Archive for April, 2012

How to Evaluate a Job Offer

Every company has different ways of compensation. Some companies have amazing benefits, but lower pay. Some value equity over base salary. Some don’t offer a 401(k) and some do, but don’t offer matching.

You need to add up the following:

  1. Annual base salary
  2. Cash bonuses
  3. Value of stock options/RSUs (restricted stock units)/ESPP (employee stock purchase plan) based on the current stock price
  4. 401(k) matching (how soon does it vest?)
  5. subtract the cost of your health insurance premiums and your estimate of how much you would spend on co-pays/etc.
  6. subtract any 401(k) matching you would walk away from at your current employer
  7. value of other benefits such as free parking at work, lunch, dinner, life insurance policy, etc.

You should also add up the above over the same time period with your current employer.

How do the two amounts compare? Ideally, the amount with the new employer should be a step up from the amount with your current employer.

The catch whenever I try to play with the numbers is the amount of 401(k) matching that I would walk away from if I took a job with another company. Once my 401(k) matching has vested, that will be no longer a concern.

It’s up to you to decide how much an offer needs to be to switch companies. Personally, I would like to see my overall compensation go up by more than it has in the last few years, so probably around 10-20%. But when it really comes down to it, which product(s) would I prefer to spend my working hours improving?

(No, I am not looking for a new job, but I have been thinking lately about how exactly I would evaluate an offer for a different company.)

Readers, how do you evaluate competing job offers?

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April Personal finance links round-up

Well apparently I starred quite a few posts in my Google Reader this week! I don’t know how – it’s been absolutely gorgeous here. Hope you’re all having a wonderful weekend :)

Canadian Couch Potato shared why daily market commentary is a joke. I particularly enjoyed his analogy, once I finally got it.

Free Money Finance shared a reader profile of a woman in her mid-twenties who wants to stay in her small hometown. I’m definitely glad that I moved out of my hometown, but it’s also incredible that this young woman knows what she wants at her age for so many life decisions. Some might say that I do, but I am most definitely single.

Krystal at Give Me Back My Five Bucks discussed when minimalism and personal finance collide. I am definitely not a minimalist – I am planning on buying a two bedroom condo just for myself :) That said, I do try to keep a limit on the quantity of shoes and clothes that I own.

Mr. Money Mustache guest posted at Financial Samurai about how early retirement is not as risky as you might think. As someone who is actively thinking about this, I really enjoyed the graphs and numbers that MMM shared, just as I do on his blog.

PFBlogWatchDog told us why you should use 5 year CDs for your emergency fund. I’m definitely a fan of that idea!

Meg at World of Wealth shared a story about a new friend with a different perspective on wealth. This is something that I’ve been thinking about a lot lately as well, as I encounter more and more people at similar income levels, but everyone has a different idea of how to spend and save their money or what wealth feels like to them.

I Am 1 Percent talked about why it is important to identify your talents early (if possible). I know I’m a bit of an oddball, but I knew what I wanted to do when I was pretty young and I’m definitely reaping the rewards from that knowledge.

Kevin at Thousandaire asked if you could go without a car. I ran that experiment when I first moved to my current city after college and survived for almost a year with a combination of a car sharing program and public transit. Eventually for my use cases, the cost of the car sharing program exceeded the costs of car ownership, so I bought a car. I’m glad I waited, but I’m also glad to have the car now.

Kathryn shared a crazy story about when you should fire a broker. I’m glad that I never got caught in the financial advisor trap!

Emily and Kyle of Evolving Personal Finance shared five money-saving moves from their wedding. I loved their ideas, even ignoring the fact that it saved them some money. Who doesn’t want to have a wedding reception in a science museum or at a family home? That sounds pretty awesome to me!

Nicole and Maggie of Grumpy Rumblings asked their readers what they would do if they didn’t have (to have) a job. There were a lot of fascinating answers to that question :)

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April food habits, Week 2

There is most definitely a culture in eating out at my office. I realize that this is bad on my wallet somewhat, but I really enjoy it. It’s an easy way to catch up with male friends and it also creates a great team bonding experience. I often work from home once a week and so I think I’m going to limit my not eating out for lunch to that day.

