I'm All for Stimulating Our Economy...

But I'm a little tired of hearing about it. I realize there are people losing their homes in foreclosure. I realize there are people whose retirement accounts are now undervalued. I realize that millions are out of a job right now.

I ALSO know that in America, when you're unemployed - the government gives you a hand. I think that rocks. I'm willing and proud to help pay for unemployment. We live in a country where - when the markets tank and people are losing money and businesses are hurting - the government tries to find a trillion dollars to fix the leak. Everywhere I go I hear about the economy. I even hear about about the economy from people who don't have a savings account, much less a retirement account or a mortgage.

There are a couple million people living in poverty in this country who probably don't feel the pinch at all. They were already pinched.

What in the hell is wrong with us? Why are we still whining? Why are we so worried about whether we can gas up our cars, and why on EARTH do people think not having cable TV is a sacrifice?

My husband and I are well off.  Extremely well off, actually. Insanely, insanely well off. We've got multiple computers in the house (well, duplex), two cars, multiple televisions (we need to dump one, incidentally), annual passes to Disneyland, cell phones, an iPod each, and secondary educations - albeit incomplete ones.

We eat dinner every single night, we have lunch every day, and breakfast when we wake up on time. Our cat eats twice a day. We have running water, electricity, gas, and high speed internet. (No cable TV though, that's why we have the high speed internet - oh the sacrifices we've made.)

I have 30+ pairs of shoes, and that's after selling off nearly all of my designer shoes a couple years back, so I could pay rent. See, I thought I was making a huge sacrifice, selling my way, way overpriced shoes to make rent.

My overpriced shoes could have fed a family for a year in Sierra Leone. I don't have numbers on that, but I'm not a bloody statistician. Google it, I'm sure you'll find that half a pair of my designer shoes could have fed somebody, somewhere.

Back when I had cable, sometimes I watched 'My Super Sweet 16.' For those of you who don't know - ugh. Just click the link. It's a train wreck. These girls scream about not getting a $500,000 car. I couldn't look away. I got the hugest kick out of swigging by beer, confident, nay smug, in my superiority to a bratty little child whining about her multi million dollar birthday party.

Here's the thing about that; I'm not much better than those petulant brats when you put it in a global perspective. I don't need to quote statistics. Almost anyone who's lived in the world for four or more years knows darn well that that are people in this world who live for a month on what we spend on a latte and a bagel in the morning. My household pulls in more than 50K a year before taxes and by God, we are filthy rich. Not only are we filthy rich compared to most of the world, we're filthy rich compared to millions here in the U.S.

I'm not saying that those of us who are lucky to live in the ultimate First World nation should scrap our big screens or our cars our even our luxury goods. 

I'm just saying we should quit whining.

http://www.worldvision.org

Oh No, They Be Holdin' My Refund Hostage

You've probably already heard the fuss about getting IOUs instead of refund checks here in California. That said, according to this, if you file early enough, you should get your refund as usual. Last year the FTB (Franchise Tax Board) processed my refund in a matter of days. As usual, I'm neither expert nor professional, but this is probably the last day to file with even a slight hope of getting your return processed before the February 1st deadline and the 30 day hold.

As I've emphasized before, most of my readers will qualify for free file - for your federal taxes as well as your state taxes. If you're in California, I suggest you grab your W-2 and try to make the deadline.

Economic Stimulus Now, Redux

A fact you may not be aware of is that if you get legally married late in the year...say, the day after Christmas - you're required to file your taxes as though you were married for the entire year. Even if you get married at 11:59 pm on Dec 31st, the IRS considers you to have been married for the entire year.

2008 is a particularly useful year for this. Remember the Economic Stimulus rebate? Single folks got somewhere between $300-600? Married folks got $1200? The amount of your economic stimulus rebate was based on your 2007 taxes, because you hadn't filed your 2008 taxes yet because the year wasn't over. You 2008 self was getting money based on what your 2007 tax return indicated about your 2008 return which would be filed by your 2009 self. Sort of. Anyway, that's part's boring. (Though there may be DeLorean joke in there somewhere.)

