Poorer Than You

Net Worth Update: July 2010

Stephanie — Mon, 09 Aug 2010 12:00:00 +0000

Back for another check-in on my finances! Prepare yourself – this entry comes with a startling revelation! (Dun, dun, DUN!)

Change: $1,561 or +4.86%

A nice continuous climb for that little line! If you look at the chart, you may notice that it’s up into the area that was the first “fall” in the chart back in 2007, when I went back to school and started taking out student loans again. But, this is where the “startling revelation” comes in…

The growth on this chart is a lie. Or, an exaggeration, anyway. And I call this a startling revelation because it really did take me by surprise, as well. It’s something I knew about, but completely underestimated until I looked at the numbers this month.

You see, I’ve been counting in my net worth the money I’ve been putting aside for taxes. As a freelancer and independent contractor, my taxes and Social Security tax payments are not withheld by an employer – I have to put them aside myself and pay it at tax time. I do pay “estimated quarterly taxes,” each quarter, but by my calculations, that amount is much lower than what I’ll really owe come tax day. I won’t be penalized because I’ve been making my quarterly payments, but… I will have to hand over a significant chunk of change.

So this chart’s growth is inflated because of the savings account I have specifically for tax savings. Which leads us to an excellent question: why did I ever include that savings account in these monthly calculations at all?

Good question. I don’t really know. I guess I thought that it wouldn’t be as big of an impact as it was. I didn’t expect to be working as a freelancer and independent contractor for so long. It was really just an oversight. However, it’s not completely wrong – after all, once I make the big payment in March or so, my net worth will drop down to what it’s supposed to be. It will all adjust at that time.

And as soon as it does adjust? At that time, if I’m still getting income from a non-W2-source, I’ll cut that savings account out of the calculation entirely.

Just be prepared for the big drop in six months or so. Believe me, I’m getting prepared for that, myself.

If you have any questions about my net worth or how it is calculated, feel free to ask them in the comments. Also, if you’d like to see how I stack up against other personal finance bloggers, be sure to check out The Wealthy Blogger List. (Spoiler alert: the name of my site is highly accurate.)

Net Worth Update: June 2010

Stephanie — Fri, 02 Jul 2010 12:40:47 +0000

I’m back again for another spin ‘round the ol’ Net Worth calculation! It’s time to see what happened in June and how some big changes (relatively speaking) to my student loans affected the bottom line. Here’s the sitch:

Change: $1,220 or +3.66 %

Yep, I still go it! (“It” being that awesome knack I have for making my net worth climb upward these days.) I managed to sock a good amount away into my savings, while weathering a few tiny storms that threatened to pull my net worth back in the downward direction. It’s all about the savings, my friends.

Student Loans: You may note, if you click the graph above and visit my detailed net worth chart for June, you’ll note that my student loan balance increased a bit, by $44, instead of it’s usual downward direction. This is mainly because I didn’t have a payment due in June for two of my loans.

Why? Because I consolidated my student loans this month! Well, two out of the three, anyway. See, the benefit of consolidating student loans is getting a fixed interest rate instead of a variable one. I won’t get into too many details here – consolidating student loans is a thing that deserves a post all to itself.

By the way, even though I didn’t have a payment due for those student loans (due to the transition period), I just scheduled an extra payment for today (huzzah for extra payments!). My new payment amount, which starts at the end of July, is higher than what I was paying on those loans before. But I’ll pay way less in interest in the long run, so it’s all good.

Retirement Account: My Roth IRA? It could be doing better. I’m really trying not to care too much about the month-to-month rises and falls, but it taunts me! Just gotta keep this in mind: the fact that the value is down means I can buy more shares for my money when I make my next investment. The stocks are on sale! I haven’t lost any money unless I cash out, which I am so not doing right now.

Emergency Fund: My big behemoth savings goal at the moment. I have to adjust my savings snowball to reflect that this is the new top goal in my life. But right now, I’m looking at a short term goal of getting it up to $3,000 by October. It’s on a rockstar pace – it’s up to $1638 at the moment. Hot!

