Shopping on a Budget

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Displaying my finds after a shopping at the local consignment store.

Last week, during my wanderings around my new ‘hood (I recently moved), I spotted an answer to this conundrum; the local consignment store. For those of you unfamiliar with consignment, it’s a secondhand shop where you can bring clothing or other items you don’t use anymore. The shop owner agrees to sell the item for you, and once your item is sold, you get a cut of the profit. If you’re not ready to let go of any items in your carefully curated closet, you can always do some good old fashioned shopping too.

Back to my shopping experience. The aforementioned shop is my new favorite because it features designer consignment. That means designer clothing, usually new or in like-new condition. The biggest perk: most of the denim is already hemmed – a definite plus if you are less than 5’10”.

My excursion was quite the success. I acquired the following pieces for $70: A black long sleeve scoopneck top (still new, from Bloomingdales), a striped turtleneck blouse (also new, from Anthropologie), and a purple Diane von Furstenberg dress. The dress was pre-loved, but I was willing to commit because after careful inspection, the dress was in new condition, excellent quality, fit like a glove, just missing the tags.

Shopaholics, fear not! Going on a budget doesn’t have to mean giving up your personal style or favorite brands. Rather, it might just mean adjusting your shopping habits and maybe even finding the local consignment store near you.

Shout out to Lucky Finds Boutique for a very productive and budget friendly shopping experience!

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Thoughts About Deloreans… and Investing

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 Like most children of the 80’s and 90’s, I have a deep love for the Back the the Future movies. No, not because Michael J. Fox was oh-so-dreamy as Marty McFly in those movies. It’s really because time travel via a Delorean is just about the coolest idea ever.

We’ve all got a couple of things we’d like to take back ever having said or done, and the Delorean is certainly the tool of choice for fixing those faux pas. However, few mistakes ever will top failure to plan for your financial future. Remember, those who fail to plan, plan to fail. Which means that if you aren’t investing in your future today, you’re already planning a financial belly flop for retirement.

We all do our fair share of moaning and groaning about bills, rent, mortgage, debt, utilities, and whatever other expenses we incur from month to month. It’s already enough of a challenge to pay bills and stay ahead of the game, especially for those of us at the beginning of their careers, or on the lower end of the income scale (or both). But it’s a challenge you need to be up to if you want to secure your future financial stability.

I’d suggest starting out by taking 1% of your income – more is better – and investing it into a 401(k) program (or similar) at your workplace. Most employers offer some type of 401(k) program to their employees. For those unfamiliar with what a 401(k) is, here’s a definition, courtesy of Investopedia.com:

A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.

Chickvestor Translation: You choose to enroll in a 401(k) program and the following things typically happen:

  • You choose to have some of your pay put into a 401(k) account. This usually happens pre-tax. Pre-tax means that the money you choose to put away is taken out of your pay before Uncle Sam takes his share. You are not paying tax on the money you are putting into the 401(k)… yet. This decreases your taxable income, which in turn can reduce your tax bracket, decreasing the percentage of your income that you are required to pay in federal taxes. Any money that you don’t pay in taxes is money in your pocket!
  • Employers typically will match your contribution to your 401(k) account, up to a certain amount, usually in a percentage. Meaning, if you put away your maximum of 5% of your pay in your 401(k), and that equals $3000, your employer will put in $3000 just to match what you put in. Suddenly, your $3000 annual investment is a $6000 annual investment.
  • You earn interest on the money that you put away. That means your money accumulates value while waiting for you in the 401(k) account every year. You don’t pay tax on this money until you choose to withdraw it from your account, so let it compound interest work its magic on your money for a few years before withdrawing it!
  • Be sure to read the fine print. Different 401(k) programs have different perks and limitations. Check with your employer to find out the specifics offered at your place of work.

Although 401(k) programs are not the only programs offered by employers, they usually are the most common. Other programs include Roth IRA’s, tax-deferred annuities, life insurance, and a whole bunch of other investment tools and strategies. Your best bet is to speak to your employer to find out your options for retirement planning.

