divided by how many months to reach your structure goal. For example if you want to have saved up for a 3,000.00 computer in 24 months time you will need to put away 125.00 each month. SmartyPig makes it really easy to set up this structure. It also has nice feature where you can let family and friends know about what you are saving for and they can contribute to your fund easily throught the website.

4. I then check up on my retirement accounts. I don’t take money out from these; regardless. I just sock money away there and I try not to get too down about the stocks being down. It is a long term investment. My 401k is down about 6 % and my traditional IRA is down also. Instead of looking at how much I have lost I try to see this as “hey the market is down, I need to buy more.” I stick with index funds so my risk is low.

Diversify, Diversify, Diversify its the best way to weather any storms and also take advantage of some opportunites that come with the calculated risks. No one knows the future; not even those financial account managers. There is no secret to getting rich quickly you have to get rich slowly.

I used to think of the structure of a loan to be that; a) entity needs money b) entity who has money sees opportunity to let other entity use their money in return for paying back the money borrowed along with an additional fee ie interest. I think we all understood the game as banks and lendors make money off of interst.
Then the lenders got smarter. They set up a business model where it does not matter if loans get paid back. They nickel and dime everyone to death. Miss your payment date by a day and it will probably cost you $50.00. I can’t wait until everyone realizes that their stuff won’t make them happy and it is better to live without the credit card debt.
I carried credit card debt while I attended University as it seemed unavoidable. I feel so much more free and lighter now that I have paid them off. It was not easy though. Once I graduated and started working I made it a priority. And I still make it a priority to keep very little on them and have them paid off every month.
This post was inspired by the New York Times article “Given a Shovel Americans Dig Deeper into Debt” and it has some nice figures on how late fees and APR have increased to account for the fact that loans are not getting paid back.
You always have to keep in mind that Banks, large corporations and CEOs will always make X and it increases every year X+2 and this happens reagardless of how their business is doing. Thus you always have to keep your eyes open.

As some of our future intentions will have some upfront costs and in order to increase our safety net and financial independence I have been looking at ways to adjust our budget in order to save some money and cut out some unnecessary expenditures.

780 anual savings by cutting out our weekly eating out of chinese food. While we really enjoy the food and not having to cook one night a week as I figure the anual cost to be ($15.00 x 52) 780 dollars it just is not worth it.

600 anual savings by cutting out the MediaMax Unlimited option on my Samsung Blackjack mobile phone and by dropping our family plan down a notch. We have been way under on our minutes usage so much so that now we have 1,957 rollover minutes that we will never actually use because we are always under our minutes each month.  While I love surfing the internet, receiving email, using twitter via SMS text messaging and uploading video to my youtube account all via my Blackjack all with it being coverd by the MediaMax Unlimited option on my phone for a whopping 39.99 a month I think it is just not worth it.  I spend most of my time at work or at home where I have the interent.  If I need to use the internet to get directions via the Live Search program on my phone I will just have to pay per usage at the rate of $0.01 per KB transfered.  It is rare that I ever need to use this feature on my cell phone plan.  Normally it gets used just because the option exists.

Walking to work? Due to the fact that I would have to ride by an intersate entrance and exit ramp where people are definatly not paying attention to any pedestirans and the lack of sidewalks make my route to work very unsafe to ride a bicycle.  I have seen many a commuter zooming 20 miles faster than the speed limit on the road rushing to get on the entrance ramp to the freeway because they are late for work and it would only take one of these cars hitting the side of you on your bicycle to really do some serious physical damage to you costing time and $$$$ and having it HURT.  Thus we have decided against me bicycling to work.  Walking to work would be possible.  According to Google Maps it 1.3 miles to my work from my apartment.  That is of course going by car drivable roads.  I think I could cut of some of the distance by using some short cuts.  I love the satellite view offerd by Google Maps.  While it won’t save too much money to walk versus driving to work, maybe $ 5 a month since my commute is so short, I think it will be liberating walking to work and not being chained to my car.  I will feel like I did when we lived in Europe. FREEDOM

Rog3r only commutes to the hospital 2 days a week so his commuting costs are low.  He can’t ride the bus to work because he has to be at work before the buses start running.

Earning extra income? I will still need to investigate all these options more. Here is a good link about transcribing.  Here is a good line about writing for an income.

I am also selling our books and DVDs online via half.com.  You can see my “store” here.  We are also selling some items on craigslist.org; Sony 5 Disc CD Player, Toshiba DVD Player, Iomega External Zip Drive, Iomega External CD Drive, 2005 Ford Taurus 3.0L V6 Gas/ E85,  VCR Toshiba 4 Head, and a Dell Dimension L933r Desktop with WIndows XP install disc. Note: the links will only be good for 45 days or so since that is when they expire on craigslist.

I just thought this was so interesting to read.  Read it here.

I really enjoyed this excerpt so much that I have to post it here.  This is one of my favorite financial websites.

•  
  In 2006, JLP from All Financial Matters interviewed Clements, asking, “What’s the most important thing you have learned since you started writing about personal finance?” Clements replied: 

  Financial success has very little to do with your ability to pick winning investments. Instead, what matters is stuff people never think about…The ability to delay gratification is critically important. Similarly, a lot depends on maintaining steady employment, staying in good health, avoiding divorce and whether you have children.