For July, I’ll be focused on socking away money and job searching. Hopefully I can transition gracefully when my job ends in September, but if the cards don’t fall that way, that emergency fund will come in mighty handy.

Net Worth Update: May 2010

Stephanie — Thu, 01 Jul 2010 00:18:43 +0000

Nothing like doing something at the last possible hour! (It’s a great way to relive your college days once you’re a year out, by the way.) Before I calculate all the fun stuff for June of this year, I really ought to go back and cover what happened in May. So, here goes…

Change: $721 or 2.12 %

Hot diggity-dog, guys! Yep, things are going pretty a-okay for the time being. Of course, any upward movement is a big deal for me, compared to the years of depressing student loans and work-study paychecks that dragged my line graph down-down-down. Happy times!

Knocked one of the weddings off of my savings list in May, by making a trip up north for my best-college-friend’s wedding. The best part (other than my best friend got married) is that I paid for all the expenses for it out of pocket. Which means I didn’t dip into my “Weddings” savings fund at all – in fact, I put my regular monthly contribution into it, as well! Because of course, there will be more weddings – probably for the rest of my life.

I’ve also taken some strides to build my Emergency Fund back up, as well. My hope is to build it up big and strong before I re-enter the job market later this year. Yep, cat’s out of the bag on that one – the job I took after moving to the DC area has an expiration date on it. It’s a friendly parting of ways that has zip to do with my job performance, but rather is due to factors outside of my control. So, long story short: Emergency Fund = mucho importante, now more than ever.

So that’s May for you… and hey, this time I can hint at June too! (SPOILER ALERT!) Big changes with my student loans (ooooo!), and more fun financial stuff than you can shake a stick at. Come back tomorrow – it’ll be time to talk June!

Net Worth Update: April 2010

Stephanie — Mon, 10 May 2010 12:00:00 +0000

Hi. I don’t want to leave you guys hanging, even though that’s what I’ve obviously managed to do. I won’t try to do the obligatory excuses, but rather just say that my life has gotten more hectic instead of less, and that we’re still in the “valley” of my hypothetical time graph. However, my net worth graph is looking a lot less valley-like, so let’s focus on that!

Change: $1,311 or 3.70 %

I call that “movin’ on up” alright! The vast majority of April’s jump went into my newly formed retirement account at Vanguard, actually. The rest is sitting in my (interest-baring) checking account, waiting to be allocated out into my savings. With all the busy-Steph-ness, I haven’t taken the time to rework my Savings Snowball since the big retirement-fund investment. Most likely, the focus will shift to my emergency fund for a little while, and then even out to spread out amongst my goals so that I can hit some targets sooner.

For such a pretty “up” graph, there isn’t much else to tell. But no news is good news, right?

Net Worth Update: March 2010

Stephanie — Fri, 02 Apr 2010 11:19:55 +0000

I sincerely hope you enjoyed yesterday’s April Fool’s Day prank, and that if you did fall for it, you’re not pissed at me! Yesterday’s post was a heart-wrenching goodbye that was 99.9999% true. That’s the key to a good April Fool’s joke: plausibility. Everything in yesterday’s post was true… except for the conclusion that I’ll stop writing.

Because honestly, I’m not smart enough to know when to quit. Lucky for you, I suppose

Plus, I have some truly HOT news to share in this month’s Net Worth Update, so it’s no time to quit writing now!

Change: $1,427 or 3.87 %

Booyah, buckaroos! Look at that little line on the end of the graph there, trying to shoot straight up toward the sky! Do you know what that means? I worked a ton of hours in March and didn’t buy much. But, it gets even more exciting because…

I opened a retirement account last night! Okay, that was supposed to be a lot more dramatic than it looks typed out. Only big money-nerd types like me will be wetting their pants at that statement. But I’m ready to declare it a big F’n deal, myself. I’ve been stating my desire to open a Roth IRA since the earliest posts on this blog and, three years later, I’ve finally done it.

And, because I did it before April 15th, I opened the account for 2009, which means I can still contribute up to $5,000 for 2010 this year (on top of the $3,000 I opened the account with last night). Those of you curious-cat types will be interested to know that after years of research and careful consideration, I decided to open my Roth IRA with Vanguard. Low expense ratios and tasty tasty index funds? Yes please!

