I think it’s great to have an emergency fund for unexpected events, such as sickness or job loss. However, if there were ever an emergency that took out the power for a long period of time, such as a major earthquake, it is likely that we would be unable to access our saving accounts or use our credit cards.
My wife and I rarely have more than $20 in cash on us, because we try to charge most of our expenses to our cash back credit cards. This puts us in a tough position if we needed to buy water or gas during an emergency. That being said, we decided to take $150 out of our savings so that we have cash available at home. We requested small denominations ($100 in one dollar bills and $50 in five dollar bills) so that we do not have to worry about getting change.
The money will be hidden in our condo and hopefully never used. We plan to buy a safe within the next year for my wife’s jewelry, important documents, and this emergency cash.
I just received confirmation from HBSC that our $25 cash back redemption request has been received, and our check will arrive within 15 business days. Not a big sum of money, but the only thing I had to do to earn it was charge my business trip expenses to my HBSC rewards Mastercard (which my company immediately reimburses me for).
My wife and I also have a Citi Dividend Platinum Select MasterCard that we use for most of our household expenses. The card is paid off monthly and earns us up to 5% cash back. In fact, we should be able to request a $50 reward from the Citi MasterCard next month. Easy money.
I really enjoy searching the web for high quality financial websites that I can learn from. It’s amazing how much information is available online. Below is a list of sites that I visit frequently.
Other than my family, I only have a couple of friends that I talk with about money. Even then, our conversations are usually limited to vague references, and not actual numbers. I can see pros and cons to keeping money matters private.
Pros
Less chance of jealousy if your financial situation is better than another person’s
Less possibility of embarrassment if your financial situation is worse off than another person’s
Less likelihood that someone will hit you up for a loan / try to steal from you
Cons
Lack of mutual learning thru discussion
Could promote “looking wealthy” rather than “being wealthy”
May contribute to a ignoring, or not giving enough attention to, financial issues
As you can see, I can argue both sides, however, I lean more towards wanting to talk about money – this blog, although anonymous, is a great example.
One exception for me when it comes to talking about money is discussing compensation with co-workers. I don’t do it and wouldn’t recommend it.
To achieve our net worth goal of $1.5M in 20 years, we need a plan. Below are our net worth goals for each year (click on spreadsheet to enlarge). This plan assumes an average annual return of 8%, and our ability to increase our investments as our careers develop.
As you can see, if we are able to hit our targets, we are still almost $300K short of our $1.5M goal. I guess that’s why they call them “stretch” goals.
We currently have $12,688.05 invested in my company’s 401(k) plan and $630.00 saved up to begin funding Roth IRA’s for my wife (minimum required to open a Vanguard Roth IRA is $3,000).
The 401(k) money was accumulated (no company match) over the past 5 years of off and on investing without a plan or a goal. Now that we do have a plan and a goal, we have decided to focus on fully funding our Roth IRA’s this year, while still contributing a small amount (2% of my salary) to my company’s 401(k) plan. The Roth IRA money will be invested in the Vanguard 500 Index Fund.
The main reasons we choose to focus on the Roth IRA’s are:
The average expense ratio of Vanguard 500 Index Fund is just 0.18%, while the average expense ratio of our 401(k) investments is 1.48%
The Roth IRA principal can be withdrawn penalty-free, while the 401(k) has limited loan availability
The Roth IRA has no mandatory withdrawals, while the 401(k) withdrawals must start at 70-1/2
Since Roth IRA contributions are limited to $4,000 in 2007 (increases to $5K in 2008) we will be investing a total of $8,000 for my wife and I this year.
We just returned last night from a friend’s wedding in Northern California. It was a great time, but we spent almost $400 for the 2-1/2 day trip. Our portion of the cabin was $160, our share of the gasoline (we drove) was $115, and meals totaled roughly $100.
The Northern California coast is absolutely beautiful – lush green countryside, quaint cabins, and dramatic ocean views. The small town they had the wedding in was so remote that our cell phones did not work, internet access was via dial-up, and our cabin did not have a TV. Not having these distractions really helped us better enjoy the beautiful scenery. Of course, the first thing I did when I got home was turn on my computer and check on our financial accounts. Old habits die hard. . .
My wife just got word today that the commission she is expecting on 4/20 will be more than we thought. She’s getting $1,599.68 ($1,147.24 after taxes)!
We have earmarked the money for the following:
$656 to pay off American Express $200 to Emigrant Direct emergency fund $171 to church $120 to buy wife new jeans (she earned it)
I posted last month about how we were gambling with some play money in Prosper.com. We currently have $100 spread over two $50 loans and an average return of 12.21%. Both borrowers are current with their payments.
That all sounds pretty good, but one drawback of the system is that you do NOT earn interest on money in your prosper account (where the borrower’s payments are deposited) and CANNOT withdraw less than $25 at a time. So, unless we choose to invest more money in Prosper so that we can make another loan (also a $25 minimum), our money is stuck in a non-interest bearing account. Add to that the risk eliment of a borrower defaulting and I’m starting to think it is not really worth it.
One of the simplest ways to get your money working harder for you is to open a high yield online savings account. We use Emigrant Direct and ING Direct because I have read many good things about both banks in online forums, and have been very happy thus far. These banks are FDIC-insured and pay a much higher interest rate that your typical brick and mortar bank.
If you would like to receive $25 for opening a high yield ING Direct savings account, send me an email and I will forward a referral link to you.
Full disclosure:
You have to fund the account with an initial deposit of at least $250.
I will get a $10 thank you bonus for referring you.
To qualify for the $25, you must use the link in the email.
Our path to financial independence and retiring early.
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