Money Monday: Money for Nothing

Even if you’re living paycheck to paycheck, it is unspeakably essential that you start setting aside anything you can, for retirement and in case of a layoff or medical emergency, even if those possibilities seem less remote than imminent starvation. (Difficult to care about social security shortfalls when you want to gnaw your own arm off for sustenance, I know.) The simple math facts are that the earlier in life you begin to save, the less you actually have to put away in the long run in order to have a decent retirement (or at least hopefully not die naked in a ditch). So even if it’s only $20, which you make returning cans or forgoing one latte per week, start a savings account and contribute to it regularly. Do it NOW.


I’ve had an account with ING for a year now, and I couldn’t be happier. They pay a slightly higher interest rate than most banks because they are online only and don’t have to support expensive edifices. They also usually hand you $25 or $50 for joining or adding a checking account… email me for a referral and we’ll probably both get some dollars ;) There are other options- check out this article for comparisons. You could start a regular savings account at your brick-and-mortar bank too, but my favorite thing about ING, pointed out recently by my financial guru, Ramit Sethi (of I Will Teach You to Be Rich), is the “Bucket” system.

For someone very visual and very Virgo like me, being able to move money in and out of labeled accounts within my savings account (they call it opening a “new one but it’s just a sub-account) is the best method of saving for specific goals ever invented. It's like having jars labeled "Summer Vacation,"House Down Payment," "In Case My Job Goes Up in Flames," "Car With Four Wheels," except you can't steal quarters for laundry or bus fare out of them.

My new “buckets” are the main “Dez-Savings” that I transfer money into, and then:

VACATION

HOME IMPROVEMENT

EMERGENCY

WEDDING

My dream dress by The Secret Boutique on Etsy, $650 (custom)

Right now I have a month and a half’s pay in Emergency, slightly more in both Wedding and Home Improvement, and about week’s pay in Vacation. If I hadn’t diverted $1000 to my Roth IRA to buy a target-date mutual fund (more on this when I discuss Ramit’s book in detail), I’d be a lot closer to re-doing the kitchen, setting an actual wedding date and location, and planning a honeymoon. Oh well. It seemed like the thing to do at the time, but it took a great deal of straining against impulses for instant gratification.

If you’re one of those lucky people who has achieved most of the improvements and toys and sojourns that your heart desires and you have money languishing in a savings account, even a high-ish interest one, you should probably move some of it out into a Roth, CD, or other investment. (By the way, I am a firm believer in having some fun money in the market: I bought a tinch of Harley and a wee bit of Victoria’s Secret stock when I was in my early twenties, and I hang on to them, in addition to my more sensible holdings. They say buy what you love, don’t they?)

The next thing to do, once you have set up your savings accounts, is to find ways to cut expenses and up your income so that you can increase your rate of savings. You simply must track your expenses. Some people really like to do so electronically, through a service like Mint or their own bank’s online statements. The only problem with this solution is a little-known ethical one: most small business owners are charged several dollars per debit or credit transaction by the issuing bank or the card machine leasing agent. They have to take cards because “no one carries cash anymore” but they lose money on every transaction. This eliminates their already-miniscule profit margins and helps to drive them out of business, destroying neighborhoods and contributing to the Walmartification of America.

If you can get off of the debit card habit, give yourself a cash allowance and keep strict track of how much you have on you and how much you’re spending on incidentals. If you run out, examine where it all went. And try to do a little bit better next time (or re-evaluate whether your allotment is realistic). Think of your spending like you’re on a business trip and will have to account for every penny or it’s lost to you forever. Learn to ask for a receipt every time and to collect them in a centralized place (if you find a gorgeous flat wallet or pouch or a small notebook with a pocket , you’ll adore looking at it so much you’ll remember to put the receipts in it. Hopefully).

Pink Giraffe wallet clutch by DesignSK on Amazon, $13.99

Growing your savings is akin to tending a garden: plenty of work-- but in the end, enjoyable. Do avoid fixating on the long-term—retirement— so much that you forget about surrounding yourself with beauty, rest and relaxation, and the occasional rich meal prepared by someone else or good bottle of imported wine that makes life worthwhile.

Happy saving!