Point is, if you received a $373 rebate check as a single person in 2008, and then got married later in the year to a spouse who got a $600 check, the government owes you $227 - because the IRS considers you to have been married during the handout. $1200-($373+$600) = $227, for those of you who hate 'rithmetic.

If someone claimed you as a dependent on their 2007 taxes, exempting you from the rebates at the time, but no one can claim you in 2008 - the government owes you a stimulus check.

If you had a baby in 2008, you also qualify for more money.

Basically if your life changed at all in 2008, you might qualify for more money.

Where do you claim the credit, you may ask? Good thing I read the IRS website, so you don't have to:

Form 1040 - Line 70
Form 1040A - Line 42
Form 1040EZ (the one most of you will likely use) - Line 9

All of the tax forms will come with an instruction worksheet on how to calculate your stimulus credit. So if you're doing your taxes on paper using pen and ink by the light of a gas lamp, knock yourself out calculating that. Or enter "RRC" on the appropriate line and the IRS will calculate the stimulus credit for you.

If you're filing online, most online tax preparation programs will calculate this for you.

Most folks reading this blog, except maybe my mom (hi mom), qualify to free file. So please, PLEASE, don't hand a tax prep firm your hard earned money to file your probably very uncomplicated taxes for you. Don't give them money to give you a refund anticipation loan at a ridiculously high interest rate when the government will direct deposit your refund in a week or two if you file early. Seriously, you may as well - well, you know.

Everything I Can Spout About Credit Scores

Ever since I started writing this blog and generally pulling ahead financially, my friends have been asking me about finances, especially credit.  Specifically they want to know how on earth a credit score is calculated. I found the answer about 2 years ago in a book somewhere, and I've been spouting a vague recollection of it ever since (luckily, it turns out my vague recollection was closer to "spot-on" than "oh crap, I totally remembered that wrong.")

After a quick Google to double check my memory, I present to you the basic components of a credit score, and my completely unprofessional (meaning: don't sue me if you try this and it fails) advice for beefing up the magic number.

• 35 percent - PAYMENT HISTORY. Obviously any lender is going to want to know how reliably you pay your debts. Some of us got shady car loans at 18 and never did reign ourselves in so that we could pay them on time and now we have an ugly, ugly blemish on our credit reports because we were really, really dumb back then. You know,  just some of us. THE FIX:  For goodness' sake PAY YOUR FRAKKING BILLS ON TIME. Your payment history is the single largest piece of your credit score. Call your bill collectors (your cell phone company might be a place to start) and ask them to start reporting your payments to the credit bureaus.  If you have no revolving credit accounts to pay off on time, get a tiny secured credit card (Many secured cards are total scams, so do some research. I recommend the Bank of America Platinum Visa. $29 a year, and you can secure it with as little as $300. I paid it off every month and received my security deposit back after 9 months. I now have an unsecured card that's been paid in full, on time for nearly a year. ) Credit card debt is something I've somehow (magically?) never racked up.  But if you have credit card debt, start making bigger, on time payments. For advice on finding the money to do that see: the rest of this blog.
  
  
• 30 percent - OUTSTANDING DEBT. Some of us are a little screwed in this department - we had crappy car loans or we bounced a teeny tiny check when we were 18 and it's gone to collections and it's grown so big that we are NOT ponying up $120 for a freaking Vanessa Carlton CD. (Shut up.) Some of us fell flat on our backs in bars when we were 21 and sprained our necks - an injury we didn't even know was possible until we did it - prompting a hospital visit we still haven't paid for (though we were theoretically insured at the time, it would be awfully difficult to prove now.) Not that I did any of those things, but - you know, maybe some of you guys did. This outstanding non-interest earning debt obviously affects your overall score. More important than that old debt that is your DEBT to CREDIT RATIO - if you've got revolving accounts (credit and charge cards) just how much of that available credit are you using? THE FIXX (two Xs, like the band - hee!): First, for some freakish reason that I still don't quite understand - paying off all of your aging non-interest earning (ie, not credit card) accounts might actually dock your score in the short term. If those random debts are old enough, they'll drop off after seven years. If you're not looking to finance anything anytime soon - letting them disappear is better. As far as your debt to credit ratio, it looks good to only use a small portion of the credit available to you. If you've got a $10,000 credit limit, try to use just $2500 or less at a time.  Using only 25% or less of your available credit looks good to lenders - and then they'll want to give you money if you ever want a house or something. A good way to keep your credit usage low is to use your card ONLY for paying a few bills - then pay the credit card bill every month.
  
