20saver


A very frugal day
March 31, 2008, 6:33 pm
Filed under: Frugality

I did three exceptionally frugal things today:

1. I gave Jake a haircut. I’ve never cut hair before and I have to say, it didn’t turn out too badly. His hair’s a little poofy, but it shouldn’t take long for his hair to “grow into the cut” and look better. If he would have gone to a salon or barber, it would have cost about $20. Money saved: $20

2. We saved 48% on our grocery bill. Kroger is having a spectacular sale this week: buy 10 specific items, get $5 back (up to 3 times per transaction). A few of my corresponding coupons were expiring today, so we needed to go today in order to take advantage of the savings. Money saved: $85.79

3. We made enchiladas for dinner tonight instead of going out to eat at a Mexican restaurant. I figure the items that we used to make the enchiladas (ground turkey, corn, black beans, sauce, tortillas, peppers, tomatoes, cheese, sour cream, etc) come to about $9. The whole dish will probably last about 2 1/2 meals. If we would have gone out for 2 1/2 meals, we would have spent about $50. Money saved: $41

Saving a total of $146.79 isn’t too bad for a day’s work.

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Money Book for the Young, Fabulous & Broke: Investing Made Easy
March 30, 2008, 4:18 pm
Filed under: Books, Money Basics | Tags: ,

This is the seventh installment of my review of Suze Orman’s The Money Book for the Young, Fabulous & Broke. The previous installment, Retirement Rules, covered the basics of 401(k)s and Roth IRAs.

“You will never truly be powerful in life until you are powerful with your own money” (page 220). What better way to be powerful with your money than to learn how to invest it! Orman is adamant about the fact that, in most cases, you don’t need a financial adviser to invest. Besides, most advisers get paid by commission so they have a selfish motive behind pitching certain plans and options. Let’s buckle down and become acquainted with the basics of investing.

First of all, Orman reminds us that saving is for short term goals while investing is for long term goals. You can’t risk the possible loss of value if you put your money in investments for short term goals. You won’t have time for the value to rebound before you need to withdraw your money. Investments are perfect for funding your retirement accounts; however, since you can let the money ride out the peaks and valleys and be in great shape when you finally need the money in 40 years.

Your options for funding your 401(k) and Roth IRA include mutual funds, stocks, and bonds. Mutual funds are premade packages of diverse stocks. Stocks are shares of a company. You usually only have the option to choose stocks of your own company for a 401(k), but you can choose any stocks for a Roth if it’s set up with a brokerage firm. Bondsare essentially loans you give to corporations or the government. They agree to pay you interest on your money until the bond matures and the principal is returned to you. Bonds are one of the most conservative investing choices available. Orman recommends waiting until you’re much closer to retirement to contribute any money towards them since bond returns aren’t very high. The key to investing is diversifying your money so that you’re taking the least amount of risk. Orman loves and highly recommends mutual funds for this reason.

There are different kinds of mutual funds:
Growth funds: earnings/profits are fast growing
Value funds: the share price is lower than the true value. Investors are waiting for the value to be recognized so they can increase their earnings.
Blend funds: both growth and value stocks are in the same fund
Small cap funds: smaller company stocks where big gains are possible
Mid cap funds: middle sized, faster growing companies that are more stable
Large cap funds: big, established companies that are the least risky
Actively managed funds: a money manager figures out the best investments for the fund
Unmanaged funds: also known as index funds, there is no manager, but instead investments are based on the existing market index (the market index is a number of stocks that represent a slice of the market, such as the Dow Jones)

Unmanaged or index funds have consistently outperformed actively managed funds. A big reason for this is that they have less fees, offering a larger net return for the investor. Orman believes that index funds are the best bet for 20somethings as they are simple and well diversified.

A few things to look for in a fund:
Expense ratio: the annual fees to cover the operating costs. Look for a low ratio in order to get the best returns. The average ratio for an actively managed fund is much higher than an index fund.
Long term performance of fund: how well it has done over the past 3, 5, or 10 years
Fund category: how the fund rates compared to its peers (large cap value, small cap growth, etc.)
Load: the sales commission used to pay the financial adviser. Orman urges never to buy a mutual fund with a load. To find out if a fund is loaded, call up the fund’s customer service and ask.