Things are not perfect (see yesterday’s post re: work/life balance), but they are starting to come together. I still have to rebuild my emergency fund following my last car repair. I also give some consideration to how aggressive I want to be with my retirement fund now that I’ve passed the first hurdle (the $3,000 minimum to buy into the index fund I wanted).

But I crossed a major checkpoint last night, so for a few days, I’m just going to bask in that.

So Long, and Thanks for All the Fish

Stephanie — Thu, 01 Apr 2010 10:53:21 +0000

Whether you’re a subscriber via RSS, email, or you just check the site regularly for updates, you’ve noticed by now that I just haven’t been writing lately. Especially keen observers will notice this started when I began working full-time. It’s true: I haven’t yet mastered the coveted work/life balance. It makes a sort of sense: I’m only just out of college and work/life balance is something it takes people years to achieve.

Unfortunately, PTY has become the victim hit hardest by my new big-girl life. While strictly speaking I have “time” to write for it, I do not have the mental energy anymore. Days bleed together and creative projects fall by the wayside.

So rather than let PTY languish any longer, I’m going to take this last opportunity to make a clean break. I’ll write up a comprehensive guide to the archives that will be the new front page of the site, and that will be my last post. This way, all of the invaluable information in the archives will be easily accessible and still open and free to the masses.

I have not come to this decision lightly. Blogging has brought me friendships, a bit of money, a strange sort of internet-fame, and most importantly, it got me through the roughest patch of life I’ve experienced so far. But given the choice between watching PTY slowly fall into disarray, or taking the steps today to put it to rest properly, I think the choice is clear here.

(And maybe it will give me time to actually read the Hitchhiker’s Trilogy, since I’m really sort of a phony, using this post title without having finished those books.)

Many thanks to the thousands of you who have made PTY a success, and the handful of you who contributed time and time again. I hope you’ll continue to follow my inane and ultimately pointless ramblings on Twitter, since that’ll be the place to find out if I ever start a new project.

[Edit: April Fool's! ]

No related posts.

Money can’t buy love! Here are 7 vital signs that you tend to ignore:

Guest Author — Thu, 11 Mar 2010 00:46:12 +0000

This week’s guest post comes from Dorothy Anderson, who is a finance blogger and recommends you be very careful before consolidating debts.

Do you remember the song by Beatles?

“….I’ll buy you a diamond ring my friend if it makes you feel alright,
I’ll get you anything my friend if it makes you feel alright
‘Cause I don’t care too much for money, money can’t buy me love”.

Are you in love but torn by money? You must be having tip offs with your better half? Love often seems to be attacked by the terrible money syndrome. Money is a sweet sensation and can buy anything material. But can it buy love for you? Know those vital tell-tale signs and let love reign in your hearts.

