Intermediate Goals: the Five Year Plan

In five years I am hoping to contribute enough of my income into a 401(K) to earn the full match or a minimum of five percent which ever is greater. In addition I want to be adding to a Roth IRA. There will be two cash savings accounts, an emergency fund and a vacation/gift fund, both receiving regular deposits from each paycheck. The first will be large enough for at least one full month of expenses, preferably three to six. The second will be used to pay for planned expenses on top of my monthly bill. Ex: birthday and Christmas gifts and vacation spending. This is about the time the future Ms. Foray and I plan to have children so I want to have all of this on autodrive so that I can begin to fully focus on my family.

Why We Want You to be Rich

Donald Trump and Robert Kiyosaki, two successful "financial guru's" with very impressive rags to riches stories, have collaborated on a new book. Why We Want You to be Rich. Both have a very ambitious real estate oriented view of growing wealth and have taken it upon themselves to educate the masses. The book does not appear to offer anything new from either, but combines Trump's "How to get Rich" with Kiyosaki's "Rich Dad, Poor Dad." The most I have learned from either is that it is entirely possible to build a profitable personal finance book series by recycling the same ideas under different titles. I will pass on this book, much more can be learned from the latest Carnival.

Regrets and Advise

I wish I had been more proactive while I was in college. I was studious enough, earned good grades and got all my work done one time. Well....most of it done on time. But I never really thought about the big picture. There was no distinction between job and career. What I mean to say is I never really gave thought to what I would be doing professionally for the next 40 years, only to who would give me my next paycheck. I majored in economics, which I loved, and went to work as a contract investigator for the Federal government doing background checks, which I hated. Sounds impressive enough, great hours and schedule, but a deadend. Paid next to nothing and there was nowhere to go up the career ladder. I wish instead I would have utilized my resources and sought internships while I had access to the alumni network and college job fairs. Now I am trying to get back into the finance world three years out of school and on my second career, as a claims examiner, with no finance experience. So what does my ramblings lead me too. Some mistakes made by college students about to enter the real world.

1) Seeking jobs that pay over jobs that add value to their resume. That unpaid internship at the broker's office will certainly add more to a job seeker than tending bar.

2) Not using the resources available. Most colleges have large career fairs and alumni networks that students can use take get a foot in the door.

3) Being undecided on a future career and choosing a specialized major that will not provide a broad educational background. Economics and business certainly look better on a resume for most positions than art history or pyschology.

There are a dozen I am missing from this list. The most important thing is to have direction or a goal, everything else will fall into place.

BMW or Wedding Bells

I realized this morning that one year ago I was ring shopping and planning my engagement to the future Mrs Foray. Its hard to believe a year has flown by, its been so busy with wedding plans. I am super excited to be wed and wouldn't change a thing, but the amount of cash that goes into this event is staggering. Here is a sample of a few line items from the wedding so far:

Reception hall = $11250 ($75 a head X 150 heads)
Engagement Ring = $6000
Band = $5000
Honeymoon = $4800
Photographer = $4000
Wedding Bands = $2000
Flowers = $1000
Invitations = $900
Limo = $800
Total = $35750

This list does not include every expense, such as church donation, rehearsal dinner, favors, bridesmaid dresses, wedding gown, tuxedos, etc. In addition we have a January wedding and have gotten huge discounts on almost everything. But New York is New York where nothing comes cheap and weddings are done big.

Is really necessary for one of the happiest days of your life to cost as much as a new luxury car? No, it could be done for much less and hopefully we will recover most if not all and more in gifts/presents. Its been a struggle, but I haven't regretted a dime spent so far and I doubt I ever will.

Keeping it simple and regular

My fiance likes to joke that I spend more type thinking about my finances than I do about her. Well maybe she has a point. I won't say that I'm obsessed but I will say I am motivated. I will be financially independent and in a much better place than my parents are at 60. I do have interests outside of money and have precious little time to spend on all of my pursuits, to ensure balance I like to keep things simple.

