1 Mistake I Made in Light of the Market and 1 Thing I Did Right

Well, everyone has been posting a lot about the economy. How can you not with the wild fluctuations going on? In light of what's going on, there is one thing I did that I can identify as a mistake and one thing I did that I can identify as a good decision.

My Mistake
The mistake I made was in not distributing my 401K contributions evenly across the year. Had I done so, I could have taken advantage of dollar cost averaging. Instead, I maxed out my contributions mid-September, meaning that my account is not going to be taking advantage of these new lower prices. I knew that I was going to max out in September but I decided to do so anyway since I thought it would be nice to have extra money for Christmas and potential year end vacations. I also thought I might be switching jobs so it would be easier if I maxed out my 401K at one employer rather than trying to figure out the exact amount I would need to contribute in my new employer without going over the maximum contribution limit. Now it looks like I won't be switching jobs in the near future. Since I work in financial services consulting, it just feels too unstable to be looking for something new. I'm also well respected in my current job and I enjoy it for the most part.

My Good Decision
The good decision I made was in deciding to hold our home down payment funds in cash. I began saving in earnest for a home about 3 years ago. It was always my intention to buy a place in 2007 or 2008. After getting married 2 years ago, my husband and I were able to significantly increase our down payment fund. It's pretty disheartening to see so much of your money only early 3% when the rest of your money is earning 7% or 10%. But we stuck to traditional wisdom and kept that money in an ING Savings account. I never even opened a CD since I was never really sure when we would find a house that we liked and pull the trigger on the purchase. Now I am so glad that we didn't risk that money since we want to use it in the short term.

My Husband Was Upset That I Bargained at a Retail Store

Background
C has a fairly expensive watch ($300) that he needed repaired. The battery had gone out and the strap needed to be replaced. The watch was one of the few nice gifts I had given to C. I got it for him during our first or second year of dating. We have now been together for about 6 years - 3 years of dating and 3 years of marriage.

The watch hadn't been operational for about a year and a half since the strap broke. It was very hard to find a replacement strap. We ended up buying a replacement strap about 4 months ago when we were on vacation in NYC when we went to the retail store of the watch manufacturer. The store in NYC was the only retail store the watch manufacturer has anywhere. Unfortunately since we were on vacation, we didn't get a chance to actually get the strap replaced at the store since the watch was a home. The replacement strap was pretty pricey. We can't remember exactly how much it cost. I think it was about $50 while C thinks it was about $100. I'm not sure when the battery broke.

Bargaining at the Store
Last night we went to this fancy watch store since we know that they do repairs. We had went there before to see if they could repair C's watch, but they would need to order the strap which we didn't want them to do. We ask the serviceman how much it costs to replace the strap and get the battery replaced. The battery was $21.70 and the installation of the band was $15, so the total was going to be about $37.

Both my husband and I were hesitating, so I asked the watch serviceman if he could do it for $30 total. He first said that he didn't set the prices, then I frowned. He then said that he would go and check. While the serviceman was gone C told me that he didn't like bargaining for services that he would rather pay the extra $7 since he thinks people don't do as good of a job with a service when you don't pay as much. I completely disagreed since I thought it was pretty clear cut what he was going to do. Well the serviceman came back and told us that he could do it for $30!

It probably took an extra 2 minutes to save $7. Upon examining his returned watch, there was a minor scratch on the face that C didn't remember seeing. C thinks that the serviceman might have scratched the watch. I told C that I thought it was probably already there. Since we hadn't examined the watch before bringing it in, we couldn't be sure. I just don't think someone at a fancy watch store would purposely or accidentally scratch a watch. Since most of the watches in the store are $1000+, I know that those guys have a lot of experience dealing with nice watches.

I have realized the C and I have very different ideas when it comes to spending money. I always knew that we had different philosophies, but I couldn't believe that he disagreed with bargaining in this case. I think he is just uncomfortable with asking people to give him special treatment, whereas I am a big believer in asking for what you want. We agreed to disagree in this case, but I will definitely try bargaining in the future.

My Husband Doesn't See How Inflation is Affecting Our Finances

In our marriage, I am the primary manager of our finances. We each manage our own retirement accounts. I want us to review this together to see if we have the right combined asset allocation, but we haven't gotten around to it. I am kind of a lazy money manager. I manage our day to day finances. Most of our spending is via credit card, which is paid off every month. I also manage our savings accounts for our emergency fund and house payment fund.

