Thursday, January 05, 2006

Tying Up Loose Ends

I am a little behind on my net worth update. I have all the information in my spreadsheet but due to a number of reasons haven't been able to sit down to do a full analysis yet. So, in the meantime, I thought I would tie up all the loose ends from last year. Over the last six months, since the inception of this blog, I have started and sometimes abandoned, sometimes finished, several new projects. I call them projects. Some people may call them rules or money saving strategies. It's the same. The goal is to mimize spending and maximize assets.

1. Max out 401k - I started contributing to a 401k in 2004 and even then I was contributing the minimum required to get the employer match. My first decision after starting this blog was to max out my 401k and take advantage of the tax benefits. I had to make up some lost time because for the first 6 months I didn't contribute much but I was able to catch up and end close to the 14k max allowed for last year. For this year I set my 401k at a sufficient % so I can hit the 15k allowable contribution for this year by mid-Dec. This would also leave me extra cash in my last paycheck of the year to accomodate holiday expenses.

2. Enroll in ESPP - At the same time when I upped my 401k contribution, I also enrolled for my company's ESPP. Probably the smartest decision I have made this year because my company stock, both the old and the new, have been the best performers in my portfolio. For 2006 I am enrolled at 15% which is the max allowed.

3. Brownbag it - Food is my biggest expense after rent. I spend more on food than on my car, my utilities, even my wardrobe, thanks to my takeout happy dialing fingers. My second big decision, after 401k and ESPP, was to start brownbagging. Since starting this I have brought my monthly food cost down from $600-700/month to about $400-450/month. That's good but there's still room for improvement. My problem is that I don't feel like cooking after an already long day of work and commute. So this year I bought a 2 quart slow cooker (on sale at Target for $9.99) and rented the Betty Crocker slow cooker cookbook from the library. If I come home to freshly cooked dinner I may be less tempted to order in.

4. Spending rules - After a week of keeping track of every little expense and realizing how fast the $2, $10 purchases add up I came up with a set of rules to help keep my spending in line. This has been my most abysmal failure to date and I don't plan on continuing it. Not that knowing exactly how much you can spend is not a good thing but watching every little penny every single day gets a little tiresome. And when that happens I lose interest. I do intend to continue some of the discipline and insight I have acuired though, just not all these rules precisely.

5. Plan ahead - Planning ahead saved me big both on my India trip and on my holiday shopping (although in the case of shopping it was savings over retail rather than the budget). You can't plan everything in life but I do intend to continue to plan ahead for big events and purchases this year.

6. Pay with cash - This was a good experiment but for me paying with credit card is a better option if for no other reason than the record keeping advantages. With credit cards, I can easily download the transactions into Money and categorize them in appropriate buckets. Less manual entry. There is a downside to paying with credit cards as I tend to be less conscious of how much I am spending so I have to be more careful. I also have too many credit cards and a little too much in available credit -- $110,000 to be exact. Since I tend to use only a small percentage of that I am planning to close all but my oldest cards and lower that ridiculous credit limit. So far I haven't been tempted to spend more just because I have a higher limit but why risk it.

7. Use the library - The best thing I did last year was to start going to the library again. I can get movies, cds, books and what's more most libraries these days offer an online access where you can do anything from check your account to pay your fines or renew your items (to avoid paying fines) to request interlibrary loans and put them on hold. Mine even phones me when my item is ready for pickup and tells me exactly when the hold expires so I can get to the library in time. Ever since renewing my library card my book expense has gone down. I have even lately started renting movies. This year I have decided to suspend my Netflix for 3 months and see if I can get by with the rentals from library.

8. Shop at home - This primarily applies to skincare and bath products. I cannot resist a scented shower gel. There, I said it. I have been doing better on this although I slipped up after receiving two Bath & Body Works gift cards for Christmas. So, I pretty much get to start again on this. Good news is I am not expecting any gift cards for a while which should give me time to finish up my existing smorgasbord of products.

9. Simplify - Probably my favorite project and one that will continue this year because I still have work left. My goal is to reduce clutter and reduce possesions until I can fit in most of my belongings (except furniture, the stove and maybe the bathtub) in 2 suitcases and a cabin bag.

Some day I would like to go back to traveling more. Maybe even go live and work from another city or another country for a while. Maybe Australia. And if none of that, we can all do with less. I read an article once that said most people already have everything they need for the rest of their lives right in their home.


At 1/05/2006 2:20 PM, Blogger Mocha & Guess... said...

My mom always says in case of an emergency were you need to flee your home real fast have one back of clothing. I also just one small back for important papers such as birth certificate, social security card/information, marriage papers (if your married), pay stubs, and any other piece of information that you need to keep or that needs to be destorted so the wrong person does not get their hands on it. And one more bag people should have is one with medications in it hopefull small enough to stuff in your first bag and any other first aid supplies, people need to make sure they can carry it out on their backs and in case of a fire make sure that the bags are placed near you and an open exscape so that you can get that and you out safely.

At 1/06/2006 12:42 PM, Blogger mmb said...

That is an excellent idea. I hear people talking about emergency supplies all the time but like you pointed out having a ready-to-go emergency backpak may be more useful in case you have to evacuate. I should do this.

At 1/08/2006 6:55 PM, Blogger Jose Anes said...

In the Right Order... 1 and 2 are the most important. 1) Maximize 401k - the easier way to assure yourself a dignified future, and 2) Use the ESPP to your advantage: but I recomend y ou sell all or most the next day the shares become available.

Good luck!

Money And Investing

At 1/13/2006 5:53 PM, Blogger Davis Freeberg said...

If you are looking to really max out your 401k, then I might suggest that you inquire about the Roth 401k. It was introduced in January and does not have the income restictions that traditional Roth accounts do. The limits are the same, so putting in 15K in really like putting in 25K to a 401k, because the money goes in after tax. If your work doesn't offer it, you might want to encourage them to amend their plan to allow for it. It's easy enough to set up and is a real benefit for those who have a great deal of time to invest or to those who are ultra wealthy and want to defer more income into tax free accounts. The major drawback to the traditional 401k is that while you may save 5K in taxes this year, someday when your 15K grows to 150K, you'll have to pay 50K instead. It's worth checking out if you are serious about saving money.

At 1/13/2006 11:12 PM, Anonymous Jonathan said...

Good list. I like #9. Simplify.


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