Budgeting with Shared Expenses

I use Yodlee MoneyCenter to track my personal finances. Its UI isn't all that attractive, but it generally works pretty well. It automatically retrieves transactions from all my accounts, so I don't have to bother with data-entry. This is a huge plus for me; otherwise, I probably wouldn't do it at all.

But things fall apart when you want to follow a budget but you have shared expenses with someone. Say I've budgeted $200 for eating out. Yodlee can generate an "expense report" for that category, no problem. Except, what if I've only spent $100 on restaurants but my boyfriend has spent $400, half of which is my share? Then I'm clearly over budget, but Yodlee knows nothing about Forrest's accounts. Similarly, what if I've spent $300 on restaurants, but half of that is Forrest's share, so I've "really" only spent $150? Again, Yodlee has no way of dealing with this in its expense report or budgeting features.

On the other side of things, BillMonk is very useful for tracking who owes whom for shared expenses, but it has no personal finance reporting mechanisms at all (by design). So this doesn't really solve my problem either.

Enter Buxfer. As a former BillMonk employee, I feel like I'm "cheating" on BillMonk by even considering Buxfer. On the other hand, BillMonk never wanted to be a personal finance tracker, just a debt-between-friends tracker, so maybe I should let the guilt go. In any case, Buxfer does automatic transaction downloading and correctly understands how shared expenses affect budgets.

So I may be abandoning Yodlee and BillMonk in favor of Buxfer. Buxfer even has an API, so I should be able to whip up some script to take BillMonk's exported XML data and import it into Buxfer. (BillMonk almost released its API...) My group of friends still uses BillMonk, though, so I may have to write another script to keep my Buxfer account in sync with BillMonk.

I'll let you know how it goes.

20 Finance Questions

One of the personal finance blogs I read is "I Will Teach You To Be Rich." Ramit (the blog's author) posted an interesting list a couple days ago: 20 questions that your financially unprepared friends are afraid of. Check it out.

It's really too bad talking about money is such a touchy topic; I find that I usually learn something when I talk to others about finances. But I have to judge whether it's safe to breach the topic in the first place. Frank discussions are unfortunately rare, apart from talking with my dad.

Almost-Perfect Roth IRA Contributions

The contribution limit to a Roth IRA in 2008 was $5000. I set up automatic deposits from my paycheck so than X dollars went to Vanguard, and in Vanguard I set it up to divide that single deposit into Y% to the Roth IRA and Z% to my money market fund. I started my job in February, not January, so my math had to take that into account, too — divide things by 11, not 12.

Despite these factors, I ended up with $4998.36 in my Roth IRA account at the end of 2008. That means I was only off by $1.64, and that was only because I couldn't use enough precision in the Vanguard percentages! I so win.

So I bought myself $1.64 worth of shares to round out the 2008 tax year to the complete $5000 limit. I am pleased with my spreadsheet math. :) Oh, and having saved that money is pleasing, too, of course. ;)

Reports of 401(k) Demise Have Been Greatly Exaggerated

If you google for "Ghilarducci 401k," you will find a lot of outrage over Professor Ghilarducci's proposal to change 401(k)s. I heard about this back in October from one of my finance blogs (although now I can't find the original post...). Read the google results for details of her proposal itself.

Her plan sounded to me like a pretty bad overreaction to the current financial situation. Representative McDermott was mentioned in the blog posts and news articles as being in charge of the hearing where Ghilarducci spoke, so I sent him an email telling him my opinion.

"He" (by which I mean his staff) sent back a form letter saying it's all blown out of proportion and not likely to actually happen. His response says bloggers have got things wrong, but in my Google alerts I haven't seen anything but "the sky is falling" about Ghilarducci and 401(k)s. So here's the reply he sent me, so it's at least out there somewhere on the internet:

Thank you for contacting me with your concerns over testimony by University of Notre Dame economics professor Teresa Ghilarducci regarding her proposal for eliminating preferential tax treatment of 401(k) plans. I welcome your interest in this matter.

A number of bloggers have incorrectly characterized my intentions and actions concerning this tax issue. I did not convene the hearing on this issue, though Professor Ghilarducci did testify before the Education and Labor Committee as a member of a panel discussing retirement savings. I am not a member of this committee and was not present and therefore did not attend the hearing.