Since I manage most of these things independently, my husband doesn't see how inflation is affecting us. I admit that it hasn't affected us that much since we live way below our means. But the increased cost of gas and food has affected our ability to save as much money as I would like for our house down payment. In fact, I think our down payment savings are fairly stagnant for the year, despite the fact that my husband and I both got pretty decent raises from last year. A big part of that is probably due to our upcoming vacation! Once we get back from vacation, expense tracking is going to start for at least another month!

Insurance Woes

Sharon from the Frugal Duchess had a great post about checking your medical bills for errors. I wanted to add my own experience to this.

If you get an unexpected bill, make sure you call and confirm:
1. who sent the bill
2. what services you're being billed for
3. whether your insurance was billed or not

If you get notice that your insurance has denied coverage, make sure you call your insurance company to find out why!

Recently I went in for a routine medical visit and had some routine tests done. I received two unexpected bills. The first was from some billing office that my doctor used. When I first mentioned that I received a bill and I thought my insurance was going to cover it, the person I spoke to said that maybe I needed to get a pre-authorization in order for the visit to be covered. I didn't think that was the case since it clearly states on my insurance card that no pre-auth is required. Once she checked the billing record, she found out that they never even sent it to my insurance!

Next I got an invoice from the testing company saying that my insurance had denied coverage. I called the testing company to get more info, but I didn't get very far besides learning when the claim was submitted. Instead they suggested that I call my insurance company. I was able to get some information from the automated system that said one test had been reimbursed and the other was denied. Of course I waited to talk to a rep about why my claim was denied. I found out that it was mis-coded in the system! It was funny that when I called the testing company, they told me that they hadn't received payment for either test when my insurance had already wired the money for one test. I'm guessing that it takes a few days to update payment status.

I can't believe a routine doctor's visit for someone with good insurance turned out to be such a pain!

Here's what I learned:

1. Sometimes doctors will bill you instead of the insurance because they forgot to bill the insurance (I know some doctors that make you do all the insurance reimbursements - what a headache!)
2. Sometimes a company will send you a bill even though your insurance has already paid the claim - call your insurance company to see if they paid
3. Things get miscoded, which could be a reason for denial
4. Insurance companies pay way less than what is billed! I was billed for two tests that cost over $200 together. The insurance company paid half that!

Update on Goals

It seemed like I was waiting for January to pass and before I knew it, it's almost the middle of February.

First, I want to say thank you to Well-Heeled for giving me the code for the progress side bars. As you can see, I only have 2 side bars, but if you remember, I had 3 goals for the year. I'm not really sure how to track my fitness goal of running. Maybe I'll put up a progress bar for 13 miles and as progress, I'll put up the farthest I've run without stopping (as of this writing, it's only been 2.5 miles and it's taken me a long time to build up to that length).

For my goal of earning $2000 of online income, I only had a dismal $25.99 for January. I need to spend some time on this blog to put it in a position to earn at least a little bit and start selling some stuff online.

For my goal of obtaining $25,000 in my early retirement goal, I wasn't able to amass the amount I needed and I was hurt by the stock market fluctuations since I have the majority of that money invested in the S&P 500. I'm planning on doing some research on alternate investment ideas and thinking about adopting Millionaire Mommy Next Door's investment strategy. I was able to add $890 to this fund. But since I realized that I would still need to add $1212 a month if I had 9% returns and I had negative returns in this month, I'm going to need to make up for the shortfall. One way I'm going to try and make up for the shortfall is I'm going to add my complete per diem meal allowance gained when traveling minus expenses to my retirement account. This will probably add another $100-$200 per month. On the side bars, I have tracked this as a goal of $16,000 rather than $25,000 since I started out with $9,000 at the beginning of the year.

Also I wanted to say thanks to Brip Blap for including me in the Carnival of Financial Goals III. Check out the carnival to see what other goals people have!

Managing Holiday Gift Expectations

Valentine’s Day may be a holiday promoted by the greeting card industry and their subsidiaries to get us to spend more money. There are numerous ideas out there on how to save money for this upcoming holiday. When you’re in a committed relationship, I think the holiday is all about expectations.

My husband and I are making an effort to spend less on stuff and to spend more on experiences. That doesn’t mean that a girl like me doesn’t appreciate the loving trinket here and there. One of my favorite presents my husband gave me was something that cost less than $10, but it was extremely thoughtful and completely unnecessary. It was a little trinket that he found with my nickname on it.

This year to manage expectations, C and I made a deal. We will be getting each other gifts, but the max price on them is $25. This way no feelings are hurt if one person spends a lot more or if one person decides to forgo the commercialism and get the other nothing.

