Entries Tagged 'Personal Finance' ↓

My hubby writes very long blog posts that he works on for days. Today he finally published a new one in which he colorfully described how I play a “diplomatic metagame” to make him lose at every board game we play with other people. It was quite a hilarious read for me because it reminded me of the glee I felt when people followed my advice to crush him. The only reason people listen to me is because I do point out some great strategies for them and I know my hubby is brilliant enough to handle himself. He didn’t make mention of an awesome strategy I employed when we played Boom Blox this weekend so I feel like I should write about it here. Basically, we were playing a game with a friend where each player had four blocks that acted like air hockey pucks. The goal of the game was to throw a virtual baseball and hit the blocks of your color into scoring zones. If you hit your opponents blocks on purpose they will gain 15 points and if your blocks slide out of bounds it disappears in a poof. So somehow I convinced our friend to team up with me to knock the hubby’s block out of bounds. We managed to knock 3 out of his 4 blocks out with our blocks. Finally, he had one block left that seemed to be out of the line of fire of all of our blocks. So I said, “hey I’m going to knock it out, get ready”. Then my hubby said, “yeah right I’d like to see you try!” So I aimed my Wiimote straight at his block and threw my virtual ball. His block went flying out of bounds and he gained 15 points, but he had no more turns left and lost. Our friend said, “wow, I didn’t expect that, but that was a smart move!” My hubby was quite annoyed of course as I rolled on the couch laughing.

Anyway, there are a few games where I can eviscerate him one on one, but he never plays those with me. So what does all of this have to do with money? Well, I think personal finance and managing your money is a very complex game. There are rules, goals, and strategies and everyone plays a variation of it. This is how I visualize it.

1. This game is cooperative - Another thing the hubby didn’t mention is that I could be a pretty good team player in cooperative games because my “vicious” energy to crush my opponents is now directed at the larger and more powerful system of the game. I think personal finance is the same thing. Everyday our own financial health is pit up against larger money systems which we cannot control on our own. For example, inflation and the stock market are things people want to “beat”, and we do it by creating and buying into mutual funds, or sharing information as to how to stretch our dollars. These are cooperative mechanics that are quite valuable. So when it comes to our money, I think the hubby and I are on the same side.

2. The game should be fun - I have written before that if the goal of earning money is to just get more money then life is no longer fun. There need to be breaks from extreme savings and money management to enjoy the money you earn. Otherwise, the game would become a total grind and having millions of dollars would still seem meaningless.

3. Strategy guides do help - When you get stuck in a game you can look up a solution online or see how others played it. The same is true in personal finance. You can read about how financial products work and how others used them.

4. A little bit of sacrifice could go a long way - As I mentioned in the beginning of this article. I knocked my hubby’s block out scoring him 15 points, but he was out of the game. That’s similar to knocking out debt. You may have to sacrifice a bit of luxury to completely pay off a lender, but after it’s done that adversary is completely out of your game.

5. There is luck involved - Every good game involves a bit of luck. I don’t think everyone starts off on equal footing so some people do have to work harder than others, but it’s never hopeless. A good player of any game could overcome bad luck.

6. The end game - I think the end game is to get to a point where you don’t worry about money anymore. For some people this could be death, but I think you don’t have to necessarily be dead to get to a point where you have no more financial burdens. It is possible to generate enough passive income through investments and other ventures.

Ultimately, games are created to simulate many aspects of real life, and the topic of financial management is many times more complex than a single board game.  I think the one thing that makes real life so hard is that the rules and missions aren’t so clearly stated and there is a constant metagame of figuring out what to do.  Once you settle on a single mission, there is always a chance of finishing it.   So, what do you think your end game is?

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I don’t write very detailed numbers concerning my personal finances on this blog even though it is a personal finance blog. I always write some estimates and approximations and also things that have happened in the past. That seems a bit weird since I sort of advocated revealing salary information and being transparent about personal finance. I am actually really open with my close friends about my personal finances, but I do feel weird about revealing exact numerical details to the world. I also don’t keep a networth graph here like many other PF bloggers because I feel that is akin to keeping score with money. The hubby also doesn’t like to give out too much information. Anyway, today I decided to satisfy some personal finance voyeurs by posting our savings and expenses in terms of their percentages of our gross income. I took most of the numbers from our current paychecks, and some numbers are averages of bigger expenses.