  
• 15 percent - LENGTH of CREDIT HISTORY. This one is particularly unfair to younger people. If you're a totally responsible 20 year old (and they do exist), your relatively short credit history is going to hurt you - past behavior being indicative of future behavior, they don't think your two years of paying off the credit card your mom co-signed for you counts (though it should). THE FIXX (dun nuh nuh nuh saved by zero...I'm so sorry) If you have no credit history at all, get a really, really low limit card. Use it very little, pay it off every month. It takes about 3 years for your good credit behavior to "count" - that is, 3 years before the credit bureaus see your timely payments as a habit rather than a fluke and raise your score significantly.
  
  
• 10 percent -  NEW CREDIT (INQUIRIES).   Getting a new credit card, loan or other credit account will negatively affect your score for a short time.  But not for very long.  Even letting a lender LOOK at your credit score docks you points, the theory being that too many inquiries means you're desperate and broke and looking for a handout you'll never pay back. If you've given someone permission to look at your credit report, it's considered a hard inquiry, and it docks your score by 5-10 points. A bunch of hard inquiries within a short period of time are counted as one (to account for consumers shopping around for the best rate.) If you pull your credit yourself, it is considered a soft inquiry and does not dock your score. THE FIX: The good news is that hard inquiries drop off your report after two years, so if you've got a bunch of inquiries dragging your score down, they'll be gone fairly soon. Beyond that, just be selective about who pulls your credit and pull it rarely. 
  
  
• 10 percent VARIETY OF ACCOUNTS. This is the mixture of credit accounts you have. Installment loans (cars, student loans) and revolving accounts (credit & charge cards). THE FIX: Lenders like to see a healthy variety of accounts, but not TOO many accounts.  Generally you want 2-5 revolving accounts and 1-3 installment accounts. ( But don't quote me on that, I just remember reading it somewhere, no lawsuits if I remembered incorrectly!)

And there you have it - prety much everything I know about credit scores as it applies to younger folk. 

Oh!

Catchy commercials notwithstanding, don't use freecreditreport.com unless you will definitely remember to cancel your "membership" after the trial period. You are entitled to one free report per year from each of the three major credit bureaus. Get it at annualcreditreport.com.

No Carpet Jokes, Please

Why anyone buys anything new is beyond me. We got our Kenmore microwave for $7.50. We got a wicked sweet coffee table for $15.  There are folks who might spend upwards of $500 or more on just those two items alone.

But we also bought a rug at a fancy furniture place for $80. It was the display model, so we had it cleaned for $49. We've got hardwood floors, so a rug was necessary. We nabbed ourselves a $400 rug for a total of $129. Which is a hell of a lot for a rug, but not a whole hell of a lot for a rug that makes your feet feel oh, so happy. 

Here's the thing, I can see laying out $129 for a really nice rug, maybe even $150.  A good 5x8 rug. But who on EARTH would throw down $400 for the same thing I got for $129? I "saved" $271 on our rug. I use quotation marks because I didn't save it. I don't have $271 in savings.

But we do have a rug that makes our toes happy.

Another way we might have gotten a super nice rug - and I should have thought of this, but the rug matched the micro-suede couches my now in-laws bought us for Christmas and I couldn't resist - another way we could have nabbed a nice rug would have been to call up a few dry cleaners and ask them if they had any abandoned rugs lying around. Sometimes people drop them off for cleaning and never pick them up, or they can't pay for them, hence, abandoned rugs. Most dry cleaners will donate abandoned items to Goodwill or to other charities - but if you call and ask you could score a sweet rug for free.