Of course when you’re in a new relationship, it might not be so easy to be forthcoming and manage expectations. My friend and her boyfriend agreed not to buy presents for each other this past Christmas. However his friends were convinced that when they said no presents, she would still expect something (to a certain degree, I would agree that I would expect something small). He ended up getting her theater tickets, which she loved, but then she had to scramble to get him something. I think it’s much easier when you can honestly communicate with your significant other to ensure that expectations are met.

Monthly Savings Needed for My Early Retirement Goal

I used this nifty savings calculator at one of my favorite financial websites, Bankrate to determine what my monthly savings needs to be in order to hit my $25,000 early retirement goal for 2008.

The calculator is great since it allows you to play with the interest rate.

I inputted in the amount I have today, my goal of $25,000, my time horizon, and tried out different interest rates. The calculator tells you how much you need to put in to be on track. I found that even with a 9% interest rate, I still need to accumulate $1,212 a month! Yikes, that is a lot of money!

So far I have added $425 to the account, but most of that is spill over from December. I need to be really serious in order to make this a success!

Why I Want to Retire Early

One of my lifelong goals is to be able to exit the full time workforce early - in just 7 years at age 35. My husband and I are planning on having kids in a few years and I would like to have the freedom to stay home with them. In my opinion, how you were raised makes a big difference in how you want to raise your children. When I was growing up, I never felt like I had much support from my parents, despite the fact that neither worked the long hours that my husband and I work (they both normally got home by 6 pm). We even had the dinner together as a family most of the time. Of course, my parents were always there providing for my basic needs, I just felt like I didn't get to spend much time with them.

Thus it's very important for me to be able to spend time with my children. In order to do so, I'm trying my best to think about how I can sacrifice now to spend time with them in the future, when they exist.

I came up with a goal of having $25,000 in my early retirement account by the end of this year. Of course, I'll need much more than this to retire early. My husband and I estimate that we would need at least $60,000 in annual income in addition his salary coming from non-retirement accounts. The details are still fuzzy, but I know I need to acquire as many assets NOW. I came up with $25,000 since I thought that was a do-able goal without taking too much from the joint goals my husband and I have. My husband and I are still planning on saving as much as we can for our home down payment, contributing the max to our regular retirement accounts, and fully funding a Roth IRA, if we're eligible. There's a good chance that we may exceed the income threshold and be unable to contribute next year.

Here's where I'm hoping that $25K will come from:

$9,000 current balance (give or take a few hundred, depending on the market)
$1,200 salary contribution ($50 each paycheck)
$4,000 per diem contribution (Allowance when traveling, mentioned here
$2,000 from online endeavors
$1,000 investment gains (anyone have advice on where to put this? Right now it's in the S&P 500, which is not doing so hot)
$3,000 bonus (this is a stretch - my group is doing great, but my company is not)
$2,000 gym bonus (I have worked out a deal with my husband where he will give me bonuses for going to the gym more than twice a week - this dovetails nicely with my goal of running a 1/2 marathon)
$22,200 Total

The question for me is where is that other $2,800 going to come from? And if I don't get the $3,000 bonus, where is that $5,800 going to come from?

One potential source of additional funds is going to the gym more, but I need to be honest - I don't like to exercise that much. That's why my husband agreed to the incentive!

I'm hoping to increase my online income more than $2,000, but that's pretty difficult. This is an area where I think it takes a lot of effort in the beginning with little or no payoff. In the end it can really have a snowball effect. Right now I can imagine myself getting a tutoring job, knowing that I could probably clear $25-$45/hour. But that would really cut into my free time and it would require one of my most dreaded words "commitment". My job is somewhat unpredictable. Some weeks will be slow and I'll only work about 30 hours, but that's pretty rare. On average, I think I work 50-55 hours, so I don't want to commit myself to something that may impede my primary income.

Does anyone else have ideas of where I can come up with "additional" income? Be on the lookout for a future post on some of my ideas for online income (this is going to be pocket change for most of you, but I think starting small helps).

How Far Would You Go to Save Some Money?

Literally, how far would you go? My husband and I often go to a grocery store that's about 60 miles away in order to get a good deal on groceries and stock up. I sense that we are saving a lot of money, but I never bothered to do the calculations.

How much would we need to save to make it worthwhile?

If I assume that it costs us $.50/mile (I'm using this as a proxy since I am reimbursed $.485/mile for work related mileage), I would need to save $60 (60 miles *2 *$.50) in order to make the trip worthwhile financially. Of course, there are also the non-financial benefits of going.

