Saving is somewhat counter-intuitive and goes counter to my desire for instant gratification, but I've just learned to trick myself into saving for the long term. To make it as painless as possible, I've done or taken advantage of the following:
401(k)
Automatic withdrawals from my checking account or deducted from my paycheck before it is deposited into my checking account
ESPP
I think it's really easy to just spend whatever comes in, and for a while I was living paycheck to paycheck. The idea of saving appealed to me, but there wasn't any money left over at the end of the month, so how could I save? I think that the most important thing that I learned as that I should pay myself first, and do the following: (1) treat saving as any other bill and/or (2) take it out before I even see it so that I will learn to adjust my spending accordingly. It worked.
I think that there are several goals for savings - long term goals such as retirement, short term goals for things you generally need to save for (such as for a down payment) and a cushion in the event of an emergency.
I'm still debating whether it makes sense to join or be a part of these "members" only sites that offer designer duds for up to 80% off. In some sense, it's nice that a bargain could be had, but on the other hand, do I really need the temptation? It's almost like window shopping or going to the mall, there will be temptation, I may see something that I like and then want to purchase it. However, if I never went shopping in the first place....
Generally, unless I need something, I don't go to the mall or go window shopping. I don't want the temptation. I don't want to be surrounded by nice new things that are just beckoning me to take them home. This is probably why I prefer to shop online. I can specifically search for what I want, comparison shop, and see if there are any discounts available. It's so much easier. I do feel a little guilt because I feel some responsibility to support my local merchants, who are likely losing sales.
Whether I shop in a store or online, I'm sure that marketers are trying to find ways to get people to open up their wallets. My junk email box is inundated with offers from various merchants that I frequent. I regularly get free shipping offers, and offers to take a certain percentage off of my orders.
That's probably why these members only sites seem to be popping up all over the place. ideeli.com, ruelala.com, gilt.com are some of the sites that seem to be gaining in popularity. I guess to differentiate themselves, they offer deeply discounted "designer" clothes and accessories. I believe that they are able to offer such discounts because their prices are not disclosed to anyone except members (and thus search engines are not able to access the sites and disclose the prices to the public), and designers may be more willing to offer discounts so that they get some name recognition and expand their audience, especially to sites where members specifically sign up for this type of product.
The problem with this, for me, was that I generally didn't buy designer clothing, and even at a discount, the prices were still higher than what I would normally pay for such items. There is a temptation though, that I'm getting something for 80% off (!), but really, would I normally pay more than $49 (after discount) for a tunic or shirt? No. Plus, these sites are filled with designer names that I'm not familiar with. I get emails alerting me that certain designer items are on sale, and they seem to want to create a frenzy by stating that the sale is only on for a limited period of time and once you put an item in your cart, you only have about 10 minutes to complete the sale.
I think that I'm going to avoid these sites from now on because I don't need the temptation to buy - I was perfectly happy before I knew of the items available for sale and I'll still be happy in oblivion. Sure, I may miss out on some great sales, but maybe in the long run it's better to just buy what I really need and then search for the best price then instead of buying in anticipation or suffer from buyers remorse. Plus, I need to save my money for more important things.
I'm a married working mom of two young children. I'm currently working full time in a technology company and I struggle each to balance work and family life. My husband also works in a technology company as well.
Why am I writing this blog? I've always been interested in learning more about personal finance. From an early age, I was told to save. My parents had opened up a bank account for me and I enjoyed watching the balance grow with each deposit. I didn't want for much, but since I wasn't given an allowance, I had to find a way to buy the things that I wanted. When I was in high school, I did odd jobs like tutoring and had a part time job to earn money so that I could buy the things that I wanted and even then I still didn't spend everything that I made, I wanted to save a bit since I knew that I would need the money for college.
When did I start investing? Sometime in high school a relative sat me down and told me to read a book, The Wealthy Barber. One idea from the book stuck with me and that was the idea of saving at least 10% of my earnings and investing it. If only I had truly followed that advice. There was always an excuse or a reason. Yes, I had expenses associated with school and I needed to live, and I couldn't really in good conscience save the money from financial aid, but could I have found a way to at least put away a small amount from my part time job at least? Saving was not really a priority at the time, just getting by day to day was the priority? If I had put away $50 per month, would that truly have been a hardship? I didn't think long term and in some ways, I'm still trying to make up for it.