Or for the cost of the original owners' dry cleaning, anyway.

I Have Time for this Now, Right?

Since my last post, I took 19 units worth of classes, nabbed a job as an accounting assistant, and I got legally married. And I moved.

Observations on Each:

(1) 19 units. Do NOT try this while holding down a job of any kind. Well, maybe a 4 hours a week at Starbucks type job - but certainly not a job that requires 35+ hours that you need to make rent. Also don't try to take 19 units and work while attempting to have any sort of meaningful relationship with anyone ever.

(2) New Job! I'm the right arm of the CFO at my company. I work during the day. I have weekends off. I miss the casual atmosphere at In N Out Burger, but I don't miss the cheese burns or the closing shifts.  

(3) Legally married. Between my new job and the fact that Fiance -  I mean, Husband - is on salary now, we feel rich. Of course, we got legally married so that we could live together in order to save money to fund the big wedding in June. (We are both just old fashioned enough that the idea of shacking up landed pretty firmly on that side of Not Cool.) So we're legally married, and saving for our wedding.  Maybe not at all romantic, but completely practical as far as we're concerned.

They say that it's not what you make, it's what you spend. With our combined income and somewhat lowered expenses we are coming out far, far ahead of what I'm used to - which, if you'll recall is paycheck-to-paycheck at a burger joint. We're by no means rich, but we make just enough to feel like we can blow our cash. We try not to, and we're pretty good about not blowing huge wads of money on useless crap...except when it comes to comic books - which I have taken to rationalizing as a quality of life expense. Being frugal enough in other areas (ie, not having cable TV) to be able to afford a comic book or two every paycheck with our allowance? WORTH IT. We're 24 and 26 years old, if anyone's wondering.

I've also always theorized that this frugality stuff works much better with two people - I'm quickly learning that it does. More on that as the weeks go by, but for now thanks for reading this after such a long silence!

Hiatus for School

Hello everyone!

BurnFive will be on hiatus until December so that I can take a 19 unit courseload, work nearly full time, and plan my wedding without losing my mind.

Thank you for reading and for all of your support.

I'll be back in December with all sort of tips and articles on how to have a lovely holiday season without burning through your cash. See you then!

My Coffee Conflict.

A commenter pointed out to me that my blog often turns to my love affair with coffee. Specifically, how much money I sometimes find myself dumping into overpriced coffee. My struggles with laying down money for my drug of choice are indeed symbolic of deeper a conflict between myself & my money; a conflict I'm certain anyone feels, not matter how old.

Once a person has gotten themselves to the point where they're solvent - even saving a bit every month - there seems to be a disconnect. The first wave of personal finance often sends folks into a frenzy of cutting corners, doing without, and spending less. After the habit of saving a certain amount becomes second nature, we might find ourselves saying "Man, I already saved 10% of my take home pay this month! Screw it! I'm blowing $100 on x!" or more likely we find ourselves allowing $3 or $5 here and there to start adding up again.

My rent & bills are just a little bit more than half of my take home pay per month, unless I work a lot of overtime. When I'm in school, overtime becomes a no-no, so I'm on a really tight budget to say the least. Even accounting for gas, savings, and little tiny extras here & there - I still have about $100 every month that goes out into the ether of impulse buying - which often means frou-frou coffee or fro-yo or another form of Snacking Out. Truth be told I really enjoy grabbing coffee or whatever with a friend, but when I look at my spending at the the end of the month, I wonder if I wouldn't have been just as satisfied having someone over for tea.

I've run the numbers for myself (and for you all) hundreds of times, and the answer is always the same! Cut out my impulse buying! At the same time, I don't want to cut my perceived quality of life. I think the conflict of saving for the future versus impulse-buy satisfaction is a problem for everyone. From someone like like me who feels stressed out spending $10 on something I didn't necessarily need to the person who spends $600 on a gadget and panics afterward, it is fairly universal.