1. Shopping at that faraway store allows us to spend time with some of our dear friends.
2. Shopping at this faraway store along with shopping at Costco allows me to shop less often since I have most of the food I need for a month or more

Ok now I think I'm looking for justifications for taking the trip out there! When we go, we do spend close to $200 or more. Next time we go, I'll try to come up with an estimate for how much we are saving to see if I can justify our trips based on financial reasons alone.

What I did with my 18% raise

I recently received an raise that was higher than expected. I knew that I was being promoted. I had been expecting approximately an 11% raise based on what I knew of the pay scale at the higher level. I also had it in my mind that if I didn't receive a promotion and a raise similar to my expectations, I would be looking for a new job.

Lucky for me, my boss came through for me and was able to deliver the promotion as expected with even more money than I was expecting. How often does that happen?

Anyways, in order to celebrate my promotion and higher salary, I decided to re-allocate my automatic savings. The end result? I now get about $100 less per paycheck into my checking account to cover our living expenses. I have ALL of my raise and an additional $100 per paycheck going to my 401K, our emergency fund, and our house saving fund. I get a thrill as I see our house saving fund increase. I can't wait until we have enough saved to be homeowners!

Biking to Church

I love it when my husband and I are able to bike to destinations we normally would drive to. We've been biking around our neighborhood for the past several months. Finally we decided to bike to church rather than drive. Yesterday was our second time doing the 3.5 mile ride. The ride is fairly pleasant, but the San Francisco hills make it quite tiring.

In order to bike to church, this is what we we did:
1. Wake up early enough to have time for the ride
2. Make sure we eat breakfast (my husband, C, always does, no matter what. Sometimes I skip it)
3. Stretch for 5 minutes before hand
4. Begin biking
5. Stop at the gas station (on the way) to fill C's tires with air
6. Keep on biking until we get to church
7. Lock up our bikes
8. Attend church
9. Ride back home

I enjoy getting exercise with a purpose. While C and I also go to the gym, I really appreciate it when we're able to get exercise doing something we would have done anyways - it also allows us to be more environmentally conscious. I would say that it allows us to save some money, however, this time I was so tired from the biking, I convinced C to stop at our favorite SF restaurant for lunch.

Women vs. Men

Kay from Don't Mess with Taxes has a great post on post about the men, women & money. SVB and Nina have also been a part of the conversation

My husband and I have frequent financial discussions that show the stereotypical differences between how men and women view money. In managing our money, there is both the offense and defense point of views. Offense is related to generating more money. Defense is related to saving the money that you have/earn. Men tend to focus on offense. Women tend to focus on defense. Of course this is a complete generalization.

It's much easier to focus on defense and to see small immediate results, whereas focusing on offense requires more work & risk, but there's a much greater payoff. In my own personal experience, the best teams (or the best personal money managers) focus on both offense and defense.

In the experience of my husband and I, I am sure that my focus on defense has helped us increase our savings & net worth. However, since neither of us were big spenders to start, this hasn't has as much of an impact on our savings & net worth as our salary increases. Making more money doesn't matter if you don't keep more of it, but making more money makes it easier to keep more of it.

My Greatest Financial Desire

Currently, my greatest financial desire is to become a homeowner. Ever since I read The Automatic Millionaire by David Bach, I have wanted to own my own place. At that time the goal seemed unfeasible. I was barely getting by in NYC with plans to move to the other side of the country in less than 2 years.

Since then I have gotten married (I can see why being married typically improves your finances) and we been able to save up a sizable down payment, but maybe not sizable enough for the bay area.

Things I have been thinking about recently:

How much can we adjust our tax witholdings in order to get more of our money back now?
It's harder to figure out the right withholding number when you're married without ready access to your partner's paychecks. I am going to try to get my husband to hand over the most recent copy of his paycheck this weekend so we can adjust our withholdings.

Should my husband and I ratchet down our 401k contributions in order to save more for our future home?
The answer here is probably yes. I am reluctant to not contribute the max to my retirement since I think I may exit the workforce or work part-time once we start a family. I didn't want to ask my husband to contribute less than the maximum while I still contributed the max. I talked with my husband about contributing less to our retirement accounts and he suggested contributing less to his account, while I could still contribute the full amount without me saying anything.

Should I try doing extreme budgeting by The Force?
We already budget by the force. I have my paycheck going into 5 different accounts. However, I allow myself a fairly large "cushion" in my checking account to cover my monthly expenses, allowing myself to never worry about not being able to pay the bills out of my checking account. When I was living in NYC with a much lower income to expense ratio, I had to really watch my spending since there wasn't a lot of money in my checking account. I could change the dynamics of our checking account so that we barely have the money to pay our bills, forcing me to be more mindful of the things I card to my credit card.

