Leigh

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Homepage: http://leightpf.wordpress.com

Managing a biweekly paycheck

I’ve been employed in some form or another off and on for the last ten years. I’ve been paid biweekly, semimonthly, monthly, and with annual and more often than annual bonuses in cash and stock form.

  • mid 2004 through late 2005 – biweekly minimum wage pay
  • early 2006 – salaried monthly
  • late 2006 – biweekly minimum wage combined with salaried semi-monthly
  • mid 2007 – salaried biweekly
  • late 2007 – biweekly minimum wage
  • late 2008 through present – salaried monthly when employed, plus stock and cash bonuses

It took a long time before I started doing much budgeting since I’ve almost always earned far more than I needed and if I didn’t, I had a decent savings account compared to my expenses at the time. In high school, I “budgeted” by giving myself 20% of my net income to spend freely by transferring 80% of my net income to savings on pay day. I remember in late 2006, budgeting by on pay day, leaving the money in checking that I needed to pay any expected expenses until the next pay day and transferring the rest to savings. That’s similar to the system I use now except that I have a whole month between pay days and my expenses are higher, so I keep more money in checking. I’ve used this system for so long that it works pretty well for me now.

I have a job offer (yay! I’ll talk a bit more about it once I’ve accepted a job offer) and they pay biweekly. This has prompted me to re-evaluate my current money management strategy. I thought that biweekly pay would be terribly annoying, but my boyfriend convinced me that it would actually be fine since I live off of so much less than my income and I could just accumulate all of my paychecks in a savings account and transfer the spending money to checking on the 1st of every month. This strategy would allow me to earn interest on my paychecks, rather than my employer, while keeping things otherwise the same as they are now. Plus, the offered base salary is enough for one biweekly paycheck to more than cover my monthly spending, which I was hoping might be the case, but I’m still going to go with this savings account transfer strategy since it’ll help to smooth out my income, especially on the months where I won’t get a paycheck deposited due to contributing to the 401(k). (some foreshadowing for you on my 2015 savings plan!)

I always thought I would hate being paid biweekly, but I’ve mostly come to terms with it happening at this point and I think it will work out just fine :)

Readers, how have you dealt with a biweekly paycheck?

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September 2014 net worth update (+0.1%)

31-Dec-2013 31-Aug-2014 30-Sep-2014 MoM YTD
cash $13,500 $6,000 $6,900 +$900 -$6,600
savings $27,400 $25,000 $28,100 +$3,100 +$700
investments $134,600 $167,800 $163,400 -$4,400
+2.6%
+$28,800
+21.4%
mortgage $187,600 $149,900 $149,100 +$800
+0.5%
+$38,500
+20.5%
net worth $345,900 $498,900 $499,300 +$400
+0.1%
+$153,400
+44.3%
liquid assets – debts $49,000 $100 $2,200 +$2,300
woo!
+$51,200
+104.5%
taxable assets – debts $121,700 $93,300 $89,300 +$4,000
+4.3%
+$32,400
+26.6%
$ until FI $823,900 $841,500 $833,500 -$8,000
-1.0%
+$9,600
+1.2%

I barely eked out with an increase this month! You can blame the stock market for that and for my not surpassing $500,000 this month. But! My liquid assets are now worth more than my mortgage :)

I saved 60% of my net income this month! I’m now at 72% so far for the year.

Expenses: I spent $3,185 in September after the mortgage or $2,158 without it. So far, my total spending for 2014 is $34,457, which is $45,942 annualized. My current spending estimate is $42,190 for 2014, which would be a decrease of $2,600 from 2013 or about $220/month.

Some of my controllable expenses broke down as follows:

  • $48 Dresses – bought two dresses for a bachelorette party and another eShakti dress (this one finally fit!)
  • $55 Shoes – repairing my leather boots
  • $143 Entertainment/Social [average this year: $206, last year: $224]
  • $5 Eating out by myself [average this year: $16, last year: $25]
  • $264 Groceries – for two people [average this year: $208, last year: $152]
  • $109 Work lunches [average this year: $150, last year: $77]
  • $119 Presents – a gift for a friend’s bridal shower [$340 so far this year, $235 last year]
  • $55 Internet – we’ll start splitting this next month, so this will go down
  • $14 Household goods [average this year: $22, last year: $29]
  • $20 Eyebrows
  • $34 Toiletries – over the counter products instead of going to the doctor [average this year: $22, last year: $31]
  • $0 Fuel [$129 so far this year, $302 last year]
  • Sport #1 annual cost
  • $362 Travel – two trips! I should be done traveling for the remainder of the year though, woo!