Taxes

Payroll taxes: 20.16% - This includes Federal and California State Income taxes, Social Security and Medicare Taxes, and the CA SDI Tax. The total may seem a bit low because the income taxes are only taxed off our income after our fairly significant 401k deduction. The income taxes are also tiered, so only a portion of our money is taxed at the highest brackets. Though I am pretty sure we may owe some more taxes this year because I exercised some incentive stock options at the beginning of the year and we may trigger the AMT.

Living Expenses:

Rent: 12.26% - We have been living here for less than a year, and when our lease is up in July the rent might go up, but we don’t think it would be too egregious because our landlord is not some huge corporation and we’re taking care of his apartment. We really do enjoy living here.

Car Insurance :1.71% - The hubby just recently got a rate reduction for being a good driver. It took about three phone calls to the insurance company but those phone calls saved us $400 per 6 months term so I am pretty happy about that.

Car maintenance : 1.08% - This is an monthly average of the amount of money we spent on maintaining our cars in the past 9 months or so. We actually spend big chunks of money at once. For example, my last car maintenance was a bit over $1000, but this happens rarely so I averaged it out.

Utilities: 1.1% - The main utilities we pay include cable internet, the hubby’s cellphone, and electricity.

Food: 4.69% - I feel that we spend quite a bit on food every month, but actually sometimes eating out is cheaper than cooking. For example, making a couple sandwiches at home actually costs a lot because deli meats and bread are getting expensive. A lot of the times the hubby and I just buy one dish and split it because restaurants give too much food anyway. There is a really good Thai place nearby so one time we just bought one curry dish for $10 and then cooked rice at home and stuffed ourselves.

Gas: 2.52% - We have been doing good at saving gas lately by driving slower.

Entertainment: 1.1% - As it was laid out in The Baglady Budget, we have a 2% ceiling on entertainment, but actually we never spend that much. On average we have spent about 1.1% per month, and that’s why the hubby is running a surplus that he wants to use on a computer in a few months.

Donations: around 6.5 to 8% - We upped our donations a bit this year and we’re donating more than before. The percentage seems a bit small when it is based off our gross income. In light of the recent disasters in Burma and China we also added a few special donations this and last month.

Other: 0.7% - This category includes things like gifts. It seems that there is always a birthday or wedding around the corner. The hubby has a gift account for such expenses.

Total expenses inventory: ~31.61% of gross income

Savings:

401k: 17% - We both contribute 17% of our paychecks into our company 401k plans. The hubby was pleasantly surprised when he bumped his contributions this year from 10% and 17% and barely noticed a dip in his take home pay. The reason is that his taxes were reduced accordingly.

529 plan: 0.72% - I have a 529 plan open with Fidelity for our future child(ren). Right now we are putting very little into it every month.

The rest: 31.21% - The rest of the savings currently is going into money market funds in our Vanguard joint account. I also funded our Roth IRAs for last year with our savings. I’m not sure if we’ll qualify for Roth IRA again this year since the hubby may be getting a raise soon, but we’ll see. This money is also our emergency fund and house down payment savings. It is growing quite a bit and I may buy some more mutual funds with it once it gets past 25% of our entire portfolio.

Total savings: ~48.2% of gross income

I hope we can still save this much when we have kids, but I think we can afford to spend 15% of our income on a kid and still manage to save a good amount for the future. It is also good that we are able to essentially live on one income because this means we don’t have to worry if one of us loses employment. Anyway, it was fun to lay this out so I could see the flow of my money clearly, and I hope someone’s curiosity has been satisfied.

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A few weeks ago I stumbled upon a site named Angry Renter through a Google ad. I rarely click on Adsense ads, but this one intrigued me. The site presents a petition for renters to sign in hopes of stopping a housing bailout. I perused the site a little bit and figured that online petitions never really work, but I left a comment anyway and moved on.