How do I deal with such a nasty internal war over my spending? Sometimes, I just have to get over it. I'm into living within my means, but super extreme frugality is a goal I don't aspire to in the least. Extreme frugality for me would mean that I'd pretty much never leave the house. That said, there are a ton of ways I can cut back in little ways that make my lattes and cups of fro-yo an okay expenditure for me. Problems begin to arise when I'm NOT making the effort to cut the little corners, when I'm simply shopping stupid or not tracking my finances.

I tend to think of everything purchase I make in terms of my hourly pay, so I still find myself pausing before I spend $3+ on coffee. At the end of the day, my weekly to bi-weekly overpriced coffee outing isn't what could take down my semi-solid financial state - it's when those impulse buys become a daily unconscious habit and nothing is done to counteract them.

Aaaand, we're back!

Too often, I feel as though I'm caught in between my time & my money. If I wake up at 8 and I have to be in class by 8:30, I'll skip making my own coffee - coffee that costs me less than a quarter a cup - and get Starbucks. Granted, I'll still opt for iced coffee over a latte, but I'm still paying way, way too much. Ideally I'd learn to just not depend on caffeine so much, but if there's anything being in class from 8am to 12 pm four days a week AND working full time AND trying to maintain a healthy social life has taught me, it's drink my coffee and don't skip breakfast.

When my schedule gets too crowded, I don't eat as well and I don't eat as much. This semester, I'm going to attempt to put myself on a meal plan of sorts, as much for my own health as for my wallet. If I've already got a batch of peanut-butter-and-raisin-slathered celery sticks made up and packaged in the fridge for nickels on the dollar, I'll be less tempted to justify buying an $8 chicken ceasar salad with exactly one slice of chicken that I won't even finish.

Maybe the most annoying thing about trying to spend conservatively and save my money is that sometimes I just feel like I don't have the time. I've never been willing to sacrifice people & relationships for money, so if given the choice between some time with friends or cooking a week's worth of meals in one night, I'll opt to spend time with people, which means I'm either paying for meals on the run or trying to throw them together in between work & studying. School is also a priority, but only because the silly little slip of paper is going to get me a higher paying job. I'm not willing to invest more time or money than I'll get back in higher pay post-degree. I don't ascribe to the oft touted insinuation that finishing my degree is going to make me a better human - it's just going to make me a higher paid human. While I want to finish, I'm certainly not going to sacrifice time with my friends or postpone my wedding - I hold my relationships with my family & friends higher than I do money or a bit of paper that will mean the same thing at age 25 as it would at 23. Often I'll choose to drop a class in order to be able to work a few more hours. If I make enough money to MORE than comfortably pay my bills, I'm less stressed out which means I'll do better in school, which means I'm far more likely to stay in it long enough to finish.

What all of this means is that there is a constant choice I'm making as far as where I'm expending my time & energy. Sometimes gaining an hour of time to relax is worth spending $5. Sometimes taking an extra hour to study is worth sacrificing a DIY project or two that will save me a little money. Sometimes it's completely worth it to blow everything off and spend a night with friends. As much as I like to put every purchase and every use of time into a numerical perspective, I think I'd go nuts if tried to put a price on every minute I'm awake. At the same time, they don't say "time is money" for nothing, so an hour or two a week planning out a budget for the month, a meal plan for a week, or even just blocking out time to study can save me upwards of $100 or more a month.

This summer, I spent about 24 hours a week in class or studying, 40 hours working, and somewhere in there I hung out with my friends - not a hard schedule, but definitely a grueling one. Even though I was pressed for time to write or do anything else, I still managed to take an hour or two every Sunday night to look at where I was financially and remain constantly aware of what I needed to do to continue living below my means.

Too often we lose track of our whole lives, not to mention our money, and stick our heads in the sand instead of actively trying to reign in our finances. Just one hour a week can help you plan for those times when you've got two minutes to decide whether you're going to plunk down cash to eat out or invest the time to eat in.