Savings: $28,100 (up $3,100)

These funds are spread across a Chase savings account, a general online savings account, a checking account that gets free ATM fees anywhere in the world, and my health savings account.

I’ve decided to keep the Chase savings account open even though I could now close it with no penalty as it has come in handy a few times, for example to get a deposit rather than a statement credit for credit card rewards and then immediately send them to the mortgage. Plus, it is only the opportunity cost on $300, which at the Ally online savings account rates loses me $2.55/year.

Investments: $163,400 (down $4,400 or -2.6%)

This includes my Roth and Traditional 401(k), my 401(k) employer matching (fully vested!), my Roth IRA, my taxable investments including stock index funds and Series I Savings Bonds.

The change here comes from:

  1. Stock market losses, with some dividends
  2. No contributions (status quo for the rest of 2014)

My 401(k) is no longer worth over $100,000 thanks to the stock market this month. Oh well!

Mortgage: $149,100 (down $800 or -0.5%)

Some statistics here:

  • 2.5%: the interest rate on my 5/1 ARM
  • February 2018: when the interest rate on my mortgage is set to reset, possibly to 7.5%
  • 0: months of payments eliminated with this month’s pre-payments
  • $0: extra payments made on the mortgage this month
  • $0: interest this month’s extra payments will save me on the next regular payment
  • 30.4%: portion of my regular payment went to interest (originally was 59%; down 0.3 percentage points)
  • 58.3%: amount of equity in my condo, assuming purchase price (up 0.2 percentage points)
  • 47.9%: amount of the mortgage I’ve paid down (up 0.2 percentage points)

This was a pretty boring month for the mortgage as I just made the automatic required payment. I’m already scheduled to be about $15,400 ahead of where I need to be at the end of 2014 to pay the mortgage off before the rate resets in 2018! I’m reasonably confident that I won’t hit my stretch goal of $91,284.28 for the end of 2014, so at least I am comfortably on track to pay it off before the rate resets.

TOTAL: $499,300 (up $400 or +0.1%)

I ended 2013 with a net worth of $345,900, so I’ve seen a change of +$153,400 or +44.3% so far this year. I’ve set the y-axis on this graph to $465,000 so we can see how my net worth grows towards that throughout the year. I have now surpassed my original y-axis of $465,000 (!), so I’ve increased it to $550,000, which is my new estimate for the year.

September 2014 Net Worth Graph

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August 2014 net worth update (+21.1%)

31-Dec-2013 31-Jul-2014 31-Aug-2014 MoM YTD
cash $13,500 $5,400 $6,000 +$600 -$7,500
savings $27,400 $21,800 $25,000 +$3,200 -$2,400
investments $134,600 $156,500 $167,800 +$11,300
+7.2%
+$33,200
+24.7%
mortgage $187,600 $151,500 $149,900 +$1,600
+1.1%
+$37,700
+20.1%
net worth $345,900 $412,000 $498,900 +$86,900
+21.1%
+$153,000
+44.2%
liquid assets – debts $49,000 $12,000 $100 +$11,900
+99.2%
+$48,900
+99.8%
$ until FI $823,900 $901,300 $841,500 -$59,800
-6.6%
+$17,600
+2.1%

After some discussion in the comments on last month’s net worth update, I decided to set my condo value to what I realistically think it would sell for today, from a comparative market analysis done by a real estate agent familiar with my area and unit. This month also saw about $4,000 in after-tax savings from my paycheck, in addition to about $8,000 of 401(k) contributions from last month and some gains in the stock market. I’m now so close to $500,000 in net worth!

I saved 71% of my net income this month! I’m at 73% so far for the year. I’ve been looking at my budget with the plan to change jobs and trying to see what I can reduce, but it’s hard when I have ~$1,900/month of fixed expenses. Add in $200/month for groceries and I guess my bare bones budget is $2,100/month, which is a pretty decent chunk of money. I’m so glad I didn’t buy a more expensive place! If I was going to take more than a month off, I could recast my mortgage, which would drop the required payment down about $400/month.

It’s interesting seeing how different my finances have unfolded than I expected. My May 2011 projections showed me hitting $250,000 in 5 years (2016), $500,000 by age 35, and $1 million by age 51. I hit $250,000 two years later than that in May 2013 and will hit $500,000 this year at age 26. My projections now show that I will hit $1 million in net worth around age 30-31, which is twenty years earlier than my projection three years ago. Early compounding really is your friend!