The bottom line here is that if you aren’t planning for your future, you are committing a major financial faux pas. So unless you’ve got Doc Brown’s Delorean in the garage at home, start your savings account, the sooner, the better.  

Lessons Learned From My Parents

My mom and dad are inspiring and amazing people. They have hearts of gold, they are generous, and they have never left me wanting for love of affection. They are strong, and put family first. This is just the tip of the iceberg; they have tons of wonderful qualities, the vast majority of which I feel grateful to have in my genepool. However, they share one major flaw: they lack financial common sense.

My mom, an accountant by trade, doesn’t have a taste for fancy things. She lives for family, her cat, the L.L. Bean catalog, and the slightly more than occasional meal out. My dad also likes to eat out, attend sporting events, travel locally, and smoke a cigar here and there. They don’t have extravagant tastes, so what gives with their finances?

They have done a spectacular job of living beyond their means over the past 30 or so years. Whether it was living in a house that was a little bit beyond their budget, buying the car that was just a little more expensive than their last one, or eating out when they had a fridge full of groceries, they kept making the wrong financial moves, be them big or small. Couple these habits with repeatedly changing or losing jobs, unexpected illness, stagnant incomes, and a recently crashed real estate market, and you’ve got the perfect storm for fiscal crisis.

Now that my parents are approaching retirement age, these issues are more pressing than ever before. They’re paying the price of living beyond their means each day. 

The situation sounds bleak, but I’m retelling it because it’s a story of transformation.  My parents are improving their situation each and every day. They are adapting, changing their their day to day habits to keep their budget in mind. They are living in a home they can afford and drive cars that are in their budget. They even have a property that they’ve begun renting out for a profit. Each day is a fresh start, and I am proud of my parents for turning over a new financial leaf.

Remember, it’s never too late to make a fresh start for yourself and your bank account. If my parents can do it as they approach retirement, you can in your 20’s, 30’s or 40’s. Commit yourself to making your finances change and it will happen!

10 Potential Tax Deductions

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Tax season is upon us. It’s just about everyone’s least favorite time of year. Doing your taxes is definitely a bit of a drag, but it doesn’t need to be as painful as many people make it out to be. Try hiring a professional to help you get through the process, or, if you are a true DIY-er, pick up an at home tax program. No matter how you do your taxes, remember, there are tons of items that are tax deductible. Here’s a short list of some of the things that may contribute to your refund this year:

  1. Mortgage Interest
  2. Medical Expenses
  3. Home and Business Improvements (Especially if they increase energy efficiency.)
  4. Student Loan Interest
  5. Business Expenses (Potentially everything from pencils and paperclips to entertaining clients during a business trip.)
  6. Transportation and Accommodations (Do you use your car for business purposes? Did attend a work related seminar last year? Do you travel to a monthly business meeting in another city?)
  7. Charitable Donations
  8. New Car (Again, especially of the energy efficient variety.)
  9. Expenses Incurred While Seeking Employment (You may be able to write off your new “interview” suit.)
  10. Continuing Education (Did you renew a professional certification? Maybe you took a few classes to brush up on skills you need to move your career forward?)

Remember, this is not a comprehensive list, and you may qualify for even more deductions than I’ve listed. Also, be aware that this isn’t a be-all end-all list. Consult a tax professional to find out how this year’s tax code applies to you and your individual situation.

Chickvesting Inspiration

I’ve had some inquiries from readers about the title of this blog. Why Chickvestor? Why not Dudevestor? Or maybe the completely politically correct Personvestor? Does it have to be sexist? Why target women over men?

My response is simple: experience.

Growing up, I watched my parents struggle with their finances. I knew there was something they were missing that I needed to know, so I began educating myself at a young age. By the time I was in middle school I had subscribed to Motley Fool and began tracking the stock market. I even asked my parents for stock to start my portfolio for my fourteenth birthday.