Thrifty Stylist Boston Talks Money, Not Shopping (Well, OK, a Little Shopping)

We have recently launched ourselves into a whole-hearted effort to take control of our finances, due in large part to Ramit Sethi and the book and blog "I will teach you to be rich." Because it's all fine and good to buy at bargain prices, but when you don't stop yourself it really does add up!

The thing we love most about Ramit is, of course, that he doesn't tell you to stop shopping. On the contrary- he tells the story of a friend who spends about $5,000 on Manolos and such every year. But she budgets it in, friends, and is still saving for her future, because she cuts corners in other places, like sharing an apartment. How many of us can say that we've planned our shopping so carefully?

We thought we'd share some of our recent "conquests" in the money-saving arena and other things we were already doing right, in case you're thinking about a similar path.

1. Contacted the IRS, who is holding our 2008 refund due to us filing for an extension in 2004 and then never actually filing (although we did pay!). This means that -- if the paperwork ever comes-- we can file for the missing year and receive a refund for that year as well as the one that's due for 2008! We aren't a big fan of confrontation or the telephone, so this took a lot of guts for us, but they were surprisingly helpful (us: "lost all of the paperwork in a move." Them: "We'll send you a packet with everything you need to file." !!! Way cool!) This probably saved us about $4000. That we haven't had for ages because we were too scared to call. Don't be scared. They're in the business of public service, lest we forget-- they're really not always the big bad wolf.

2. Got our credit report, which wasn't as bad as we had expected (only one late payment, when we totally didn't get our Target bill, grrrr. They even said when we called "oh yes, it looks like the bill came back to us." Bleh! We stopped using the card since they hiked the interest rate. Not worth it.) Then, we called our bank to see about refinancing our mortgage since according to "popular wisdom," we should have a better rate due to our credit score. Not that they've called back, but it's a step toward saving more. (Hold on, calling again... Woohoo! Finally got a live human and a recommendation about something called "rate modification" which is different from refinancing... We'll see how that goes!) UPDATE: For a $1500 fee, they are willing to "recalculate" or something rather than actually refinancing (saving us re-inspection, closing costs, etc.) and drop us to their prevailing (almost half a percentage lower) rate-- which, if we're doing our math correctly on the mortgage calculator, will save us $69,000 over the life of the loan! Let's see... $1500 now or $69,000 later? SOLD! (Now for that tax refund... cough... Or maybe this is a good time to transfer some $ out of that down payment subaccount!)

3. Canceled cable. What a waste of $60/month! The only things we ever really watch are What Not To Wear on Friday nights and the Simpsons. New Simpsons are on Hulu the day afterwards, and we have our beloved fashion blogs to make up for missing Stacy and Clinton, so really, what was the point?

4. As we mentioned in our "At Home" post, we are making our own cleaning products, using washable napkins and hand towels, and have joined a CSA to cut down on our grocery bill (drastically!). We're also trying to bring breakfast and lunch to work and cook dinner just about every day (er, trying being the operative word here).

5. Started tracking our spending religiously, whether keeping receipts or updating our "expenses/income" spreadsheet at work. After a month or so of this, we'll examine where our money is really going and try to adjust accordingly. We'll set a real BUDGET for clothing purchases that fits into our income stream, rather than saying "ooh! We got paid! Shopping time!"

Thankfully we were already on the right track, though; we have zero credit card debt (never got one- we know ourselves too well!); already had a 401(K) to which we're contributing the percentage allowing us to receive the max match; had opened a Roth IRA in our early 20s (which has lost several thousand dollars since then, oops... we picked stocks we loved and/or thought would do well, instead of investing in a decent "target date fund," which we now have done thanks to Ramit, so maybe it'll stop tanking so hard), and had opened an ING Orange Savings high(ish)-interest account, to which we contribute with a small automatic monthly deduction from checking.

Our fiance was laid off in May and is moving in with us in October, (our housemate moved out this month so we have two months with no help with the bills!) so it's really imperative that we take care of this now.

We still need to get a real credit card to start building more credit, since we've never had a car or anything... and apparently paying a mortgage on time for 12 years doesn't account for much.

How conscious are you of how much you spend? How about saving?

Has anyone else read Ramit's book? Highly recommended! Let us know your thoughts!

Happy saving and conscious spending ;)