Expenses: I spent $3,570 in August after the mortgage or $2,543 without it. So far, my total spending for 2014 is $31,272, which is $46,908 annualized.

To hit my $38,500 spending goal for the year, I need to spend no more than an average of $1,807/month over the remaining 4 months this year. That’s not really possible considering that the mortgage, property taxes, and HOA dues alone will add up to $6,653 over the remaining 4 months of the year or about $1,663 on average per month, leaving me with only $144 of room each month to hit $38,500. So that’s not going to happen. My current spending estimate is $42,360 for 2014, which would be a decrease of $2,450 from 2013 or about $200/month.

Some of my controllable expenses broke down as follows:

  • ($47) Clothing – adjustment on the cost of some dresses from July
  • $331 Entertainment/Social [average this year: $214, last year: $224]
  • $28 Eating out by myself [average this year: $18, last year: $25]
  • $36 Groceries – for two people [average this year: $201, last year: $152]
  • $116 Work lunches [average this year: $156, last year: $77]
  • $53 Presents – a gift for a friend’s bridal shower [$221 so far this year, $235 last year]
  • $53 Internet
  • $94 Electricity – June/July [$614 so far this year, $571 last year – rates went up about 7% year-over-year]
  • $3 Household goods [average this year: $23, last year: $29]
  • $20 Eyebrows
  • $38 Toiletries – buying a year’s supply of lip balm [average this year: $21, last year: $31]
  • $29 Fuel [$129 so far this year, $302 last year]
  • $1,420 Travel – a) bought flights for a September trip with my boyfriend, b) bought the second flight for a fall trip with some girlfriends, and c) paid a deposit on the hotel for the trip with some girlfriends (the other women owe me for their portion of the cost…) September will see another ~$650 in travel spending and then I will likely be done with non-work travel spending for the year!

Savings: $25,000 (up $3,200)

These funds are spread across a Chase savings account, a general online savings account, a checking account that gets free ATM fees anywhere in the world, and my health savings account.

I’ve decided to keep the Chase savings account open even though I could now close it with no penalty as it has come in handy a few times, for example to get a deposit rather than a statement credit for credit card rewards and then immediately send them to the mortgage. Plus, it is only the opportunity cost on $300, which at the Ally online savings account rates loses me $2.55/year.

This month, I was able to set aside just over $4,000 to my savings account! (It’s only up $3,200 because I tossed a bit at my mortgage to get it under $150,000…) Since I’m done contributing to my 401(k) for the year, I should be able to save quite a bit of funds post-tax over the rest of the year (close to $4,000 from each full paycheck).

Investments: $167,800 (up $11,300 or +7.2%)

This includes my Roth and Traditional 401(k), my 401(k) employer matching (fully vested!), my Roth IRA, my taxable investments including stock index funds and Series I Savings Bonds.

The change here comes from:

  1. July paycheck 401(k) contribution and employer matching (last contribution for the year to any of my investment accounts)
  2. Some stock market gains

My 401(k) is now worth over $100,000! That’s pretty exciting!

Mortgage: $149,900 (down $1,600 or -1.1%)

Some statistics here:

  • 2.5%: the interest rate on my 5/1 ARM
  • February 2018: when the interest rate on my mortgage is set to reset, possibly to 7.5%
  • 1: months of payments eliminated with this month’s pre-payments
  • ~$900: extra payments made on the mortgage this month
  • ~$2: interest this month’s extra payments will save me on the next regular payment
  • 30.7%: portion of my regular payment went to interest (originally was 59%; down 0.2 percentage points from July)
  • 58.1%: amount of equity in my condo, assuming purchase price (up 0.5 percentage points from July)
  • 47.6%: amount of the mortgage I’ve paid down (up 0.6 percentage points from July)

I cheated and threw enough extra at the mortgage this month to roll the balance under $150,000. It was worth it. I still increased my cash position by $3,200, so I call it not a bad month for savings.

TOTAL: $498,500 (up $86,500 or +21.0%)

I ended 2013 with a net worth of $345,900, so I’ve seen a change of +$152,600 or +44.1% so far this year. I’ve set the y-axis on this graph to $465,000 so we can see how my net worth grows towards that throughout the year. I have now surpassed my original y-axis of $465,000 (!), so I’ve increased it to $550,000, which is my new estimate for the year.

August 2014 Net Worth Graph

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Guest post at Frugal Portland

Hope you all are having a great long weekend!