Interestingly enough, this weekend I read an “expose” by the Wall Street Journal about Angry Renter. The gist of the article is that Angry Renter is a fake grass roots campaign run by a non-profit organization called FreedomWorks.org ran by a bunch of fat cats including Steve Forbes. They also listed the expensive properties the leaders of the organization owns. They also quoted the president of FreedomWorks.org saying “I’m an angry homeowner who pays his mortgage”.

I found it funny that the Wall Street Journal needed to write this article because it shows that maybe Angry Renter is really pissing someone off. So what if Angry Renter is run by homeowners? Homeowners pay income taxes also, and I don’t think any sensible person wants their money to be used to prop up bubblicious housing prices so that their children cannot afford a reasonable home. I also don’t think anyone wants to contribute their hard earned money to banks that scoop in billions of dollars a year by being legal loan sharks. Though the site is biased, some of the statements on Angry Renter are true. For example, renters do not get tax rebates for renting, and for all intents and purposes, renting serves the same basic need as buying a home. Why is there such a clear discrimination? Renters do wield less political power because they own less money as a whole compared to the banks and homeowners. So what is the problem with one little non-profit group with rich donors wanting to give renters a voice?  Additionally, it is also true that most homeowners are responsible and didn’t buy into the housing bubble so that they don’t need a bailout.  So why should all of us suffer for the folly of a few?

I am just surprised that all of this is happening in America, a place that prides itself on freedom, democracy, and free market.  Why should people have the freedom to be stupid and irresponsible, but not be encouraged to manage their money wisely?  A general housing bailout seems to send the message that saving money for a downpayment and renting is stupid because as long as you bought a house the government will protect you.  Why don’t they apply bailouts to obsessive gamblers that were “tricked” by the casinos, or stock speculators that lost their shirts during the dot com bubble?  Why is the housing bubble so special?  The answer is simply that the banks want their money back from people who can’t pay, and they are disguising their greed and grapple for survival as a humanitarian mission to “save the troubled homeowners”.  Give me a break because I don’t want to pay for mortgages that I did not sign for.

So the bottom line is, I don’t think you need to be a renter right now to be angry about the impending giant housing bailout. Currently, the House has passed a $300 billion bill for housing aid which President Bush and the White House is threatening to veto. Unfortunately, old George only has a few months left in office and as long as the Democrats stay in power this housing bailout will probably go on regardless of how many signatures people collect.  Anyway, I hope more bailout bills never go through, but that is probably just wishful thinking.  Meanwhile, I will be a patient and maybe slightly angry renter.

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Just recently I read about a case of salary discrimination where a female worker found out that she was paid less than her male counterparts for 19 years. She found out by accident because she was about to retire and a memo was sent to her containing three of her male coworkers’ salaries. She was more senior than most of them and was paid anywhere from 20% to 30% less. This reminded me of one of the companies I worked for because my coworker and I found a list of everyone’s salaries on that company’s shared drive under a folder named Public/Company. If you sorted the list by salary and position it was pretty clear all the women got paid the least in their roles compared to their male counterparts. Additionally, new hires were paid quite a bit more (10 to 20%) than people who have stuck around the company ever since the lean years of 2001 to 2003. When I was leaving the company I made it clear to my manager that I and my cubemate knew this information since it was on a public shared drive where we store our collective files and he was pretty pissed because he found out that a brand new guy a couple levels below him was paid more than him. So he packed up and left soon after me. After we both left nearly everyone in the engineering organization of that company got a raise. It felt like a lot of drama at that time, but I think in the end everyone was better off because the salary information was public (even though it may have been unintentionally public). The people who stuck around got a “market adjustment” and mostly caught up to their new peers, and those of us who left found better opportunities.

So having gone through that incident, I have thought a lot about the pros and cons of public salary information in a corporation. Here are my conclusions:

Pros of public salary information:

1. Companies can’t secretly discriminate against workers if salary information were all public. This will pretty much eliminate lawsuits where employees do find out discriminatory compensation.

2. There is no secrecy between coworkers so there is no speculation as to who is getting paid more, and so everyone can just focus on work. If salaries were posted by position then there wouldn’t be an incident where newcomers with the same positions are paid a lot more just because they joined at a more prosperous time.