I feel pretty good about this week too, almost to the point that I don’t feel like writing another one of these posts, but I’ll keep doing it for the rest of the month. I’m definitely feeling like some of my spending is shifting from Entertainment/Dining Out to Groceries this month because I’m eating more dinners at home, which is good.

It sure is easier to eat dinners and to feel better about what I’m eating when I have all the time in the world… Hah.

Sunday, April 8th

  • Brunch: pancakes and milk
  • Dinner: mac and cheese!
  • Groceries bought, cost $52.74
  • Total day’s cost: $52.74
Monday, April 9th
  • Lunch: leftover mac and cheese from last night
  • Dinner: granola bar and chocolate? Oops! Still sick, so my appetite is a bit off.
  • Total day’s cost: free!
Tuesday, April 10th
  • Breakfast: oatmeal and orange juice, plus an orange
  • More groceries bought, $32.44 – I picked up some bread, more interesting soup, meat and cheese. (And leftover Easter chocolates :P omg so cute)
  • Lunch: Chunky tomato soup and sourdough garlic loaf! (still home sick)
  • Dinner: Peanut butter granola bar and some hot chocolate
  • Total day’s cost: $32.44
Wednesday, April 11th
  • Breakfast: cereal and orange juice
  • Lunch: burger and milkshake with coworkers (coworker covered for me)
  • Dinner: prosciutto, ham, and my favorite medium cheddar cheese on sourdough garlic bread
  • Total day’s cost: free!
Thursday, April 12th
  • Lunch: French toast with coworkers, cost $28.92 (covered for coworker from yesterday)
  • Dinner: out with a friend before going to play sports, cost $4.37 (Entertainment)
  • Total day’s cost: $33.29
Friday, April 13th
  • Lunch: with a friend, cost $8.88
  • Afternoon snack: frappuccino from Starbucks, cost $4.11 (Dining Out)
  • Dinner: frozen general Tao’s chicken and rice (Groceries)
  • Total day’s cost: $12.99
Saturday, April 14th
  • Lunch: out with friends, cost $20, but paid with cash which is already counted as spent
  • Dinner: leftover food from last night
  • Total day’s cost: sort of free
Week 1 Week 2 Total
Entertainment $55.43 $4.37 $59.80
Dining Out $19.04 $4.11 $23.15
Groceries $3.00 $85.18 $88.18
Lunches $22.09 $37.80 $59.89
Overall $99.56 $131.46 $231.02

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Update on the 2012 Clothing Spending Plan: Shoes!

For reference, the shoes plan for 2012 was:

  • I will need to replace my other pair of “bright” colored flats, which I bought in 2010. I’ve worn them quite a bit and I’m not quite ready to part with them, but I should plan for phasing them out. Perhaps I will replace them with a pair of blue flats. I’ve found a particular brand of flats that seems to fit me well, so I’m budgeting $100 for this, but I likely won’t need it all.
  • The leather boots that I bought in the fall of 2010 will probably make it through this fall, but I think I will need to replace them by the fall of 2012. I only spent about $60 on them and I think I should budget for closer to $200 on the replacement pair and perhaps they would last more than two fall seasons.
  • Total estimated cost for the year: $300 or an average of $25 per month

Inspired by Bridget’s Hunter wellies, I bought myself some rain boots. Then sure enough, it hadn’t rained much since then. Oh well. I’m sure it’ll start raining again. I love how colorful they are!

Next up is some new flats. I also want to buy a new pair of short brown leather boots in the fall. Hopefully these will be all of the shoes purchases for the year. I’m going to rely on my hatred of going shoe shopping to help with that… But then endless.com and Zappos make it too easy to buy shoes and way less stressful :(

I’m looking at few different pairs of flats. Speaking of which, I should actually do a run to the Sally Ann before I move again. I have a ton of old clothes and shoes that I cleaned out before packing and while unpacking for February’s move.