Fortunately, there was one thing that I was able to avoid, and that was credit card debt. Temptation was all around me. I was finally out of my parent's house, I had some money coming in the form of financial aid, and I wanted to go out. But, at this time, the credit card limits were really small. I think that the credit limit of my first card was only $200. Can't really do too much damage with such a small limit. Gradually, by the time I graduated, the limit went up to $2,000. I think that I was able to avoid this debt was because of my mindset about debt in general. There was "good" debt and "bad" debt. Credit card debt was, in my mind, "bad" debt and had to be discharged as soon as possible. Whenever I got a statement in the mail, I was always diligent about paying it off. I blanched at the idea of paying a lot of interest. The thought of paying 13% interest was just obscene to me. I was also taking out student loans for school, which was a necessity, and so I didn't want to add to my already large debt burden.
I'm currently a person living in one of the most expensive areas of the country, the San Francisco Bay Area, more specifically in Silicon Valley. Sure, I could have chosen to live in a less expensive area, but my husband and I have family in the area and he grew up here, and we wanted to live close to family. Because of this, we have, with open eyes, chosen to try to find a way to live here.
When we started to look for a house in 2003, we knew that we had to stretch to buy. A modest house at that time was still really expensive. Since it was just the two of us, we didn't need a large house, but wanted enough rooms to support additions to the family, if any. So we looked at houses that had between 1100-1500 square feet.
Originally, we were looking at a much more expensive houses, but at some point we decided to lower our price range because my husband had lost his job. It was actually a blessing in disguise because it forced us to lower our expectations and to think about financial stability and responsibility. We thought that it would be best to find a house that one income could support instead of buying a house that would require both of our incomes to support. We decided to look in more affordable areas and expanded the search area. They say that the mortgage you pay should only come out to, at most, 28% of your gross income. I say, it should be at most actually 28% of your net income after taxes, instead of gross (ideally, less than 20%). We finally decided to settle down in a typical small ranch house with 3 bedrooms and 2 baths.
It took a while to get used to the mortgage payments because they were larger than our rent. I sometimes wonder if we made the right financial decision to buy a house, but there are other reasons to buy a house.
What are the pros? I love our neighborhood, I love the stability of knowing that I'll be here for a while, I love getting to know our neighbors and feeling a sense of community, I love feeling like I can do whatever I want without fear of losing our deposit, and most of all, I love that this place is mine. Also, we could take advantage of the tax deductions for mortgage interest and property taxes.
What are the cons? The mortgage payments are higher, we had to start paying property taxes, there is more responsibility in that if anything breaks, we must fix it and can't rely on someone else like a landlord, and if we ever need to move, then it is difficult to go through the process to sell the house and move.
If we were in a different position, then it probably would not have made sense to buy a house, such as if our jobs were unstable, but this was where we wanted to plant roots. This was where we wanted to raise our children, once we had them (if possible). This was where my husband's family was and where I had some good friends. It was in some sense, an easy decision albeit a nerve wracking one. After all, neither of us had bought a house before and it's difficult to put so much money down at once and commit to a large mortgage payment. The first few payments were painful, but we got used to it and adjusted our living patterns (budget) accordingly.
Buying a house is a very personal decision. They say that the American Dream is to own a house, but I didn't necessarily buy into that. A dream can quickly turn into a nightmare if you are not careful and really consider the consequences of buying. Since we had lowered our expectations, we knew that we could manage. The mortgage payments, while large, were manageable especially since we had lowered our price range for houses. Also, since we lowered our price range, our property taxes were also lower.
Fortunately, while the prices in our neighborhood did drop from the height, they have pretty much stabilized. Living in the middle Silicon Valley definitely helped keep prices from sliding down too far. In some ways, I don't think about the housing market because I know that I'll be here for the long haul. It's like a share of stock, it's not a real loss or gain until you actually sell it.
I think that there are two major components to my financial life - saving and spending. Saving encompasses short and long term goals and the idea of investing. I'll try to break down these things in various posts.