Though retirement does occupy my thoughts it does not occupy my time. I contribute regularly to my 401(k) and savings through automatic direct deposit. Most of my bills are paid through Bank of America bill pay. This alleviates my having to recall when the payment was last sent and finding the funds to pay the new bill. I time all of my automatic deposits and withdrawals to fall on payday. This way I am sure of the amount of money that will be in my account. I merely check the bill pay once a month, mostly out of habit to see that my bills were paid.

To track my journey towards financial freedom I maintain an Excel spreadsheet of all my accounts and record the balances at the end of the month. Excel provides a basic structure for me view all of my accounts and to project any trends. MyMoneyBlog and SavvySaver have both detailed Yodlee as an time saving substitute to Excel. Yodlee can access all of your accounts in real time and display their balances. Various banks also provide similar services. One day soon I will venture into this brave new world, until then I will continue to enjoy the safety of my tried and true spreadsheet.

Carnival of Personal Finance #68

Carnival of Personal Finance #68 is up at Punny Money. Get it while its hot! Included this week is my very first contribution. Living paycheck to paycheck.

Setting the goals, part 2

Now that I have laid the basics of my cash-flow system and savings plan I can look forward to the biggest expense, retirement. I have read a lot of other blogs that have used calculators to find the magic number that will allow for a comfortable and lengthy retirement. As I am 25 and still have a wedding and a house to tackle I do not think it is realistic to put a number as my retirement goal. Instead I will aim for as much money as is humanly possible.

On top of what I place into cash savings I currently contribute 6% of my income into a 401(K). There is no employer match, but I am eligible for a profit sharing contribution. A Roth IRA would probably benefit me more as there is no free money obtained from my 401(K), however the ease of use wins me over. I can set a percent and it is taken out before I ever touch the money. The profit sharing plan will deposit up to 10% of my income into my 401(k) regardless of my participation. I plan to increase my contribution by 1% for each raise until I reach 10%. Once this goal is met, hopefully within two years, I will begin an automatic deposit into a Roth IRA. I already have an IRA established with approximately $2000 from a former employer that I was unable to rollover into my current plan, and will convert it into a Roth. I will increase the amount into the Roth with each raise until the yearly max is met. Now I am so far ahead of myself I do not know what I will after this point.

Also I plan to purchase a second home on top of my primary residence as an investment, mostly for passive income, but also to sell when I retire. There is also the bleak possibility of social security still being around when I am to benefit from it. I am hoping that 10% plus the profit sharing contribution and a maxed Roth IRA will allow me to meet whatever my magic number is. I will also have my future wife's retirement savings, however she is stuck in the "I am young and have plenty of time to save for retirement" rut and has not started contribution. If I do not make the magic number Wal-Mart will also need a greeter.

Setting the goals; part 1

Now what kind of a personal finance blogger would I be without goals. The goals are both short, within two years, intermediate, within 5 years, and long term, over 5 years. I have already posted on how I plan to facilitate my cash-flow system to break my paycheck to paycheck cycle. This will be the basis for accomplishing all of my goals.

The first of my goals is to establish a cash savings account with a balance greater than $1000 and to contribute regularly to that account. $1k is just large enough to cover most unexpected expenses, including my auto insurance deductible, and if needed would cover one month's worth of mandatory expenses. My savings is in a ING Direct account; I know there are other banks which pay slightly higher interest, but my savings is not large enough to take advantage of those rates. Every pay period I have a set amount, $100, withdrawn from my checking account and deposited into savings. Ideally this would have my savings growing at a pace of $1300 a year, plus any additional money from bonuses I could include. Overtime I would increase the amount of automatic contributions to $200 a paycheck and hope to maintain a cash balance of $10,000. $10k would be more than enough to cover any expenses, until I move into homeowner and parent status.