Please be assured that I have no plans to eliminate the tax incentives for 401(k) plans. Rather, I am actively exploring ways to provide more incentives for families to save and to prepare for retirement. I regret that some blogs have misinterpreted my intentions. I share your concerns about Ms. Ghilarducci's proposal; at the same time, we must continue to encourage discussion of thoughtful proposals that can help to improve income security for retirees. While Ms. Ghilarducci's plan is not one I support, I am willing to listen to new and innovative ideas from many sources; certainly, careful scrutiny of new suggestions is always appropriate as we attempt to effectively address issues of retirement security.

Again, thank you for sharing your views and concerns. I appreciate hearing from you.

Sincerely,

Jim McDermott
Member of Congress

Sure, it's generic politispeak, but I couldn't find this response (or really any page saying anything other than "oh noes, the Democrats be stealin' your 401(k)!" (What's a financial post without a lolrus link?)

Update, November 10th: I'm finally seeing calmer posts about this in my google alerts. Blogger John Clinton writes, "All in all, it looks to me like a case of someone in the media going after the big attention-grabbing angle of the story — Congress wants to kill off 401(k) plans! — and ignoring the other four sides of the issue."

Update, November 20th: And now FactCheck.org weighs in!

Phone Banker Fee Refunded, FTW!

I check all my financial accounts through Yodlee pretty compulsively consistently, and tonight I noticed an odd $2 charge from "Phone Banker Call 01/30". Now, $2 is not a big deal, but not having any idea what the charge is does bother me, so I called up my bank to see if they had any more information on what the charge was.

The customer service rep told me that it was a fee from Wells Fargo itself, for speaking to a banker about something that the automated phone system could have handled. He listed off the types of services that count, and all of those things I do exclusively online. I hate the phone and avoid it wherever possible; simple things that the automated phone system could handle, I would just do online myself. I said as much, and added that I couldn't remember making any such phone call.

He very politely, and without any prompting on my part, offered to refund the fee. FTW! It's only $2, but I don't recall doing the thing they say they charged me for, so I'll have the fee refunded, thankyouverymuch. :)

If I had made such a phone call, I think I would have remembered if the banker had mentioned at the end, "Oh, and by the way, this call just cost you $2 in fees. Have a nice day." I don't recall ever knowing that such fees were possible. I assume that somewhere buried in the fine print of the Terms of Service it's been updated to say this fee exists, but overall it seems pretty shady and lame to me.

Some quick Googling shows that this fee isn't new after all. Blogger Toby Getsch wrote about this in 2006, and the Oakland Tribune in 2003. If Wells Fargo ATMs weren't everywhere, I would have dropped them several years ago... *sigh*

Mochas Seduce My Wallet

Café Spending in 2007

Oof.

As you can see, mochas (the bulk of my "café" purchases) are the bane of my wallet. On the one hand, I do enjoy them. I don't think that all spending is bad if you feel you get proportional pleasure out of it and there aren't cheaper options that are equally good.

So I enjoy my mochas while sitting in bookstore cafés... But I'm not sure I'm actually getting $80(!!) worth of pleasure out of them each month. That's like a mocha a day. What was I doing in August?? Two mochas a week seems more than sufficient for me, and that would only be $26 a month ($3.25 × 2 × 4). Huh. So I suppose I buy café foods along with my mocha far more often than I thought I did...

Like I said, I'm not against buying mochas and food per se, since I do enjoy the experience of consuming them while sitting in bookstore cafés. But I am against mindless, unconscious spending. I really wasn't very aware that the café purchases were adding up so fast, and sometimes I do just buy the mocha at the bookstore out of habit.

So. Hopefully I can keep track of "Have I had 2 mochas this week yet?" in my head from now on. :P

What If Your Financial Accounts Were Public?

What's the worst-case scenario if your financial data were publicly available? I don't mean your login credentials or other personal information necessary to access your financial accounts; obviously that's inviting identify theft and stolen money. I just mean your accounts, balances, and transactions.

Is there any security risk associated with that data? I suppose if you're worth a lot of money, maybe the worry is that you could become a target for having your money stolen. But I wonder how much is perceived risk, versus actual risk.

The other concerns I can think of all seem to be social: Embarrassment at purchases made or amounts spent. Awkwardness at having more money than friends, or having less, or being better or worse at managing what you do have. Indignance — the "what business is it of yours?" response.