Once I entered my twenties, and I started trying to have conversations about money with friends. I noticed immediately that my male friends were far more willing to engage in conversations about money and to talk about their challenges and successes. They were more open about their salaries and financial goals, and had more financial knowledge. Meanwhile, my female friends seemed far more guarded, and avoided talking about money as if it was impolite or taboo. On the occasions when I managed to engage them in conversation, I often learned that they were in debt, or having trouble managing their money. I even found that some of my friends didn’t have basic budgeting skills or financial knowledge (“What’s a 401k?”), and in extreme cases didn’t even know how much money they were making! I found it troubling, and I knew that there had to be a way to reach these women and help them pave their own financial road. I had the knowledge, but I was missing the necessary platform to reach my audience. I decided that I had to create a safe, friendly place where anyone could access financial advice that was interesting, entertaining and informative to help empower people through knowledge.

Hence, The Chickvestor was born.

As a side note, I know we are all on our own life and financial paths, and that we all have varying degrees of expertise, knowledge, and experience. To all the financially savvy women and men out there, please know that I support you and appreciate your support! You are awesome just the way you are the title of this blog isn’t intended to discriminate or make any assumption about you. Rather, it’s meant to inspire you and help you through the financial journey you are taking each and every day. No matter where you are on your journey, if you need help, have questions, or would like to read a post on a specific topic, please comment and I’ll be sure to get back to you with the information that you need!

P.S. Thanks to Ali Rosenblum for the inspiration to write this post!

Rule of 72

Image courtesy of howtheinvestmentbusinessreallyworks.blogspot.com

Image courtesy of howtheinvestmentbusinessreallyworks.blogspot.com

For those of you who don’t know, I am an undeniably proud math nerd. Obviously, this has its pros (understanding money, finance, statistics, etc.) and its cons (math jokes aren’t such a big hit in most social circles). Luckily, it’s enabled me to do some financial translating for you, and so today I bring to you the rule of 72.

A couple of weeks back I posted an entry about the wonder that is compound interest, Financial Advice From Einstein. The rule of 72, which Einstein discovered and  relates directly to the idea of compound interest. When you invest in any account that gives you compound interest, all you need to do is divide 72 by the interest rate you are receiving and it gives you an estimate of how long you can expect to wait for your money to double.

For example, let’s say you have $1000 invested in any account. Imagine you are receiving a 6% interest rate (rate of return) on the account. According to the rule of 72, all you need to do is divide 72 by 6 to figure out about how long it will take your $1000 to turn into $2000.

72 ÷ 6 = 12

So, assuming you just let your money sit in your savings account and never add to it, it will take about 12 years for your $1000 to turn into $2000.

You can start to get a sense of how important rate of return is when you compare interest rates of 1, 4 and 8 percent using this rule:

72 ÷ 1 = 72 years to double

72 ÷ 4 = 18 years to double

72 ÷ 8 = 9 years to double

Money invested in the account that has an 8% return only takes 9 years to double, while money invested in the 1% account takes a whopping 72 years! That should make you think twice about leaving your money in a savings account with an interest rate of 1% or less. Counter-intuitively, the account making a 4 percent return won’t be halfway between 9 and 72. However, it is important to note that a 4% return will take twice as long to double as an 8% return.  

You can, and should, also use this rule to keep track of your debt.  If you have $1000 in credit card debt, and the interest rate is 10% on your credit card, it will take just over 7 years for your $1000 debt to turn into $2000 in debt.  This rule is especially handy these days, when credit card interest rates can run in excess of 20%.

Granted, the rule of 72 isn’t an exact science, but it is known and used by financial gurus everywhere as an estimation tool. Even if you aren’t a self proclaimed math nerd like me, whip out your calculator and start dividing! You might be surprised to find out how little, or much, your investments are making. 

 

College: The Aftermath

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I remember a lot about college. Where to begin; the parties? The classes? The dating scene? It may not have been quite as wild as portrayed in “Animal House,” but I still remember it like it was yesterday. The one thing I don’t remember is accumulating all of my student debt. Sure, I had an academic scholarship and a job, but I still managed to accumulate nearly $20,000 in student loan debt from my undergraduate degree. Luckily, I wised up before I began grad school, and accepted a fully subsidized fellowship for my masters degree. Nonetheless, I’ve managed to pay down my student loan debt, and plan to have a $0 balance by the time I turn 30.

