Sep 24, 2008

Economic Ignorance... No Longer Bliss

I still can't get over the fact that when capitalism fails, it must be recused with socialism. As my friend put it, it's "socialism for the rich, capitalism for the poor."

A long time ago I asked my dad if "The Great Depression" could happen again. He said no, that the government had a system in place now that would make it impossible. Well, now it seems that "system" is more like bailing out the banks when they've taken too much risk and screwed themselves over.

Listening to the news these days is scary. All the "financial crisis" this and "Next Great Depression" that. I don't know how much of it to believe, but I admit, I'm scared. Scared because history doesn't always repeat itself, and while the markets always tend to trend up over the long run, well, it's still possible that the Great America could collapse. Isn't it that we've borrowed trillions of dollars from China, a country that is fast taking over as a great superpower? How long can capitalism, American capitalism, withstand the weight of the world moving forward?

The other night, when I was listening to CNN around 4:30am, with the news going back and forth between the economic crisis and the Prime Minister of Iran speaking to the UN, the following thought popped into my mind:

What doesn't kill you, makes you stronger. What makes you stronger, kills you.

Is America as we know it coming to an end? Or is everyone just way overreacting?


Sep 22, 2008

Is Now a Good Time to Invest?

With the stock market sinking further and further into the depths of despair, I'm tempted to go crazy investing in my Roth IRA index funds. I just put in an extra $400 into this my Roth for this year. I still have $1000 left that I can put in. I don't really have the money now to invest in it, well I do, sort of, but I'd rather wait a little bit. I know I have a little while to get that extra $1000 in, but given the way the stock market is doing I'm thinking of putting more in now, or at least when my next paycheck comes in. What do you guys think?


Sep 17, 2008

So Long Jealously of My Banker Friend

A few months ago, I was visiting a few friends in New York and had the opportunity to briefly meet up with an old High School acquaintance. As a recent graduate from an Ivy League school, she was doing quite well for herself. Having quickly moved her way up at Lehman Bros., her salary must have been more than a copywriter like myself could ever dream of earning, especially at my age.

At the time she was downsizing to a shared residence somewhere on the southern end of Manhattan from a solo bachelorette pad on the upper-east side. She seemed to love her job, or at least love it for the time being, even though it required long, hard hours.

And today, my friend, my very intelligent Ivy-educated friend, is out of a job.

She'll recover, certainly. Even if banking jobs are slim pickings now, they still exist. And anyone with that kind of background could move into other financial career paths. Money will always need management.

But it's still obviously a nightmare on her end. One second you think you have a stable job, working for a company that's been around since *before* the great depression, and then the next day it's gone.

That's why I like working for a startup company. I always assume it will go under any second. If it succeeds, all the better. But in this economy, nothing is certain. I'm lucky to have a job right now, but who knows how long that will last. The important thing is to build up your skills so you may be able to apply to any number of jobs, if your industry or position is taking an nose dive.


Wall Street is the Least of My Concerns

Supposedly frugal and a careful spender, I managed to completely blow my budget out of whack during a month of vacation. That makes sense, I guess, since I wasn't earning much income during this time, while I was spending quite a bit. My rational - I'll just be really careful with my spending later and make the money back - was not quite thought through as much as it should have been.

The hit my stocks and mutual funds have taken isn't helping, of course, but that's close to the least of my worries. I just don't have enough money in stocks yet for the hit to be that painful, and while it's still not fun to watch my savings deplete itself, I have hope that one day the stock market will be on an upswing again and my money will magically reappear. At the very least, in the investment department I'll break even... at some point.

Meanwhile, I know I need to be extra careful on my budget and work hard to find ways to save money over the coming months. My accounting isn't an exact science, I must admit, since for this entire year I've been trying to save 50% of my take-home pay for taxes. I've also failed to do this properly, as I'm behind in this saving, but at the very least I'm on track to catch up... as long as I can keep my job.