So where do I stand on goal 1. $700 in savings and growing! I am hoping to be at the $1k mark within 30 days, however, I still have to pay for a limo, tux, honeymoon and two wedding bands.

Who is Dow Jones?

In case anyone paid any attention or even cared the Dow Jones flirted with its all time record high this week. There has been a sizable amount of media attention laid at the feet of the momentous event, but is it really deserved? In fact this attention would lead one to believe that economy is at an all-time high as well.

The Dow Jones is a index of 30 blue chip stocks that are suppose to be a good indicator of American industry. However, with the U.S.A. being a large and diverse economy, 30 stocks is a poor representation of the overall health of our economy. With such a small number it is easy for the Dow Jones index to misrepresent the direction of the economy due to the strength of one or two stocks. A better index is the S&P 500, which true to is name is made up of 500 U.S. corporations, as it takes a far broader measurement of the U.S. economy. The S&P is nowhere near its all time highs. Does this make the S&P a better indicator or investment opportunity. Not at all.

So what does this all mean? Don't believe the pundits hype about market strength when given only one measurement. Be sure to thoroughly research your decisions and stick to what is important regarding your investments. Your risk allocation. The strength of your individual stocks or mutual funds. And diversifying among small and large as well as domestic and international corporations.

Paycheck to Paycheck

Living paycheck to paycheck has been a major issue of mine since graduating the University of Maryland (GO TERPS!) and entering the real world. I am paid on a bi-weekly schedule and I tend to spend all of my money within five days, including funds ear-marked to pay bills. Subsequently I must tap in the savings I direct deposit each paycheck to cover my monthly expenses. This ultimately keeps my savings low and when a big or unexpected expense comes along, and they come too often, I must use a credit card. This negative cash flow cycle is sending net worth the wrong direction. I know I am not alone with this problem, it is probably the largest issue facing individual wealth today. I have been playing with a few ideas on how to escape this trap:

1) Just make more money. Not as easy to accomplish as it is to type.
2) Cut back on expenses. Very, very difficult when you are planning a New York wedding
3) Develop a better cash flow system. I need a system that will help me from raiding my
savings while covering all needed expenses, and still enjoy life.

The first will take care of itself over time. I am a dedicated and hard-working employee and I am confident my paycheck will rise in time. The key here will be to roll the extra money towards savings and eliminating debt. Also I consider myself opportunistic and I am always on the prowl for a better employment opportunity that will advance my professional aspirations and fatten the paycheck.

The second step is the most difficult. I have a lot of extra expenses right now as I am getting married. However, I have cut back where I can. No more Dunkin Donut coffee breaks or splurging on shopping sprees.

Step three, developing a cash flow or budget system that will pull everything together and make it work. I think the most important step is to pay myself first. I have set up an automatic 401(K) and a direct deposit into my savings at ING Direct. I plan to increase both over time as step one takes care of itself. In addition, I now separate all monthly expenses in half and withdrawl that amount from each paycheck, placing it into a separate ING Direct account and pull the funds when needed. As I am on a 26 paycheck a year cycle this will hopefully allow two paychecks worth of expenses to be added to my personal savings.

Carnival of Personal Finance #67

Be sure to catch the latest Carnival of Personal Finance sponsered this week by Canadian Capitalist!

Money.com Millionaires in the Making

Do these articles annoy anyone else? Generally the article will profile a couple close to their early 30's, no children, and a combined income well over $100K. Its a little difficult to relate when I am struggling to make ends meet in NYC, planning a wedding, and will be having children before I am 30. It is my goal to shatter the stereotype. I aim be profiled on the money.com website in 10 years, well on my way to being a (multi-)millionaire with two or three rugrats underfoot.

Introduction

Good Morning!

I have decided to join the growing number of personal finance bloggers out there. This blog will be an attempt to air my financial grievances, provide educational resources and ask for advise.

A little background on myself. I am a 25 year old male living in New York City working in the property and casaulty insurance field. I am happily engaged and will be married this January.