3. There would be better accountability for a company as to where their money is going. For example, public companies disclose the pay packages of executives because shareholders like to know the information. Also, the government gives detailed salary information on all positions because they are spending public money. If everyone in a company knew what others were making, then it’s easier to trim the fat when needed.

4. Employees would be more aware of their worth to a company and the career and promotion paths would be more clear. This gives employees direction and something to work towards. In the government they basically state how many years of experience or education you need for a certain pay grade. This makes it easier for people to figure out what they need to do.

Cons of public salary information:

1. Workers may be more complacent in knowing that they will get paid a certain amount as long as they stick around. They may not work to their max potential because they already know what raise and bonuses they would get.  However, I think companies could avoid this complacency by giving out performance based raises and bonuses and clearly state what the rates are for each performance level.

2. Companies would have to shell out a lot more to hire people from competing firms during great economic times because they would have to raise the rates for everyone.  I do think this is a good thing for the employees, but it can be costly for employers.

3. Companies with posted salary information may give  regular but smaller raises and bonuses because they need to make the most amount of people happy.   This is how it is in the government, but it doesn’t have to be always true.

I know that in America people believe that salary information should be confidential, but I really think that open salary information could be beneficial to employees and employers. Since I am Chinese I do discuss salary information with my friends and it is actually very helpful to know what the market rate is for my position.  I think ultimately public salary information has a stabilizing effect in a company because those who are comfortable with what everyone else is being paid are probably happy with what they are being paid.   Since employees often leave companies due to their thoughts about their salary, a company can benefit from workers who are content with their salaries.

What do you think?  Do you work for an agency with public salary information?  Do you wish you worked for one?

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Well, I have been working for almost three years, and I am on my third job. Some older family members have warned me about being a job hopper, but I don’t think it’s such a bad thing, and here’s why.

When we are in school we are trained to learn new things every semester. We also get new teachers and sometimes new friends. So in a way we are trained to change our environment constantly for 12 to 16 years. It is pretty jarring when you get out of school and you are expected to stay with one company for a very long time. In my case I stayed with my first two companies for more than one year each, and I thought that was a pretty long time at each job, but apparently some people I have met still think you should stay at a company for at least five years, or for life. I think that’s just silly because I really think that if I didn’t change jobs, I wouldn’t have learned as much as I did. I started in a pretty great company with a bunch of extremely smart people, but after testing one application for over a year, I was pretty sick of it. It was possible to move into another part of the company, but I would still work with the same product, and I decided it was time to move on. At my next company I learned a lot more about web technologies and picked up more useful skills. However, after a year and half of the same work I felt that there was not much more to learn.

Another thing I have written about before is that there is really no loyalty towards employees these days. Companies can fire us whenever they want, so why are we expected to give our lives to one corporation? I think in today’s society, blind loyalty to one employer is pretty foolish. When you put yourself out on the market more often you learn what skills are needed in your field, and you can improve yourself accordingly. When your skills are updated and transferable you will not be afraid of a situation where your employer decides to shed you like last year’s fashion.

Job-hopping also builds up your network faster than if you would have stayed in one place. I think making just one friend in a workplace is a great thing, and if you go to more places you are more likely to make business connections that could be tapped later. It is definitely possible to find people you can get along with in almost any workplace. I still keep in touch with quite a few ex-coworkers and it’s fun and informative to discuss our jobs and lives we no longer work with each other.

Finally, when you change jobs more often you are more likely to get great raises from job to job. I think if I had stayed at my first company for 3 years I wouldn’t have had an over 50% increase in my salary in that amount of time.

I feel that in the Silicon Valley job hopping isn’t really looked down on as much because companies are dying and rising all the time here and people shift accordingly. Nearly everyone I know have had a job for less than two years. Right now I feel like I could stay at my current company for quite a while, because I still have a lot to learn after working there for six months. I am pretty sure I won’t stay for life, though, but a tenure of a few years is likely.

I am curious, though. What do you consider to be job hopping? Is changing jobs every year considered job hopping? How about changing jobs every two years? Do you think it is bad or good for your career?

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