I ask because I'm considering the security risks of downloading all my financial data from Yodlee into my own database, so I can run whatever analysis I want on it. I want to imagine the worst-case scenario: that my machine is not secure, and some hackers are able to read all my financial data. What mischief could they do with it? Brainstorming in comments and by email welcome!

Paying for Free Things

Free software is pretty much all I use on my computers, with the exception of the OS itself in the case of my Windows laptop. I use free services online. But sometimes I'm so pleased by some piece of software — it's so above-and-beyond what you'd expect from a free utility, or it's made my life much more simple/enjoyable — that I want to donate a bit of money to its creator to say "thank you" and "keep up the good work!"

Below are the programs (and one person) that I have given money to when I didn't have to:

Trillian

Before there was GaimPidgin, there was Trillian. (Or at least, I knew only of Trillian in my pre-Linux days.) I was pleased enough with having multi-protocol chat capabilities to send them a few dollars. When they later came out with a Pro version, they grandfathered in anyone who had ever donated $1 or more as a "thank you" for early support.

Flickr

This one isn't a donation, but rather a voluntary upgrade to premium service that was actually worth it. Once you hit 200 photos on Flickr, you can't browse to your older photos; you must have a direct link if you still want to access them. I hit the 200-photo limit pretty quickly, foresaw myself continuing to use Flickr heavily, liked the service, and thus gave them $25/year for unlimited photos.

Peter S. Beagle

Not software. :) Author of The Last Unicorn, which I was first introduced to in animated film format as a kid, then later in the original book form as a high schooler. (I've never seen it in hat form.) He's supposedly getting screwed out of quite a bit of money that his publisher's been making, thus the donation.

IPA Unicode "Keyboard"

Useful website for copy-pasting real Unicode characters when you're typing IPA pronunciations. 'Cause I know you're, like, always typing IPA pronunciations. ;)

Firebug

If you do any sort of web development and you don't know what Firebug is, run, do not walk, to http://www.getfirebug.com/ and get yourself some sweet, sweet Firebuggin'. You'll thank me later. (Note: I haven't actually donated to Joe Hewitt, the creator of Firebug, yet. He doesn't have a PayPal donations button on his site, so I'm emailing him directly asking if he'd like some money. :))

NPR (or more specifically, KUOW, my local affiliate)

I like listening to NPR and the local public radio shows when I'm driving. They have interesting discussions of fairly diverse topics (not just politics, but all sorts of stuff). When they interview people, they ask good questions — you know, the ones you're yelling at the radio. They ask those questions, but respectfully at the same time (rather than in a hostile know-it-all way, like some shows). So I figure I should support my local public radio station. (Added May 7th.)

So what things have you paid for, that you didn't have to (or could have gotten away with not)? What made it worthwhile?

Finance Blogs I Read

In my blogroll over in the sidebar, I have several finance blogs listed. I read their posts via Bloglines, usually all at the same time. So I have a fairly poor handle on which blog is which.

Thus this post, describing each one briefly. If I get confused about how they're distinct, I can come back to this post and remind myself. :)

Get Rich Slowly

Written by JD. He writes about his personal experiences with his finances. Readers sometimes write in with questions, which JD answers himself then asks others to give their own opinions in the comments. JD also reviews finance magazines and books.

I Will Teach You To Be Rich

Written by Ramit Sethi, also the co-founder of PBwiki. He interviews finance-related people. He also occasionally does surveys of his readers, then analyzes the results.

Money Smart Life

Written by Ben. This guy is one of the reasons I got myself an American Express Blue Cash credit card.

My Two Dollars

Written by David. He has good, practical tips from his personal experience.

The Simple Dollar

Written by Trent Hamm. In April 2006, he experienced what he calls "a complete financial meltdown." After he educated himself on personal finance and got his stuff in order, he started his blog. Trent sometimes writes book reviews, ending each with a "Buy or Don't Buy" conclusion, which is quite helpful.

Well Heeled

Written by "Wanda". She seems the least hard-core of the bunch, but she's still a good source for seeing what someone more like me is going through. (She says of herself, "On the plus side, I’ve started saving for retirement and I don’t carry a balance on my credit card. On the minus side, I love dining out and generally have a hard time abiding by a budget.") Her blog is more of a description of her financial journeys than the advice-oriented blogs discussed above.

