The Almighty Dollar

Restoring some fiscal sanity in our -- negative savings rate -- lives


Pressing your luck could cost you

In this wide world of passwords and PINs, keeping track of your car's permit expiration dates seems like such a hassle. As my friend just learned the hard way, putting off a renewal could cost you double or even triple the original amount.

His tags and parking permit expired four months ago, but until this week, he had been driving and parking on DC roads without incident. I guess you can say he's been lucky. Well, his luck ran out on Monday when his car got towed.

Sometimes he can be a bit flighty, but the bottom line is he didn't want to pay the $87 to renew his permits. Now it appears he will have to pay more than triple that amount to get his car back up and legally running. Here is the breakdown of costs:

Registration renewal = $72
Zone permit = $15
Car tow = $100
Tow storage ($20/day) = $80 (he picked it up yesterday)
Taxi to towing lot = $20

Whopping total = $287

Not to mention all the time he's spent trying to clear up this mess. His friend took him to the towing lot twice, and both times left without the car. First time the lot was closed. Second time they refused to let the car off the lot without proof of registration payment. At the DMV, he waited in line (of course!) to learn that his safety inspection had also expired, therefore, he could only get a temporary permit for his car. Since the towing lot is open during work hours, he cabbed it to the lot during lunch, and finally got his car.

Phew! And that doesn't include the horror he'll face at the safety inspection station...

(P.S. My husband points out that this presumes his car indeed passes inspection and no additional service work is needed!)


Re-evaluating our portfolio

Although I've been absent from blogging, this past week has been quite important for me PF-speaking...

My husband and I have spent most of last weekend and early this week re-evaluating our retirement portfolio. It's been an encouraging experience overall, seeing how much it has grown due to healthy returns and diligent saving on our part.

We are in our early 30s (I'm 30, he's 32) and didn't really begin socking away money for retirement until a few years ago. Before that, we focused on saving as much as we could for our wedding and a home down payment. While things worked out okay, I still wish we had put more aside in our IRAs back then.

What frustrates us most is having our retirement savings spread out in multiple accounts: brokerage, traditional and roth IRAs, SEPs, and recently a self 401K. To reduce our taxable income, we focus first on maxing out our tax-deferred accounts. However, since the maximum contributions in IRAs are so small (only $4000), it's hard to build a portfolio in these accounts when the required minimum fund purchase is often $2500. So we really have to focus on the bigger picture and not get bogged down in each individual account.

I think it's wise to regularly monitor your investments. Make sure you like what you have, dump what you don't, and look for something new. Markets and industries change, and your portfolio should be smartly balanced for the times. When we started out, it was difficult to build a diversified portfolio with our small holdings. We did our own research and bought a handful of mutual funds in different categories. Over time, we dumped a couple that were underperforming and bought new ones, all with a longer-term outlook in mind.

Now that our portfolio is over $100,000, we wanted to examine our investments and make sure we were spread out enough. We felt that we were not well-balanced. Basically, we were heavy on a medical/health fund and were lacking in small-cap exposure. Also, our large cap fund has ballooned and was recently closed to new investors. While it's performed admirably, we are beginning to look into other large cap funds that are smaller and more nimble.

With these changes, we feel more secure about the way ahead.


Know of a truly accurate retirement calculator?

Every once in a while, either myself or my husband will plug our numbers into online retirement calculators to see how we are doing. This exercise helps us to stay focused on our goals, motivates us to continue socking away money, and to be honest, we find it pretty exciting (I know, we're nerds).

However, I have yet to find a comprehensive calculator that takes into account both tax-deferred (401Ks, Traditional IRAs) AND non tax-deferred savings (Roth IRAs). Can you point me to an online calculator like this? Surprisingly, I can't seem to locate one, although it seems easy to make one up. If I knew how to create it, I would.


Mom and Dad to the rescue

The New York Times highlights the increasing burden of parents supplying financial assistance to kids (can I say adults?) into their 30s.

A study by the Institute of Social Research says 34% of those aged 18 to 34 get cash from Mom and Dad every year. Parents help in other ways, giving generous presents, cars, and down payments for homes.

I know it depends on each individual's situation, but generally, I think the sooner we are able to support ourselves, the better. It's not the same when there's always a cushion to fall back on.


Not all bbq grills are created equal

In anticipation of hosting guests at the end of this month, my brother had mentioned wanting to buy a new lawnmower and grill. Since they are arriving this weekend, I asked if he had bought them yet. While he still plans to get the lawnmower, he has decided to wait on the grill until next summer.