April 15^th is 6 days away.  I have plenty of time to complete my taxes and file on time. J  No, really I will be completing this task this weekend. All other financial investigations will be put on hold in the mean time.  The site Get Rich Slowly has a great informative PDF file about 66 ways to save money that the webmaster found published by the U.S. Federal Trade Commission and the Consumer Federation of America.

A good way to keep more of your money is to spend less of it on the things you buy.  Don’t just walk into a store and pick up something and buy it.  Discuss the price with a representative, see if they can lower it.  Don’t walk in with that attitude that you simply have to have the item.  Walk in with the attitude that you can easily leave the store without giving them any of your hard earned money if they don’t negotiate the price with you. 

I know that on the news everyday it seems the anchors talk about the slowing economy and as you listen you start to get down and worried.  Slap yourself and realize that there are still a lot of people making profits in the type of economy.  You can be one of them.  At least use the doom and gloom to your advantage and go into stores ready to negotiate the price.  Remember there is nothing you HAVE to buy.  Some food, clothing and shelter is nice but above and beyond that is not necessary.

As an example my Fiancé and I purchased a guitar amp last week.  We had been talking about buying one for about 6 months.  We had been playing a lot of guitar and decided to go for it.  We went in with an idea of what we wanted and about how much we were willing to spend.  We went to the store and started looking around.  An representative offered to assist us.  We advised him of what we were looking for and he pointed out some amps in our range.  We only needed a small one to play in the apartment or doing a  little band paying in a garage; nothing to perform in a large space with.  We saw a fender amp for about 170.00 that we really liked.  We also had some other items we wanted to purchase like guitar strings, cords and some picks.  We rounded up these items and then told the representative that we wanted to purchase the fender amp but the price was a little out of the price range we were looking for.  We asked if there was any special going on or if he could lower the price of the amp.  He pulled out a calculator and then said he could lower the price to 119.00.  It seemed so easy.  We had done a lot more haggling in South America when purchasing a belt.

Go ahead and ask them to lower the price for you.  They will probably say yes.  If they say no, just walk away.  You probably did not need the item anyway.

We all know that when you open any account of any kind they all want to do a credit check aka credit inquiry aka credit pull.  I never knew that there were two different ways to check credit history; a soft pull and a hard pull.  A soft pull does no damage to your credit a hard pull however drops your overall FICO score for 6 months. 

Silly that just a credit inquiry would drop your score.  If you have the credit to buy something you’ve got it.  So you just have to space out when you buy big purchases like a car and a house?  That isn’t very economically stimulating.  Maybe we should tell George W.?

I found a neat wiki all about personal finance here.

I also set up my Traditional IRA with E*Trade.  I set up a “complete savings” account also.  Their rate is now 3.45% APY.  There was no minimum balance required.  And if you set it up after 30 days they will put $ 25.00 in your account.  And you can set it up online in a matter of 10 minutes. 

Since I have funded my IRA now I can finish doing my 2007 taxes.  Mine are not too difficult to do as I use TurboTax.  How do I do my fiancé’s taxes.  He needs to file so he can receive the economic stimuli payment.  But he received no w-2 as he earned 0.00 wages this year.  He is a full time Nursing Student.   I will work on this over the next few days. 

The question is how do you file without an income?  The government sent all those letter to everyone advising no matter what every needs to file and then we will all get some economic stimuli 300-1200 $$$ so we can then in turn go out and buy stuff to stimulate the economy.  Word to the wise; save the money, stash it in an IRA or a savings account.  I will find out shortly if you can file with no financial documentation.

Each one is administered by a state.  Then the state passes off the management to a mutual fund company thing.  Oh well I am still confused as to how it is really orchestrated.  Kiplinger.com has them rated here.  Maybe that will aide understanding.

I have investigated nothing financially since the last post.  I am still reeling from the fact that the governments take 29% of the money I earn.   What do they do with it?  Is there a published general ledger somewhere?  I don’t think so.  Maybe the politicians are just laundering the money.  They start social programs and raise taxes for the revenue but then when it comes down to it no one qualifies for any of the social programs so they just funnel the money around and around until it ends up in their pockets.

When the politicians say they are going to raise taxes to start some social programs for the “poor” and that they will only be taxing the “rich”, their definition of rich and poor is very different from that definition of rich and poor we have in our minds.  In the eyes of the government if you have a job earning any kind of wage at all then you meet their definition of rich.  You have money eligible to be taxed.  A great question to ask your politicians is not how the program will benefit but who will qualify, SPECIFICALLY, and how do they plan to PAY FOR IT.  SHOW US THE NUMBERS, ITS OUR MONEY.  Because, really, I am all about them taking taxes out and providing financial aid to college students working their butts off, paying teachers a descent living wage for having an advanced degree, paying to fix the potholes, and I could go on and state all of the great things the tax revenue could go towards but we all know it doesn’t.  The money gets lost in the “shuffle”. 

Most days we are squashed between big government and big business.  None of these margins benefit John Q. Public (documented or undocumented).  We need to ask the hard financial questions of ourselves, our government and our “Enrons”.