I'm having a lot of fun w/ Google doc's charting features, trying to figure out what exactly I have to do to get back on track.

The figure I'm looking at here is my "cash debt" figure, which includes all of my cash accounts. At the moment, my fairly-scientific estimate of my cash debt is -$10344. The following chart is a fairly simple visual of how much money I'll have in the coming months in my overall cash "account" if I can save $500, $1000, $1500 or $2000 per month.

What is an actual realistic amount of savings? Well, it really depends on what my taxes are. They're not literally 50% of my take-home pay (prob. more like 43%), so come tax season this chart will change a bit.

$1000 a month is realistic, if I work at it. $1500 a month may be realistic, but it would require cutting back on some things that mean a lot to me, like voice lessons. I only spend $160 a month on voice lessons (two lessons a month) and that's not something I want to give up yet. I want to see if I can balance my budget by being careful elsewhere.

This chart... is also not entirely accurate. My tracking of my investment and cash accounts was on-and-off over the past year. So the X axis is out of whack. However, the Y axis is accurate. So you can see my investment accounts, while not doing well, are still around where they started. They took off for a bit and then slumped down again, which makes sense looking at the current state of the economy.

It's my cash accounts that I'm terribly ashamed of. I know better than to let this happen!

Income Potential...

My monthly pay before taxes is $4800. I also earn $400 in an ongoing copywriting gig that takes only a few hours a month at night. So that's $5200 total, as long as I can keep my current job and this freelance position.

Every once in a while I have opportunities for additional projects, but for the sake of not overestimating my income, I'll say that for the foreseeable future, I'm earning a solid $5200 a month before taxes. Assuming taxes is 50% of my pay, that's $2600 a month.

... in August I spent $3276.49.


Here's the breakdown on that OVERspending...

My big errors here mostly revolve around being in a relationship. The amount I spend "dining out" ($174 in August) is ridiculous. Then, there's the $462 in travel. That's actually two RT plane tickets for an upcoming vacation / trip to my hometown for me and my bf. I think he paid me back for his tickets, but I'm not sure so I'm including them in this chart. Rent costs are a little wonky for August because they include a $612.50 deposit for the place I moved into in September. I think that's "last month's rent," though that's not clear to me. I didn't need to spend $76 on "beauty"... really, the only cost for beauty that would be worth it is the eyebrow wax for $20. Once a month. I didn't really need the makeup. Auto costs... $380... are a bit of a pain. $50 of that was for a parking ticket. Grrgh (yea, don't remind me how I have another $50 ticket to pay this month.) But only $150 of that is the parking ticket and auto insurance. Another $77 is DMV renewal fees. Then there's gas. And I didn't drive much in August.

Sept Half-Way Point...

I'm doing better this month. At $1338, approx., for 1/2 the month (including rent), I'm on track to hit my target savings, sort of. If I want to save $1000 this month, I'll need to spend just $1600 total. That leaves $262 left.

Ok, so that's not really possible. I already know the following spending will occur:

$80 voice lesson (from today, check to be cashed)
$50 parking ticket (damn street cleaning)
$300 health insurance (I owe for this month and last month)
$32 for shoes. Yes, I already bought them. I needed new black shoes for work.

Plus, I'll probably have to fill up my tank once more. So that's another $70.
Not to mention 15 more days worth of food. Even if I get cheap food for $50, that's still $50.
That means that at the least, I'll probably spend another $580 this month.

Even with that spending, it's possible to save $630 in September. Maybe?

I'll set my goal at $600 "saving" for September. It will actually get moved into my (fallen behind) for-taxes account, but nonetheless it's an improvement and step towards my goal.

The other good news is that this month, I have a potential $1600 in additional income sources if some things work out. That's only $800 post-tax, but if I can bring in that revenue then I'll meet my actual goal of $1000 savings. Which would be great. Because I really need to meet that goal.

Being realistic and knowing myself