I should tell you now -- grills are a sore spot for me. My condo is on the first floor and has a beautiful, private patio perfect for outdoor dining and relaxing. Gas grills were permitted when we moved in, and we immediately got one. For a year, we savored many grilled chicken breasts and kabobs by candlelight. But, unexpectedly, the association switched to a new master insurance plan that prohibited grilling of any kind at some distance from the building. (Apparently, this is a DC law but no one complies!) So we were forced to get rid of the grill and miss it terribly.

My brother doesn't have these restrictions and certainly has the space for it. He and his fiance bought a new home last winter. They chose to forego a patio, because they planned to build a backyard deck. This project has been slated for next year.

He told me that the grill he wants is very expensive, so he doesn't want to spend the money on it now. Instead, he plans to buy it next year after they've built the deck. Since I'm in grill-denial, it seems silly to waste two summers without bbq just so he can have an ultra-lux, stainless-steel, triple-burner grill (an assumption, but knowing my brother, I'm probably right).

I said, who cares what it looks like, as long as it grills well? He said, looks matter.

Yes, you read that correctly, and we weren't talking about Dolce & Gabbana jeans. For god's sake, it's a grill.


Keeping secrets about money

There are days when I miss my family so much and wish that I lived closer to them. But those feelings evaporate instantly when the topic of money comes up.

Over the phone, I was explaining to mom why my husband had to cut short the visit to his parents' house this past weekend. It's a long, complicated story, so I'll spare you the details.

Basically, he drove back to DC in order to make a last-minute IRA deposit for his parents on Monday. The contribution would give them an additional tax refund of $1400.(Later, we realized they could have mailed it, but just in case, he wanted to make the deposit in person.)

Anyway, the trip was worthwhile, because we learned a lot about his parents' financial situation. It's a relief, since they've kept us in the dark until now. We never wanted details, only a general idea of where they stood. After they talked about wanting to retire in 5 years, the numbers show that's not a realistic option. Even still, they are much better off than my parents, who are older and have almost nothing saved for retirement.

Whenever I discuss money with my mom, she gets very defensive. She says it's insulting when I mention how unprepared they are for old age. She tells me not to worry, that she is capable of working if something happened to my dad. When I say I'm being realistic, she says I am crushing her hope and optimism. Then she accuses me of expecting them to save every penny until their death -- thus never enjoying life. And predictably, she points out that we all lead different lives; she has her way, I have mine. End of conversation.

It astounds me how often I see people reject sound financial advice. Some people feel ashamed, because they know they haven't been doing the right thing. Others get defensive, because they feel stupid for being ignorant. And then there are people like myself, who are open to any advice or criticism that could help improve my life.

I think the worst thing people can do is to NOT ask questions, especially when it comes to finances.

Seeing that most of us aren't money experts, the only way to obtain information is to seek it out. That's why I value the pf blogging community. It's a give-and-take atmosphere and a great network of people from various backgrounds. Keep up the blogging and sharing!


That gym membership can help you retire

Consider your gym membership to be an investment in your retirement, according to USA Today. With the ever-rising cost of health care, staying healthy could save you tons of money in the future. I mean hundreds of tons of dollars in savings -- about $200,000 per couple.

A Fidelity study reports that a couple retiring today would pay this amount towards health costs over a 15-year period, a third of which would pay for prescription drugs. What's scarier is that this number does NOT include dental or long-term care, or over-the-counter medicine costs.

Not only is being healthy good for the mind and body, it's good for your wallet -- in the long run.


When it comes to health, older folks have harder choices

I have another story that reinforces my previous post about the importance of insurance. My father-in-law recently learned that he had cysts in his throat. The doctor informed him that his thyroid needed to be removed.

I know this procedure isn't that unusual. In fact, my husband's co-worker had hers taken out, and she can function perfectly fine with daily medication. However, my father-in-law is nearing 60 years old, and the risks for complications are much higher in older folks.

He had his surgery two days ago and was released from the hospital last night. Barring a few minor problems, he is recovering nicely. My husband is traveling to see his parents over the long Easter weekend (well, long for him, not for me -- I have to work).

His unexpected surgery made me recall a conversation I had earlier with my mother-in-law. When I visited the in-laws this past winter, she told me they had changed their health insurance plan to a cheaper one, hence, getting less coverage than before. They felt it was worth paying a higher deductible to save on the recurring monthly premiums. I was a bit concerned about their decision, because I felt that it was wiser to enhance, not reduce, health coverage as one gets older. At the time, their health was generally good, but by no means perfect.

People have a tendency to neglect their bodies' warning signs, until a problem becomes serious, and therefore, expensive to fix. Now I wonder if the small monthly savings was worth changing to a cheaper plan.


No tax refund for me

Judging from the posts of other personal finance bloggers, it seems like I'm the only one who OWES money to the federal government come April 17th!