These ones come in both brown and black. I’m still not sure what color(s) I want. They’re Naturalizer! So they have to be super comfy! And they have a small heel!

And then there are these similar ones that come in green! And it’s not a bright green either. It’s much more subdued. I especially like them since my current pair of green flats aren’t super comfy.

They come in some other colors too, like red, sand and black, but I like the black ones in the first style better. I’m not a huge fan of crazy bows or buckles or anything on my shoes, but I like the interweaving designs of these two styles.

Right now, I have four pairs of flats: green, black, purple, and grey. The grey ones from last spring are my go-to pair. The purple ones are two few years old and didn’t have very good support to begin with. The green and black ones never broke in well.

So I’m leaning towards buying the green flats and black ones. I prefer the brown ones over the black ones, but a) I don’t want to buy three pairs and b) it would be nicer to have the dressier aspect of the black ones for dresses and such, though I do also have some sandals for that. Hmmmm. Or maybe I’ll order all three and then return the ones that don’t fit. Or maybe I’ll start with one of each of the styles? Online shoe shopping is baaaaad.

So how am I doing with the spending plan? The rain boots were $47.51. Two pairs of the above flats would be about $158 with taxes. So that’s about $205.51, which leaves me with $94.49 for the year and I still want to buy a new pair of brown leather boots.

Weee new shoes! :)

P.S. I’m trying to write more “fun” posts on Fridays! How am I doing so far?

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Should I really be using a stable value fund as my fixed income allocation?

My current target asset allocation is:

  • 87% Stocks / 13% Fixed Income
  • 50% US Stocks / 50% International Stocks

I am currently targeting the following funds to implement this:

  • 34% Vanguard S&P 500 Index Fund
  • 8% Vanguard Extended Market Index Fund
  • 43% Vanguard Total International Stock Market Index Fund
  • 13% Vanguard Retirement Savings Trust

I’m starting to wonder if I should really be allocating the entire fixed income portfolio to a stable value fund, especially as my portfolio and that allocation % grows.

Why did I originally pick the stable value fund? During the 2008 downturn, it did not lose ANY value. It looks like it has zero years/quarters/months with a loss. It has a better return than a money market fund – it has been returning about 3-5% historically. I also liked that it gave distributions monthly. (Yes, I know that sounds silly.)

The other two fixed income funds in my 401(k) plan are:

  1. PIMCO Total Return Institutional, which is an active intermediate-term bond fund with an expense ratio of 0.46% and a random quarterly expense of 0.25%. The average duration of its bonds is 7.1 years and its average maturity is 9.0 years. Its 1 year return of 4.16% is severely lagging the Barcap 5-10 Yr Govt/Credit Benchmark 1 year return of 10.79%.  All of its other returns are pretty close to the benchmark. 86% of its bonds are rated A, AA, or AAA.
  2. Vanguard Total Bond Market Index Fund Investor Shares, which is an index intermediate-term bond fund with an expense ratio of 0.22%. It had a small dip in 2008 and its returns slightly lag the Spliced Barclays USAgg Floag Adj Ix* benchmark. 69.7% of its bonds are U.S. Government and the rest are rated Baa, A, Aa, or Aaa. Its average duration is 5.1 years, which is a bit shorter than the PIMCO fund’s average duration of 7.1 years. Its average maturity is 7.1 years, which is shorter than the PIMO fund’s average maturity of 9.0 years.

If I was going to choose between the two bond funds available in my 401(k), I would go with the Vanguard Total Bond Market Index Fund over the PIMCO one. The slightly shorter maturity and duration make the fund somewhat less volatile. I think that I will leave the current funds in the stable value fund since my policy is to re-balance with new funds and not to change investment strategies too frequently. I also like the idea of having a small (5-10%) allocation to cash and then the rest of the fixed income allocation being bonds.