Vital sign 1: For couples, money and sex are the only reasons for stress and estrangement. For those who have tied the knot, one person is in charge of the finances and the other one has no knowledge of the money being spent. At the end of the month, when it is time for a review, couples end up accusing each other for overspending. So as a first step, start sharing everything including money matters. Stop escaping from your responsibilities and instead of blaming each other, sort out ways to pull back the reigns of your household expenses. This will reduce arguments.
Vital sign 2: The most common rift that takes place is due to different spending habits of two people in love. This is natural. Two individuals hail from different backgrounds and may have different spending habits. Only love is the common factor that binds them. It can be so that while you are enjoying a weekend golf, your partner is busy making efforts to consolidate debts to pay off arrears that you both have incurred. So in that case, the one who is enjoying golf must rush to support the other one in paying off debts. You need to sit together and sort out your priorities when it comes to expenditure. Talk it out. Help your partner to clear debts rather than piling them up.
Vital sign 3: Most couples suffer from the very common “why” syndrome. For every little thing that they do or want to do, they ask each other “why”. It may be so that the lady might want to have a nice haircut at a posh salon but the man might ask “why”. At the same time the man might want to have a drink with his colleagues and the lady might ask “why”. From this stems up another tassel. So why keep a space for this irritating “why”? When you both are planning a household budget to regulate your expenses, make sure you keep aside some amount for both of you separately. If you want you can spend independently without having to give any explanation for your desires. It is important for you to understand that people may have different demands. Respect and love each other just the way you are. Ruth Hayden, author of “For Richer, Not Poorer: The Money Book for Couples,” thinks that the right choice is to avoid conflict by keeping some accounts separate. His idea echoes, “You should have some autonomy money, I should have some autonomy money, and we need to learn how to practice being a couple together with our money.”
Vital sign 4: The most challenging situation for a married couple comes when they have to deal with a monetary crisis. No matter how much you try to control your spending, life is unpredictable. There can be a rush hour when you might have to pay for high medical or maternity charges, car repair, mortgage and many other unanticipated situations. But why so? How can money take over your love? Start maintaining an emergency fund. So both of you can decide how much you can contribute. Make sure this amount is directly proportionate to your respective income.
Vital sign 5: Are you throwing tantrums at each other regarding a big purchase? If you are thinking about buying something big such as a house or a car, first check the agreement level. It can be that you want your partner to contribute whereas he/she cannot. So why not give some time? Postpone the idea and let the other person settle down with finances.
Vital sign 6: If you are in love, you must be honest with each other. Lack of integrity is another vital sign that leads to a financial crisis followed by a charged up emotional battlefield. Credit cards are one of the most used financial accessories. Whenever you go for shopping, you usually swipe cards. But are you swiping your partner’s card without his/her knowledge? Stop doing this. Even if you are spending, let your partner know about this. It happens that you keep on swiping cards and at the end of the month when your partner discovers this, it is kind of shocking. This instantly makes way for a big challenge. If you feel you cannot control your temptations, start communicating. Don’t let your partner get disillusioned. It is important to be transparent. Divulge all that you are doing so that nothing is hidden between you two.
Vital sign 7: Couples suffer from another complex-“I am right”. Usually the one who earns more tries to gain an upper hand. So any kind of advice from the one who earns less gets unheard. If you want to be happy, be a good listener. It is very important that you start respecting each other’s views. Since you earn more, it is not necessary that you are making the right decision. Your partner may have a strong say since you both are connected by love. Discuss problems and sort out solutions that would ensure your conjugal well being.

Well known therapist and author of “Overcoming Overspending: A Winning Plan for Spenders and Their Partners’, Olivia Mellan says, “people with different spending attitudes tend to “polarize” when they become a couple”. So the basic idea is to give a conscious effort towards a mutual consonance. If you think digging your head in the sand will drive away your problems, you are not thinking it right. Take the initiative to ward off these issues. Now you know a few vital signs. What next? Act on it. Knowledge is power but actions always speak louder than words as the adage goes. Realize the priority of love over money and don’t let money ruin your happiness.

By the way, I am sure that you can add more vital signs to the list. Why don’t you add it in the list or ask your friend to do so! And don’t forget to keep this blog post open in your partner’s laptop.

Net Worth Update: February 2010

Stephanie — Wed, 03 Mar 2010 12:32:51 +0000

Even though it’s not good for my financial picture, net worth calculations are a lot more exciting when it’s unknown… will it go up, or will it go down? Up or down? What’s it gonna be February… up or down?

Up (a little)!

Change: $4 or 0.01 %

At first blush of the numbers, it looks like I grabbed a bunch of money out of my cash accounts, threw them at my retirement fund, and made a little extra last month to put into my student loans. But those numbers are deceiving, and it’s actually a bit more complex than that:

Taxes: My work as an independent contractor, a freelancer, and a business owner left me paying nearly all of my own taxes for 2009. Barely anything was withheld for me during the year. But despite my large tax bill, in some ways, it’s like I got a tax refund. Why? Because I put aside more than double the amount I actually needed to pay my tax bill – due to my own conservative estimates and things like the Making Work Pay tax credit.

Retirement: In addition to throwing everything I could at my retirement account from my earning last month, I also threw my “tax refund” (see above) in there as well, which allowed me to nearly triple my retirement savings in February.