At last, our taxes are finally done. Bad news is we owe about $900. We don't plan on mailing in our forms until the end of this week, since I see no rush to give Uncle Sam our check until it is absolutely required. Although we may seem like procrastinators, actually, we have been working on our taxes over the past 2 months.

My husband isn't technically a contractor, but due to a complex system created by his employer, he is considered self-employed for tax purposes only. Honestly, I don't even fully understand it, so I let him deal with the taxes. My situation is very straight-forward. I am an employee and get a W-2 every January.

Before we were married, my husband paid an accountant to do his taxes. In order to qualify for an early-bird discount, he would organize his papers in advance. Still, the bill would usually come out to $200-300. I always did my own.

The first year of our marriage we used the accountant for fear that we would screw something up in our newly-merged financial state. But dishing out $500 in accountant fees, in addition to paying taxes, seemed like a waste.

Thank goodness for TurboTax Premier. We've used it for the last 2 years. Not only do we save money, but doing our own taxes has helped us understand our finances better. I now know that we had about $10,000 of unanticipated taxable income last year, which explains why we owe money. Hopefully, we will be able to come up with more accurate numbers for next year.


Do it yourself investing or hire a professional?

I'm curious how many of you rely on professionals for investment advice and whether it is worth the cost.

When we were starting out, my husband and I initially considered hiring a financial planner, but then opted against it. Our then-accountant remarked that if people spent the time to do their own research, they could invest just as well as a professional and pocket the fees. At first, we were skeptical, since neither of us have a background in finance. But we hate paying people to do things we could do ourselves, so we started reading. And reading, and reading.

In this day and age, there is a vast amount of information available online. The hard part is sorting through it all and determining what details reflect a well-managed fund or company. We also decided on our investment strategy -- basically we wanted to focus on investments with a longer-term outlook. No day trading for us. Although savings and investing are priorities, we aren't willing to devote the time to watch a stock's performance on a daily basis. Our goal is to build a nest egg for our future.

The bulk of our investments are in mutual funds and ETFs. We tried to buy individual stocks, but always had bad luck with them for one reason or another. That said, we have chosen strong funds that have outperformed the Dow over time and have built a diversified portfolio that some may consider too international-heavy. We are comfortable taking slightly greater risks at our age, but by no means are we stupid.

Overall, we are very pleased with how our investments have done over the years. This makes me wonder,

For those of you who have hired a professional, are you happy with your investments? Is it worth the extra cost?

I ask, because a few of our friends who use brokers have complained about their investments. Some have bought seriously under-performing funds with high fees. Others own stocks that were purchased at inopportune times. All of these decisions were recommended by their brokers. It seemed like with simple research, it would have been obvious that these picks were unwise.

Just save -- it's that simple

Bloggers, journalists, financial analysts and managers keep asking the same questions about our retirement. Are we saving enough? Are we saving too much? How do we know what is the right amount?

We can debate this topic to death, but there still won't be an answer to satisfy each individual's situation. In fact, I think the whole debate is silly and can be simplified into one question:

If and when you retire, would you rather have too much money or not enough?

I think it's pretty obvious that most people would prefer to have a little extra in their bank accounts than to scrimp until our last living day.

So stop talking about it. Just save as much as you can, as early as you can.


You're never too young to buy life insurance

I found out one of my relative's cousins died last week from lung cancer. He was in his late 20s and never smoked. The family learned that his wife was pregnant during the same week he was diagnosed with cancer. Now three months along, she will have to go on without him.

The news broke my heart. It also made me realize how important it is to have life insurance, even for young couples. My husband and I purchased life insurance more than a year ago. We had discussed doing it right after our marriage, but laziness and home buying got in the way. Thankfully, we finally got our act together and did it. I can't tell you what peace of mind it brings to each of us.

When you are young and newly married, it is so easy to put off this task. You're healthy and have many other plans with your money. Although you vowed 'til death do you part, no one really wants to think about that!

As grim as it may sound, buying life insurance is one of the most thoughtful things you can do for your loved ones. Neither of my parents has life insurance, and that freaks me out. I try not to think about it and trust that we will be able to cope with the situation when it comes. They are just too old (and have pre-existing heath conditions) to consider buying any insurance now.

My brother and his wife have a small amount provided through her company, but it's certainly not enough to cover a big mortgage and daily expenses. He tells me that if something were to happen to either of them, the house would be sold and life would go on. If they have kids, he said he would reconsider.

Even though we don't have children, my husband thought of it differently. He said having life insurance brings him a sense of security, knowing that if he were to die, I wouldn't have to struggle with money while in mourning. He wanted me to have the option to pay our mortgage in full. Of course, I want the same things for him as well.

I don't know if my relative's cousin had life insurance. Considering their young ages, it's likely they didn't. Now with a baby on the way, my warmest thoughts are with the mother.