My Three Savings Accounts, or How I Keep My Grubby Paws Off of My Money

When I started actively saving again after years of blowing my hard earned money on I-don't -know-what, I enrolled in the Keep the Change program at my bank (purchases are rounded up to the nearest dollar and the difference is transferred from my checking into my savings) - they matched the transfers 100% for the first three months and 5% thereafter. So far I've saved $102.31 this way, and I'll be receiving (so far) $42.30 when my matching funds are distributed to me in January. If your bank offers a similar program, I can't recommend it enough.

I generally keep a fairly low balance in this account, treating it as a safety net for any accounting errors I might make, causing my balance to be a little more or less than I'm counting on. I also use it for small, unexpected expenses if I don't have room in my budget for them. For example, when the price of gasoline jumped through the roof, I used this account as a buffer until I'd adjusted my spending to account for the higher cost. This is the most liquid of my savings accounts because transfers into my checking are instantly available. Once a month I transfer $25 over, which generally covers anything I may have needed 'borrow' from myself. The balance is kept fairly low (about $100) because the interest rate sucks. When the balance is over $100, the difference is transferred into my second savings account.

My second savings account is with an online bank with a far, far better interest rate than my brick & mortar bank. This account scrapes $25 off my checking account every payday, and I often will transfer small amounts of idle cash into this account. I use it to save for upcoming major expenses, in the $200 to $500 range. These generally are not emergency expenses but they're not exactly extravagant either. The last big ticket item I used this account to save for was a plane ticket to visit my family on the east coast, an expense that I would deem a necessary luxury. I continually add to this account whether I'm actively saving for anything or not. This account is slightly less liquid than the first one, it takes a few days to transfer money back into my checking. I also receive a referral bonus if I refer a friend who funds an account with $250 or more, I receive $10 and they receive $25. So far, I've earned $30 this way. (If you're interested, email me). When the balance gets to be more than $500 or so and I'm not actively saving for anything, the difference is transferred to my third savings account.

My third savings account is actually a money market account, held at a major online trading firm. This is my Big Savings Account, the balance is kept much higher than in the others and I never pull anything out of it. Partially because I opened it as part of a promotion - if I make an electronic transfer of at least $50 a month for a year, I'll receive $100. So yeah, I leave it alone. I transfer the $50 a month, sometimes more if I can afford it. My money market account will eventually be where I keep my emergency fund, though right now a lot of it is earmarked for my wedding.

If you've been keeping track, you'll have noticed that I have received or will receive a total of $172.30 simply by being an active saver. That figure doesn't even include interest.

So if you're not saving anything, I highly recommend a tiered approach:

(1) Open a simple brick & mortar savings account, linked to your checking. If your bank offers a program like Keep the Change, take advantage of it. If not, simply do it yourself. Once you get comfortable with the idea that, yes, you CAN leave that money alone, set up an automatic transfer, something small - even as little as $5 a month if that's what you can afford.

(2) Once you've gotten used to the idea of Leaving Your Money Alone (managing to get that first account up to $100 should just about do it) start transferring any amount over $100 in your first account into a less liquid, higher interest account. Set up a transfer that will scrape a little bit off of every paycheck, and again - start small if you have to.

(3) The time between steps two and three is significantly longer than between one and two, but once you've got $500 or so in a fairly liquid, high interest account, start funding an account that's harder to withdraw on. Anything over $500 in account #2, transfer to account #3. Try to fund it regularly, about once a month. I treat my $50 transfer just as I would any other bill, it's basically an invoice from Future Me.

As you open each account, shop around and try to find some sort of promotion, especially one that will earn you money if you leave your money alone.

Right now I'm sitting on $628.76, which comes out to about $104 a month since I started these accounts up from ZERO in late January / early February. It still might not seem like a lot until you remember that I flip burgers for a living. And I live in beautiful, oh-god-the-cost-of-living-is-so-high-here, Orange County, California. If I can find $100 a month, pretty much any single twenty-something year old with a steady job and low overhead can too.