Carnival of Personal Finance Submission

I'd recently heard about blog carnivals, so when I wrote up my net worth post I decided to submit it to the Carnival of Personal Finance to see what happens. My post was one of the 40 accepted and posted over at the No Credit Needed blog!

So, welcome Debbie and any other new readers who've stumbled over here from the carnival post.

Categories: money, blogging

Calculate Your Expected Net Worth

So you have some savings socked away (or not, oops), but maybe you're wondering how it compares to others of your age and income, or maybe you want to know if you'll be able to retire on that amount of savings. (Twenty-two-year-olds are allowed to think about retirement savings, right? :) ) I've done a bit of reading on the subject (though, notably, I've not read the recent "The Number" books out there). Below are two formulas I've found for estimating expected net worth.

My opinions of these formulas reflect the fact that I'm new employee in the workplace and thus my "expected net worth" calculations are very susceptible to certain assumptions made by the formulas.

A Very Rough Formula

I first came across the notion of "expected" net worth while reading The Millionaire Next Door by Thomas Stanley and William Danko. (The link is an Amazon Affiliate link, FYI -- full disclosure and all that.) In their book, they suggest the following formula to calculate your expected net worth:

expected net worth = (age)(gross income) / 10 - inheritance

(Normal mathematical precedence rules apply.) So they're saying that inheritance doesn't count, for one thing; your expected net worth is how much you have contributed, not how lucky you were that a rich relative liked you and kicked the bucket. Fair enough.

What I dislike about this formula, however, is that it's very wrong for youngins who haven't had a chance to earn much money yet. According to the formula, I should have a net worth of $44k by now. But I've only had 3 summer jobs so far! How in the world does it make sense for any 22-year-old but a college entrepreneur to have had a chance to amass that kind of net worth? Especially considering many college students will have a negative net worth from student loans and/or credit card debt until they hold down their first full-time job.

They don't give an explanation of how they derived this formula, so here is my own interpretation. Most personal finance books and blogs advise you to save at least 10% of your gross income. (The more you can put away, and the smaller the percentage of your income your can comfortably live on, the better.) So at 10% savings goal would explain the "(gross income) / 10" term. Multiply that by each year you've been saving, and don't count inherited money in the total. The formula overstates how many years you've worked and it doesn't take into account compound interest. Perhaps Stanley and Danko hoped the over- and underestimates would balance out?

To be fair, the authors do state that they have a super-duper fancy formula they use in their own research, and that this formula is just a quick-and-dirty version. Still, why do they not say "working years" instead of age? If I claim I've worked an entire year at my gross income (which I haven't), I'm suddenly above their "expected" value. If you're more like whatever their typical case is, then perhaps this formula may still give you useful values. (These shortcomings are also discussed on Old Niu's blog.)

A Better Formula

A second formula is presented by Marotta Asset Management via the blog Free Money Finance:

adult years = age - 20

expected net worth = (adult years / 240 + 0.1)(adult years)(gross)

Change the adult years calculation if you started working at an age significantly different from 20. I used the formula as-is, and the number it gives me still seems reasonable. YMMV. This second formula was also presented without an explanation of derivation.

For example, this formula says my net worth should be 0.217 times my annual gross income, or $4.3k. This seems much more reasonable for a 22-year-old to have accomplished. I have no sense of how much an older person with a higher income should be expected to save, so I can't comment on how well this formula or the Stanley and Danko one works for other demographics. (But do check out MSN Money's article for some median figures of different age groups.)

Note that, technically, the Marotta formula isn't meant to show your net worth. It's meant to say how much you should have saved by the time you retire (they assume at 72) in order to live off your savings at your current income level. Think of this number, then, as a minimum expected net worth; you may well have other investments and assets that push your total net worth higher by that age.

Conclusion

Neither of these formulas cope well with people whose income is currently in flux. Obviously, a more advanced analysis would be needed to take each year's individual gross into account. But if you're looking for ballpark figures, plug your age and income in and see what comes out. In any case, the end result will likely be the same: save more, spend less.

Update, 9/11: Based on a comment by Debbie, I've created an Excel spreadsheet that takes into account varying income levels per year. Suggestions for improvements welcome!

Categories: money

Last Tuition Payment

Assuming I graduate as planned fall quarter, I've just made my last tuition payment! That is all. :)

Categories: money, school