Car Repair: The heating/air conditioning in my car went totally nutty last month. The heat decided it was only going to work if I’d left it full blast when I last turned off the car for an extended period of time. The diagnosis left me $450 poorer ($430 after coupon, actually). But both heat and air conditioning are important where I live, and I need my car in order to work. I took a portion of the payment out of my emergency fund and paid for the rest out of pocket from the month’s income.

Wedding Spending: I used some of the money out of my “weddings” account to buy two bridesmaids dresses for two separate weddings I’ll be in. I need to keep contributing to this fund heavily for the travel costs associated with these two weddings.

So really, my money moved around a whole lot during the month and settled in three places: my retirement fund, my tax bill, and the heating system in my car.

Plutus Awards

Additionally, I’m proud to announce that Poorer Than You has been nominated as a finalist in the 2009 Plutus Awards! You’ll find Poorer Than You under the nomination category “Best Personal Finance Blog for Teens or College Students.” The competition is both stiff and awesome – I highly suggest you check out all of the other finalists in this category, if you aren’t already a rabid reader of them: 20 Something Finance, Green Panda Treehouse, Money Under 30, and Studenomics.

And of course, I hope you’ll take the time to vote! There are a ton of categories, ranging from personal finance blogs to awesome bank accounts and financial products. Do it – go vote!

5 Situations Where You Should Leave Your Credit Card in Your Wallet

Guest Author — Thu, 25 Feb 2010 13:01:00 +0000

This week’s guest post comes from Fred, personal finance writer at Credit Card Finder. He helps people to compare credit cards online.

There are smart ways to use your credit card: you can keep your wages earning interest in a savings account while you spend on your credit card and pay it off at the end of the month, you can even accumulate meaningful points or take advantage of cash-back offers. However, there are times when using on your credit card is going to cost you more than the purchase could ever be worth. Here are five situations where you should not use your credit card:

1. Don’t take your credit card for a night on the town

When you have a big date (or just a big night out with friends) planned, it can be easy to burn through your cash as you pay for drinks, dinner, dessert, or entrance fees, drinks, drinks, and drinks. But what happens when your money runs out at the end of dinner or after the second round of drinks and the night is still young – plus you have to be able get home?

It can be tempting to lay down your credit card and start a tab, but you are going to end up with much more than a headache and a woozy stomach in the morning. You’re going to have a credit card hangover too, and those can’t be placated with a few aspirin and a greasy breakfast. Instead, think about the interest you will be paying on all those rounds, and all the rounds you shouted your ‘new friends’ in the excitement of the evening; is a monster hangover really worth a credit card hangover?

2. Don’t use credit to pay bills

If you have lost your job or are just having trouble making ends meet, a credit card is not the answer. A credit card may solve your problems in the short term, but it is really only making things worse for you down the track. If you don’t have enough money coming in to keep your household running, then you need to find another way. A way that isn’t going to add another bill to the list at the end of the month, and one which will not charge you interest, making it harder for you to ever pay off your credit card debt.

Instead, look at where you can cut back on your costs – can you live with just one car, can you cook at home more than eating out, can you cancel gym memberships and walk more? Then you can contact your bank, the electricity and water companies, and anyone else you owe money to and explain the situation. Chances are you can negotiate more time to pay your bills and even a payment plan for the long term to make things more affordable, without accumulating bad debt.

3. Don’t bet on credit

Online gambling sites make it easy – not to mention fun, at the time – to simply enter your credit card details and try your luck. However, you can lose a lot more than just chips when you gamble with your credit card. On top of losing an online game of poker or roulette, you are losing someone else’s money – the bank’s, and they are going to want to be repaid, with interest.

4. Don’t start a marriage on credit

If you are swept up in the romance of a proposal, you may not think twice about putting the perfect engagement ring on your credit card. However, you should be thinking twice (and three times!) about starting a marriage based on debt – just how long is it going to take you to pay off that ring? How much interest is that ring going to have accumulated before you can pay it off? Not to mention the other debts a young couple has to worry about – student loans, a mortgage, car loan…

Instead, find a way to keep your credit card away from the engagement ring. You don’t want to scrimp on the one you love, but consider borrowing the money from your parents or even better, find out whether there is a family engagement ring which was destined for your fiancée’s finger anyway. Otherwise, explain to your girl that you don’t think it makes sense to start your life together in bad debt, and buy a smaller ring. You can upgrade the ring when you can afford it – have the original diamond reset with a larger one, or put in a more expensive setting.