Last week, Kathleen over at Frugal Portland kindly published a guest post of mine on how I’ve always saved at least 50% since I’ve had an income. If you’ve ever wanted a peek into how my teenage mind worked, this is the post for you! (Note that the numbers in the post represent my net worth at the time of writing in July.)

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How much cash to keep on hand?

This is a question that I’ve been really struggling with recently. As I’ve been strongly considering leaving my job in the last few months, I started being a little anxious about how much cash I had around and wanted to stockpile more cash, but then every month, I’ve also wanted to throw the extra money from my paycheck at the mortgage.

What do my liquid funds look like right now?

  1. $19,551.10 in savings ($300 at Chase and the rest at Ally)
  2. $10,172.00 in Series I Savings Bonds that are redeemable (if I redeem them in early September)
  3. just under $17,000 in taxable index funds at Vanguard
  4. total: ~$46,723.10

That is approximately one year’s expenses, maybe a little more or a little less depending on which twelve month period you look at. Yes, I can’t rely on the stock index funds being worth more than 50% of their current value, but that’s still a decent chunk of change. And I should stop forgetting about the Series I Savings Bonds because they were meant to be potentially long-term cash.

So then why, as I contemplate taking some time off between jobs, do I want to stockpile all of my extra money as cash over the next few months? I guess it would help, to a certain extent, to not have to replenish my savings after starting a new job, but especially if I get my second bonus for this year, I don’t need to stockpile all of the extra money as cash. Based on my current budget for the remainder of the year (October, November, and December since September’s spending is more than covered with my August paycheck), I should set aside an additional $9,381.65, or about three months’ spending. That seems much more reasonable to me than simply attempting to hoard all of my money, which was my going plan… And then, once I start a new job, if there is any extra money left in my savings account, I will throw the rest at the mortgage.

Readers, what strange financial habits do you have in times of stress?

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Q2 2014 Update

Eurgh, this update was super delayed! It’s now midway through Q3! I have several job interviews lined up and I am super excited about some of my prospects! That will definitely affect how my financial goals end up falling for the year, so I will definitely be reconsidering my goals for the year (such as the mortgage payoff plan!) once I have a more firm idea of what my income will look like. I’m especially not excited about paying for COBRA. I found out how much it was and, ahem, let me say that I am only paying 5% of the actual cost of my health insurance plan. Wow.

Income

I saw one bonus in the second quarter and my regular income chugged along. I didn’t see a raise on my regular salary. I also saw expected amounts of interest (~$100), credit card rewards (~$55), and dividends on my index fund investments (~$950!). Maybe another quarter soon, I will surpass $1,000 in dividends across my portfolio! That would be pretty cool. I think it might happen in Q4 this year.

Saving

In Q2, I saved 79% of my total net pay.

I’ve contributed about 55% of the yearly 401(k) contribution as of the end of Q2. It will be fully funded by mid Q3. I’m contemplating fully funding it early in the year in the future to help me be a bit less stressed out if I am unhappy in my job.

I made $22,749.03 in extra mortgage payments in Q2, which is about 8% of the original mortgage balance, double last quarter’s payments.

I also set aside $1,300.00 in cash.

Giving

I made a small number of donations in Q2 compared to Q1, but I’m close to having positive budget space in this category, which is nice. I’ve been really happy with my increase here this year and will consider increasing it higher next year.

Spending

I was only $300 over budget this quarter (or $100 per month), compared to $1,700 last quarter! Total spending came in at $10,061.91 and I’m on track to spend about $44,781.15 total this year, which would be a decrease of $27 from last year (2013).

  • $586.64 Clothing – this was clearly way over budget. I’ve spent $1,286.64 on clothing so far this year. Hopefully this goes down a bit in H2…
  • $525.18 Entertainment – slightly under budget. $1,261.70 total so far this year.
  • $965.53 Food – pretty much right on budget.
  • Charitable donations – I’ve overspent by about 2 months’ of budget. This should reconcile itself soon.
  • $6,141.33 Housing – this includes my mortgage payments, internet and electricity bills, HOA dues, household goods (e.g. toilet paper, paper towels, and cleaning supplies), mortgage loan fees, and property taxes. I was about $500 overbudget thanks to increasing my internet speed, budgeting for average monthly electricity bills rather than winter electricity bills, and property taxes going up.
  • Medical bills – nothing surprising here. Just paid my normal premiums for dental, medical, and vision insurance. I’m over budget a very small amount since I hadn’t budgeted for the premiums going up, but they didn’t go up very much $ wise.
  • $269.29 Personal care – this includes eyebrows, hair cuts, make-up, and toiletries. This was overbudget a very small amount.
  • $424.44 Recreation – after spending nothing in Q1, I spent a fair bit in Q2. Still under budget for the year though.
  • $311.95 Shopping – bought a new router with my boyfriend and then some other general furnishings.
  • $35 Transportation – just fuel. Q3 will see insurance and vehicle tab renewal, which will be much more expensive.
  • $365.08 Travel – I’m surprised I spent this little on travel in Q2! That puts the year at $2,258.65 so far.