If you’re confused about which options are available within your 401(k), give HR a call. That’s what they are there for.

Orman explains that consistently contributing small amounts to a fund over time is key to investing success due to the wonders of dollar cost averaging. The price of funds changes over time: when a fund price is lower per share, you buy more funds with the money you contribute; when a fund price is higher per share, you buy less funds with the money you contribute. Buying more shares at a lower cost with steady, small amounts is better than putting all of your money into the market in a one time lump sum because you are taking advantaging of dollar cost averaging, allowing you to buy more shares in the long run. More shares mean higher profits when the price per share rebounds.

Orman offers one last piece of advice: the easiest one stop shopping for funds is a total stock market index fund. It’s the simplest and most diversified option available.

I have absolutely zero experience with investing as I’m yet to have a 401(k) or Roth. One day, and hopefully soon, I will be able to get some experience with mutual funds. I’m planning on sitting down with Jake to see about changing his 401(k) to better match what Orman recommends. Right now, he has a cookie cutter plan that isn’t offering the best returns. I’m really glad that I read this chapter as I knew very little about investing. Now I’m ready to jump in with both feet whenever I can get my hands on a retirement plan.

Next up for my Money Book for YF&B review is how to get the best deal when buying a car.



Making more than just cents
March 29, 2008, 11:00 am
Filed under: Rebates

This past week, I sent away for the following rebates:

Organix shampoo: $6.99
Rite Aid March Single Check Rebate: $9.48
Walgreen’s March EasySaver Rebate: $30.78

Grand total: $47.25

Even deducting $.82 for the cost of postage (Rite Aid was sent electronically), I still net $46.43.

Gotta love rebates!



Short, but sweet visit to Walgreen’s
March 28, 2008, 5:26 pm
Filed under: Deals, Walgreens

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Since CVS and Rite Aid were pretty dismal this week, I only visited Walgreen’s.

2 bottles of Head & Shoulders shampoo on sale for $9
2 4pks of Scott toilet paper $7.98, minus in ad coupon= $5, minus 2 $1 coupons= $3
1 toilet bowl brush on sale for $.99

Total out of pocket $13.29
Will be getting $5 ($4 for Head & Shoulders, $1 for toilet paper) back in EasySaver rebates
After rebates $8.29

I managed to grab the last two 4 packs of Scott as soon as I walked into Walgreen’s and held them closely while I got the rest of my items. After missing out on the Angel Soft deal last week, I wasn’t about to let this week’s Scott deal slip from my fingers! $.25 a roll? Yes, please!

I’m also really glad Head & Shoulders has been on sale a lot lately since it’s the only shampoo Jake uses. He’s all stocked up for a good couple of months now.



Conditioner rant
March 28, 2008, 11:26 am
Filed under: Uncategorized

I’m pretty open-minded when it comes to hair care products, but I do put my foot down on thin, watery conditioner.

The conditioner I’m currently using is pretty watery and it never feels like I use enough. I squeeze out my usual amount (which is a good sized dollap since I have long hair) and smooth it on, only to have my hair feeling like I didn’t put any conditioner in at all. So, I squeeze out some more and repeat.

What a waste! But at least I use it up quickly and can move on to a good, thick conditioner.

Which brands have thin, watery conditioner that I should avoid wasting my money on?



Money Book for the Young, Fabulous & Broke: Retirement Rules
March 27, 2008, 10:28 am
Filed under: Books, Money Basics | Tags: ,

This is the sixth installment of my review of Suze Orman’s The Money Book for the Young, Fabulous & Broke. The previous installment, Save Up, covered ways you can save money.

The whole reason behind Orman writing chapter 6, “Retirement Rules,” is that 20somethings cannot safely rely on social security to take care of us when we retire. There is very little chance that the system will still be running when we reach that point in our lives and, even if it is, the amount we will get from it will not be enough to live off of. In short, we must fund our own retirement. Luckily, we have the power of compound interest on our side because of the sheer amount of time we have until we retire.

There are two basic flavors of retirement accounts: 401(k)s and Roth IRAs.

Here’s a nice trivia fact: the name 401(k) comes from the part of the federal tax code that deals with these plans. The contributions you make into your account are taken out of your paycheck and invested into mutual funds, stocks, and or bonds. There are limits to the amount of money you can put into your 401(k) every year. For 2008, the federally imposed limit is $15,500, but your employer could have a lower limit. Give HR a call and check it out.