Generally, I think that my financial life centers around my general philosophy that a person should live below his or her means. I'm definitely tempted to live it up because I'm constantly surrounded by enticing advertisements, stories and thoughts of "what about me?" and things like that (and of course the idea that one should live for today because you don't know what tomorrow brings), but I think that everything should be balanced. Sure, I can spend everything I have today, but what if I do live tomorrow? How will I pay my mortgage or pay my other bills? Balance is the key. Balance.
There are a few priorities and really, money is a finite resource. I should balance my desires against my real needs. Plus, I try to think about the long term. I would like to retire at some point and that can't happen unless I plan and act accordingly. This long term goal still has to be balanced against my need to also live for and enjoy today.
I've create a pseudo budget, I generally know how much I bring in each month and I know what my fixed expenses are, but I also make saving a priority. But, if I want to travel or do something outside the norm, then I know that I have to save separately for that or offset it from my other expenses. Going into a deficit for unnecessary things would definitely work against my long term goals.
I finally opened up a California Uniform Transfer to Minor account for my son.
My son is 4 years old and I wanted to start teaching him some money basics. He knows that both parents go to "work" and when we take him to the store or a restaurant, he sees that we pay for things with a credit card or with cash money. He has a piggy bank with some money and non-money (but nonetheless valuable to him such as Chuck E Cheese tokens), but no real concept of money.
When he got some money for his birthday, I thought that it was time to start teaching him some basics like saving, spending and investing. It may be a bit early, but I want to start instilling in him the value of money and teach him how one should approach it. Some basic concepts like spending are easy to grasp, but I also want him to learn how to save or to delay instant gratification and save for the things he wants.
He received $50 for his birthday from various aunts, uncles and grandparents. I showed it to him in bills (two twenties and one ten), and told him that we could go to whatever store he wanted the next day and spend $10, the rest would have to be "saved." His eyes lit up when I said toy store and I think that I lost him then. I explained that we would go to the bank to open up a savings account so that he could also save his money.
When we went to the toy store, I kept repeating that he had only $10 to spend. He got cheeky and said that he thought that he had $50. Good memory, but I stood firm and said he only had $10 to spend. He took some time looking at different toys in the store and after a while finally decided on a small toy that cost only $3. I handed him $10 so that he could hand it over to the cashier. He got $6 in bills and some change. If the cashier had handed him a million dollars, I don't think he would have cared, he was just staring at his brand new toy.
I started to wonder if anything was sinking in, but I think that I just have to be persistent and impress upon him that money is a finite resource and once it's gone it's gone and that we should allocate it according to our needs and then balance it against our wants. Also, I thought about what values I wanted him to have. That the "joy" we get from new "things" is only transitory until we get the next "thing" and that one should build a life around other things that are of more value, like family and friendship and experience. Maybe I was expecting too much, after all he is only 4.
The next day, we stopped by the bank and opened up a California Uniform Transfer to Minor account. I had brought his piggy bank and the extra birthday money. It was a relative easy process and in the end he got a booklet that showed how much money was deposited. Once his piggy bank was returned to him and after we left the bank, he kept asking where his money was. I said "at the bank", and then he followed up with, "why is it there?" I told him it was where we save money. I guess it's a hard concept to grasp, that money is held at a bank far away from you, where you can't touch, hold or look at it anymore.
I think that I'll continue to use his piggy bank and we'll make periodic visits to the bank. I may have to get two piggy banks, one for savings (which will be deposited in the bank) and another for spending. Every time he gets money, we'll put maybe half into savings and the other half into spending. I'll save the concepts of investing and charity for later, maybe when he's 5 or 6, when he starts to get an allowance. I found a pretty neat piggy bank that has four different compartments, one each for savings, spending, investing and charity (the Money Savvy Piggy Bank). I may have to get that so that I don't have to juggle so many jars/piggy banks.
Kids get the idea of money really quickly, especially how to spend it, but I don't want him to grow up expecting money, to think that it comes easily and that the only thing he can do with money is to spend it. He needs to understand that it really is a finite resource and should be used carefully.
Don't know if I'll always be able to compete with the glitz of a toy store and its allure, but maybe with constant repetition and by setting an example, he'll get it.
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