Somehow I want to substantially increase our home savings rate.

Start Buying Your Christmas Gifts Now

I, like most Americans, often wait until the last minute to buy Christmas gifts. This year I decided to try and do something differntly. I try to shop a little as the year goes by - especially now. I am on the lookout for items that I think my friends and family will want. I then buy them now, or sometime wait for them to go on sale. Then once they're home, I wrap them up.

I personally love to wrap presents, but I hate to do it when I have a gazillion other things to do. Buying gifts slowly gives me pleasure since I spending money on others and I get the joy of wrapping presents for them.

Of course, there are some gifts that are a better price during the holiday season (or even right after the holiday season). On those items, it might be better to wait for the big sales.

Gym Membership for Life

My fiancé and I had talked about getting new gym memberships. He currently has one to a gym that does not have a location near our new home in SF. I normally do not go to the gym or just use the one at the hotels when I travel. 24 Hour Fitness was the obvious choice for us, but we needed to know more information about the prices. 24 Hour is especially good for me since I travel, allowing me to use the gym while I am out in other parts of the country as well.

His friend had gotten a deal where he paid $750 for the first 3 years and $99/year thereafter. This type of membership obviously benefits someone who knows they will be going for a long time and the club benefits from those who get decide they are going to start working out all the time and then do not stick with it.

Yesterday my fiancé went to the gym with his friend and asked if they had any three-year specials. Here is the deal we received: $600 for the first 3 years and $49/year after that. In the first 3 years, that calculates out to be an average of $200/year and $17/month. In subsequent years, it’s only $4/month. Of course, the benefit for the club is they make their money upfront since we had to pay $600 for each of our memberships yesterday. My fiancé’s friend even thought about switching to the new deal since it would save him money in the long run (after more than 12 years), but he decided not to. We can use all 24 Hour Fitness gyms except for one or two really nice ones, which is fine by us.

That means no excuses from me that the gym is too expensive. It is now a sunk cost for us, so we better use it and enjoy it! It also means that 24 Hour needs to stay in business and we need to work out A LOT to decrease our cost per use.

Comparative monthly gym prices (note this might be out of date since it was 2 years ago when I was looking to join a gym and these gyms are mostly in NYC):


NYSC: $80 discounted all-clubs access


Reebok Sports Club in NYC: $180 - the NICEST gym I have ever been to. What other gym has a 40 foot rock climbing wall?


Equinox Fitness, mostly in NYC : $100

Shopping Spree

Last week I went to the mall with my finance. Since moving back to California, I haven't been doing that much shopping for clothes. One great thing about living in NYC is if you really want something at a regular store such as Ann Taylor (my favorite) or Gap, you can get it on sale if you're willing to wait and travel a bit. So last Saturday was somewhat of an anomaly for me since I went on the largest clothing shopping spree of my life! I got one great suit from Ann Taylor (over 50% off and very classic). My next purchase,a pair of jeans from Lucky, was a major splurge costing about $100 including taxes. I justified this purchase by the fact that I have sort of been looking for a new pair of jeans for over 3 years and I bought my last new pair over 5 years ago. I do still have several perfectly good pairs of jeans, but my 3 favorite pairs all have rips in them. I will still continue to wear those jeans and only wear this new pair for special occasions. This should allow this new pair to last my at least 5 more years.

My last purchase came at Lady Foot Locker. This normally isn't a store I shop at, but when I walked by, it definitely looked like the store was closing. There were no shoes on display and the whole store was a mess. Unfortunately my finance and I had to get back to his house for dinner. On the way to my house, I was still thinking about the sale, so we decided to go back to the mall. We got there 15 minutes before the store closed. Luckily the stuff I had picked out earlier was still there. While we were waiting to check out, I decided to try on a black down jacket. Now being February in California, this isn't something I absolutely needed. I tried it out, and it fit perfectly. However checking the price, it was $119. With the 50% off, that was about $60. I couldn't justify spending $60 for a jacket that I probably wouldn't wear until next season. As I was putting it back on the rack, the saleswoman informed me that the jacket was only $27, including tax. I was shocked! Since this was a Nike jacket, I thought I could probably get more for the jacket on ebay, if sold in the right season. I decided to buy it. It was unusually cold this past weekend. I snuggled in my warm jacket. My mom asked me if I needed the heater (she usually turns it off when she goes to bed) and I was able to say "no" without fear of being chilled since I was wearing my new down jacket.