The neat thing about 401(k)s is that your employer probably offers a company match where they match a certain percentage of your contributions up to a specific amount. This is free money! Do not pass up this opportunity! Any plan where you get a company match is top priority. Orman is very clear on this point: you must enroll and invest enough in your 401(k) to get the maximum company match each and every year.

There is such a thing as a vesting schedule that applies to your company match (not your contributions). Each year, a little more of the company match becomes yours- typically 20-25% a year until it is all yours- in order to ensure that your employer is not wasting their money on an employee who won’t be sticking around with the company for very long. Therefore, skip contributing to a 401(k) if you are not planning on staying long enough with the company to collect the match.

The money put into your 401(k) is taken out of your paycheck pretax. Another term for this is tax deferred. You pay the taxes when you take the money out of your account when you are at least 59 1/2. The amount you pay in taxes is based on your income tax bracket at the time you withdraw the money. If you make a withdrawal before you turn 59 1/2, you not only owe tax, but must also pay a 10% early withdrawal penalty.

Unlike a 401(k), a Roth IRA is completely separate from any employer. You must set up an account yourself. In a Roth IRA, the money you put in has already been taxed and will not be taxed again when you take it out (unless your account is less that 5 years old or you’re under 59 1/2 when you withdraw your earnings). Orman highly recommends concentrating on a Roth if you can’t get a company match or if you’ve already gotten the maximum company match.

Orman is absolutely wild about Roth IRAs because, when you make withdrawals in 40 years, your tax rate will be higher since you will more than likely be making more money than you do right now. So it makes much more sense to be taxed now with a Roth IRA then later with a 401(k).

Just like a 401(k), the money you contribute to a Roth is invested in mutual funds, stocks, and or bonds and there is a limit to the amount you can contribute to your Roth IRA every year. For 2008, it’s $5,000. You must also make less than $101,000 if single or $159,000 if married. You can withdraw your contributions anytime without penalty or taxes from a Roth, but your earnings can only be taken out tax- and penalty-free once you hit 59 1/2. In this way, a Roth can double as an emergency cash fund. Orman recommends opening up a Roth account with either a discount brokerage or a no load mutual fund company because of their lower fees.

Another advantage to having a Roth IRA is that you can withdraw your earnings penalty-free, up to $10,000, to use for the down payment on your first house. Again, your account must be more than 5 years old in order to cash in the waived taxes and fees. For a 401(k), you can also use your earnings for a down payment, but you must pay the taxes even though the 10% fee will be waived. 

Since I don’t have a full time job, I do not have any sort of 401(k) account. I would absolutely love to have a Roth IRA and plan to open up an account once I can afford to set aside the minimum balance and monthly transfer requirements, not to mention any fees I’ll need to pay on the account. Once I do get a full time job, I plan on maxing out the company match. Jake has a 401(k) through his employer, but they do not offer a match, instead they just give a plain percentage regardless of if you personally contribute any money or not. He’s currently contributing 3%, but I’m hoping that he’ll be able to set up a Roth soon and contribute that money to the Roth instead.

Next up for my Money Book for YF&B review is investing principles.



Unexpected Netflix credit
March 26, 2008, 7:30 pm
Filed under: Uncategorized

I received the following email from Netflix this morning:

“We’re Sorry Your DVD Was Delayed

Dear Sarah,

As you may have heard, our shipping system was unexpectedly down for most of Monday. We should have shipped you a DVD but were unable to. Your DVD was shipped today, Tuesday, March 25th, instead.

We are sorry for any inconvenience this has caused. We will issue a 5% credit to your account in the next few days. You don’t need to do anything. The credit will be automatically applied to your next billing statement.

Again, we apologize for the delay and thank you for your understanding. If you need further assistance, please call us at 1 (888) 638-3549.

-The Netflix Team”

I had no idea that there was any delay and I would have been none the wiser if I had not gotten this email. Jake and I only use our Netflix account for movies that we can’t get from the library and don’t stay on top of how quickly the movies get delivered. Since we pay $8.99 for our plan, 5% off would be only be $.45 off our our monthly bill. So we’re basically just recouping what we pay for tax. It’s nice of them to offer the credit, regardless!