How did I manage it you ask? The truth is that it hasn’t been easy. I committed myself to pay more than the minimum each month, no matter what. I also made it a point to take overtime work, and committed at least part, if not all, of my extra income to my student loans. Most importantly, no matter what was happening, I stuck to my plan!

This is not to say I neglected my other responsibilities. I still saved, contributed to my retirement, paid my bills, paid off credit cards, bought a home, made some investments, and even did a bit of traveling. I made this all work out by creating a balanced budget and sticking to it, even when times got tough. You can do it too. Create a plan, commit yourself, and make it happen!

Cheers to Good Times!

Imagine this: you just got a new job!  Or a raise! Or a bonus! Or some other type of windfall.  In any case, wahoo!

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First off, congratulations. No doubt, you have earned it. Now, what to do with that extra income becomes the question. Your first impulse is probably to go out and celebrate, but should you? Maybe you should save it? Invest it?

How about all three? Yes, you can have your hard earned cake and eat it too! Try divvying up your newfound earnings in a way that allows you to feel like you are enjoying your money but making it work for you too.

To achieve this, try splitting your extra income into three equal quantities. Set aside the first third to put into your retirement, savings, or other investment account. Use the second third to pay down any debt you may have, be it credit card debt, student loans, mortgage, or whatever other bills are on your mind. Last, use your final third to treat yourself. Get a manicure, take an overnight trip, or go out to dinner with some friends.

It’s important to keep your financial psyche positive by rewarding yourself for your hard work. So be sure to take the time to invest wisely and grow your nest egg, but don’t forget to allow yourself to enjoy the fruits of your labor.

Time & Money

Courtesy of Shawn Olson Creative Arts,www.shawnolson.net

Courtesy of Shawn Olson Creative Arts,
http://www.shawnolson.net

The Superbowl is fast approaching, and many of us (myself included) are anticipating the most exciting part of the annual American tradition: commercials. It’s no secret that advertisers spend millions of dollars to secure thirty second commercial spots each year, just to tap into the viewing audience that watches the game. All of this crazy and excessive spending has got me thinking about time and money. The old adage says that time is money. But based on these obscene expenditures, is time really money? Or is it something more?

I’m going to go with the something more. I believe time equals opportunity. Opportunity is desirable, and therefore costs money. The opportunity to reach millions of guaranteed viewers during the Superbowl Halftime Show is extremely desirable, so it literally costs a fortune.

Recently I’ve been applying this same principle of opportunity cost to my own life. If an opportunity is worthwhile, I’m willing to pay, either monetarily or with time. If not, I let it go.

A great example of a worthwhile expense for me was hiring moving men to assist with moving furniture from my apartment to new house. It would have taken me ALL DAY (no exaggeration) just to move my sofa into the moving van, forget out of the van and into my new pad. Of course, that doesn’t include any other furniture, boxes or other belongings. It was absolutely worth it for me to pay a couple of movers to help me out. I spent $300, and they moved everything out of the apartment, onto the van, and from the van into the house. It was beautiful, and done within mere hours. Best of all, I didn’t even break a sweat! It was completely worth the money I paid because it created the opportunity for me move in a single day and focus on unpacking.

Conversely, I was recently offered the opportunity to work on Saturdays for an extra $100 per week. This opportunity isn’t quite as worthwhile. Sure, and extra $100 would come in very handy. But at what expense? Friday will become yet another work night. I’ll have to get up with my alarm clock on Saturday morning and surrender my sweet sleeping in time. Not just that, I’ll have to cancel any plans I would have had with family and friends. On top of all that, I’ll have to actually go to work. Is the opportunity really worth my time in this case? No, I’m not being bratty. These things are real considerations for me, which means I have to seriously consider whether this opportunity is worth its cost.

The main idea here is to always weigh your options. Different people have different priorities. Different opportunities have different values. Consider your options and be honest with yourself about what opportunities are worth to you.

To all my football fans out there, enjoy the game! Go Ravens!