5. Don’t pay for your taxes on credit

It seems like a good way to earn some credit card rewards points for a bill you have to pay anyway! But paying your tax bill on your credit card can cost you more up front, on top of the interest if you don’t pay it off right away. This is because the IRS is prohibited from paying fees to credit card companies to process their transactions. When you use your credit card to pay for anything, the person you are paying is being charged merchant fees from your credit card company to process that transaction. Most businesses will absorb those fees as part of the cost of doing business so you won’t even notice. However, the IRS is prohibited under the Taxpayer Relief Act of 1997 from paying those merchant fees to the credit card companies, so they charge those fees to you. Therefore, on a $4,000 tax bill, you would actually pay $4,099.60 to cover the service charges. Does paying an extra $100 on your bill equate to enough rewards on your credit card scheme?

As well as the service charges you will have to pay, think about the interest that will accumulate on your tax bill if you don’t pay it off within the interest-free days. It’s bad enough paying tax, do you want to keep paying for it month after month in credit card payments?

How Big Should Your Emergency Fund Be?

Stephanie — Wed, 10 Feb 2010 16:07:01 +0000

Last month I announced some changes to my Savings Snowball, including dropping the goal for my Emergency Fund from $10,000 to $5,000. No one said anything about that, so it must not have been a huge controversy. But I don’t find myself especially comfortable with either of those numbers. Why? Because nailing down how big an emergency fund should be is not easy.

Experts love to give you rules of thumb like “3-6 months living expenses,” which is certainly as good a metric as anything. But if your current living expenses are inordinately high or low, that’ll throw the whole thing off.

The truth is, your emergency fund should be big enough to exactly cover the cost of true emergencies in your life, but no bigger. Obviously not having enough money in your emergency fund is bad, but too much money isn’t good either. You might be tempted to use your E-fund for non-emergencies if there’s too much money in there. And extra money in your E-fund isn’t being put toward other goals in your life, which will slow those goals down.

The truth is that the only way to know exactly how much money you’ll need in your emergency fund is to be psychic. And I’m going to go ahead and assume that if you’re psychic, your emergency fund consists of “already knowing the winning lottery numbers.” So for us mere mortals, we must rely on the old metrics of “3-6 months expenses” or simply picking a nice round number out of thin air, like I did.

Some tips on keeping your emergency fund big enough, but not too big:

Remember to adjust the amount for life changes. When you first move out on your own, you’ll need a bigger emergency fund than you did when you lived with your parents or at college. In general, the size of your emergency fund will have to grow as you go through life.
Credit cards and other available credit can help in a pinch, but don’t rely completely on them. We all know that people who consider credit cards solely as their “emergency fund” are stupid. But if you have a credit card with a good limit and a low interest rate, it can be used once your cash reserves are tapped out, as long as you have a way to repay it later.
Personal relationships should also be a part of your emergency fund. Don’t be a mooch and go running to friends and family for every little thing that comes up! But do work toward strong ties with people so that you have people to rely on in a true emergency. The flip side of this is that you have to be ready and willing to help out with their emergencies, as well.
Avoid tapping your emergency fund as much as you can. If you can pay for minor emergencies or not-really-emergencies out of pocket, then you won’t need to keep as much in your actual emergency fund to cover the real-deals.
Keep your deductibles for insurance in mind. If nothing else, your emergency fund should have as much in it as your highest deductible – be it auto, home, or health insurance. Best case scenario would be enough money to cover all of your highest deductibles.

Don’t sweat your emergency fund too much. Yes, you should have one and you should follow the tips above to choose the size of it. But slow and steady wins the race – putting aside any money every month into an emergency fund is better than not. In fact, half of Americans have no emergency fund at all, so if you put anything away at all, you’re already “above average.” Just don’t let that go to your head, hotshot!