Given that, the target breakdown could look like this:

  • 87% Stocks / 13% Fixed Income
  • 50% US Stocks / 50% International Stocks (within stocks)
  • 5-10% Cash / 3-8% Bonds
This would mean the following implementation:
  • 34% Vanguard S&P 500 Index Fund
  • 8% Vanguard Extended Market Index Fund
  • 43% Vanguard Total International Stock Market Index Fund
  • 5-10% Vanguard Retirement Savings Trust
  • 3-8% Vanguard Total Bond Market Index Fund

I have some time to think on this, but I’m definitely leaning towards adding some bonds to my portfolio.

Readers, how have you implemented the fixed income part of your investment portfolio?

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Financial Priorities

One of the biggest learning curves after investing in understanding and working with my finances over the last several years has been trying to figure out what my life and financial priorities are and how I should keep my spending in line with those.

Some examples:

* Dinner out with coworkers when I have leftovers at home and I’ve already eaten out once or twice that week? Not really important to me.

* Going out drinking/clubbing every Friday night? So not important to me. I prefer my Friday nights to be quiet nights at home where I can unwind from the long week and eat leftovers. There, I said it – I look forward to eating leftovers on Friday night.

* Having a super fancy car, such as an Audi or a sports car that accelerates really well? Not important to me, but having a car that is reliable, is cheap on gas, and gets me from point A to point B well with a radio, comfortable seats, and bluetooth audio is important to me.

* Feeling comfortable in the space that I live in is incredibly important to me. Living by myself and in a nice apartment building offers me that comfort, though it is quite expensive.

* Playing whatever sports I so choose and picking up new ones randomly is something that frequently causes me to go over budget. I’m working on that.

* Helping my sibling out occasionally with small things and buying nice presents for my parents is really important to me since they have supported me quite well throughout the years and they still help me out when I don’t really need it on occasion.

* I could not imagine living without internet at home.

* I used to have a prepaid cell phone, but with my busy schedule, having my calendar, to do lists, and (personal) email on my phone eventually became incredibly helpful, so I bit the bullet and got a smartphone last year. I’m still not convinced that it’s worth $80+ per month, but it’s definitely worth at least $50 per month to me.

* I don’t see a point in paying someone to clean my apartment when I can do it with minimal effort since my apartment isn’t too big and one small person doesn’t create too much of a mess.

* I prefer to buy clothing from brands where I know exactly how a particular item will fit. This saves me a lot of time since I can buy some items online by buying the same brand and size, such as shoes, socks, bras, sportswear, etc. I finally found a particular brand of jeans at Nordstrom that always fits me and they do alterations in-house which makes jeans shopping so much less stressful. I pay for some of these conveniences, but it is worth it to me.

* I love traveling, even though I have barely enough vacation days to take any long, interesting trips. This is important though and can add up quite quickly.

* I eat out for lunch almost every day. I find that eating leftovers for dinner is more time and cost efficient than for lunch since I pay an average of $7/meal for lunch out, but dinner would run closer to $20/meal out and I just don’t eat enough of the portions for that to be worth it.

* My health and mental sanity is incredibly important to me. I will spend whatever it takes to work on that.

* I like having a small laptop computer that can actually be used for something beyond just going on the internet. (No, I don’t play video games.) But that adds up – the one I bought in 2011 cost about $1,500 and my previous one cost about $1,700 four years prior to that. This laptop was worth every penny of that to me.

* Investing for retirement with the power of compound interest is important to me. My goal right now is to invest 20% of my gross income for retirement by maxing out my 401(k) and my Roth IRA if I’m eligible.

So what does this financial picture look like if we try to categorize it and put it in a priority order, with my average monthly spending in 2011?

  1. Housing ($1,700) + down payment savings ($2,500)
  2. Retirement investing ($1,800)
  3. Health and Fitness ($200)
  4. A car that reliably gets me from point A to point B ($250) + car replacement savings ($250)
  5. Travel ($170)
  6. Electronics ($160)

In 2012, my travel spending is going to go up, but my electronics spending will go down. Since my housing expenses have gone up, I’m saving less money each month towards a down payment, so I doubt I will average $2,500 per month in down payment savings this year, but slightly over $1,200 per month would help me hit my new down payment savings goal.

Readers, what are your financial priorities?

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April food habits, Week 1

Last month, I talked about how I wasn’t really happy with my food spending. One of my projects for April is to fix that. I’m less concerned about how much money I’m spending on food and more about the time invested and happiness I get out of the food eating experience.

I almost always eat cereal and orange juice for breakfast, so I’ll only specify breakfast if that’s not the case. That spending falls into my “Groceries” line item. I usually buy orange juice by the gallon and switch up the cereal a lot, buying the largest box of a type I can. I also generally have some chocolate in the afternoon which either falls into “Dining Out” (vending machine), “Groceries” (bulk chocolate buying), or “Travel” (I love buying chocolate while in other cities). If I go for afternoon coffee, that counts in the “Lunches” category since it’s a work break thing.

Sunday, April 1st

  • First lunch: sandwich, $4.37 (Dining Out)
  • Second lunch: free or you could say it was included in my weekend tournament fee
  • Dinner: awesome local pizza, $14.67 (Dining Out)
  • Total day’s cost: $19.04
Monday, April 2nd
  • Stopped at the grocery store on the way to work to get some yogurts for snacks. Cost for 5 small yogurts: $3. (Groceries)
  • Breakfast: yogurt at work
  • Lunch: manager paid. I really like eating lunch with my team on Mondays.
  • Dinner: out with a friend while shopping – fun! Cost: $17.98 (Entertainment)
  • Total day’s cost: $20.98
Tuesday, April 3rd
  • Lunch: by myself. Cost: $5.56 (Lunches)
  • Dinner: leftover pizza from Sunday night
  • Total day’s cost: $5.56
Wednesday, April 4th
  • Lunch: with a friend. Cost: $7.65 (Lunches)
  • Dinner: made some frozen Chinese food I had bought at the grocery store the previous week and had the leftover rice from Friday night.
  • Total day’s cost: $7.65
Thursday, April 5th
  • Lunch: with a friend. I almost ate by myself, but then I decided to see if she was free and that was a good plan. Cost: $8.88 (Lunches)
  • Dinner: out with a friend before going to play sports – fun! Cost: $11.34 (Entertainment) We do this every week and normally I spend $5 on a small sandwich, but we switched it up this week.
  • Total day’s cost: $20.22
Friday, April 6th
  • Breakfast: oatmeal and orange juice
  • Lunch: stayed home sick from work, so I had chicken noodle soup and salted crackers for lunch. I keep a stash of soups at all times :)
  • Dinner: leftover Chinese food from Wednesday night and leftover rice from the previous Friday night. I should probably throw that rice out now.
  • Total day’s cost: free!
Saturday, April 7th
  • Breakfast: oatmeal and orange juice
  • Lunch: out with some girlfriends. Cost: $18.34 (Entertainment)
  • Afternoon snack: out with some girlfriends: Cost: $7.25 (Entertainment)
  • Total day’s cost: $26.11
Overall Cost
  • Entertainment: $55.43
  • Dining Out: $19.04
  • Groceries: $3.00
  • Lunches: $22.09
  • Total: $99.56

I think I did a pretty good job of doing what *I* want for food this week. Sometimes I will go along with my coworkers because that was the “easy” route even if I didn’t want to go where they were going or I wanted some time to myself. An excellent side effect of eating lunch by myself or with a friend is that I will often get back from lunch before they do and then I have some quiet time before they all come back!

Looking at the way I generally eat, if I cook a batch of food on Sunday, I think I need to eat some of it during the week for lunches since I do often eat out for dinner with friends. The problem is that my favorite part of lunch time is *leaving* the office building and going for a bit of a walk to wherever I eat lunch. A way around that I suppose is to go eat in the “cafeteria” where there is a microwave instead of sitting in the kitchen on my floor OR to eat “quickly” and then go for a walk with the rest of the time I would have otherwise taken to eat and walk somewhere.

I’m going to keep tracking my food habits each week for the rest of the month and hopefully every other week will be as happy as this one was!

I meant to go out and get groceries yesterday, so I’ll probably do that today.

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