Here’s what my travel expectations look like for the rest of the year:

  1. (July) Weekend getaway with my boyfriend – $430 total
  2. A friend’s wedding – $710 flight, $70 lodging, $100 transportation, $100 food -> $980 my portion
  3. A friend’s bachelorette party – $325 flights, $400 lodging (my portion), $300 food and incidentals -> $1,025

I spent $2,258.65 on travel in H1 and anticipate spending $2,435 in H2 for a total of $4,693.65, which is about $500 over my original budget. Next year’s travel budget is in the works and it is starting to look like it’ll be around $6,000: two weddings, Christmas, and a two-ish week trip to Europe. I’ve debated postponing the bigger trip, but that seems a little silly to do simply for financial reasons.

Readers, how was your Q2?

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I might keep my Barclaycard Arrival

I’ve been using my Barclaycard Arrival Plus World Elite MasterCard for everything except for 5% Chase Freedom categories and Amazon.com purchases. I have to admit that it is pretty awesome having essentially only one credit card. (I don’t notice having a separate card for Amazon.com purchases since the card is already linked and I don’t carry it around with me.) As much as I have a tendency to overcomplicate things, it is really nice to keep things simple from time to time.

In some ways, I’m still trying to build my credit history. The average age on my credit cards isn’t quite 24 months because I keep applying for new credit cards and canceling older ones. (I’m trying to cut down on that now, but I picked some early credit cards that didn’t turn out to be very useful…) So my goal for the rest of 2014 is not apply for any more credit cards.

I’m not convinced that the Barclaycard Arrival will keep its program at 2.22% cashback forever, but maybe it will since it has an annual fee of $89. I’ll keep my Fidelity American Express as a backup 2% credit card forever (plus it’s nice at Costco!), just like my 1% cashback credit union visa with no foreign transaction fees. I don’t know about the Chase Freedom, but I’ll probably keep it around for a while since it has no annual fee and it is with the same bank as the Chase Amazon.com visa which I doubt I will ever get rid of since a) it is no hassle and b) I’ve now had it for 3.5 years, which is by a slim margin my second oldest credit card. I’m going to ditch the Chase Sapphire Preferred Visa once I use the ~70k points ($875) to book something (even if it’s after the annual fee hits because using the points to book something will earn me $175 more than redeeming them for cashback directly). But the Barclaycard? I love it as much as you can possibly love a credit card.

I tracked my “everything else” spending (basically everything except for foreign purchases, restaurants, and Amazon.com purchases) for the period of July 2012 – June 2013. I spent $19,384.88 total, with an average cashback earning of 1.75% based on where took American Express and where did not. I would have earned an additional cashback of $91.11 in these categories by using the Barclaycard Arrival for everything, covering the $89 annual fee with $2.11 to spare. I also spent $954.99 on foreign transactions, for which I lost out on 1.22% of cashback or $28.48. Lastly, I spent $3,799.25 at restaurants and drugstores, for which I lost out on 0.22% of cashback or $8.36. So if I had only used the Barclaycard, I would have earned an additional $22 in cashback for the year over the annual fee, making it basically a wash, except that instead of needing to carry three cards (Fidelity Amex, Chase Amazon.com Visa, and credit union visa) to accomplish that, I only need to carry one (the Barclaycard).

What would my ideal single credit card look like? I explained this in a comment on Emily’s post a few weeks ago:

  1. Visa/MasterCard (accepted more widely than American Express)
  2. Chip and PIN (easier when traveling – remember, this is an ideal single credit card)
  3. No foreign transaction fees
  4. 2% cashback on everything (no categories)
  5. Easily redeemable
  6. No annual fee
  7. No maximum on the earnings
  8. Free FICO score
  9. Trip cancellation insurance, baggage delay insurance, and supplementary rental car insurance (I’m super worried about something going wrong while traveling)
  10. Flexible automatic payments (Chase and my credit union both reduce the automatic payment if you make an extra payment.

The Barclaycard Arrival World Elite Mastercard meets all of them except 6) and 10). Points are easily redeemable since I travel often enough. I love not having to worry about whether a merchant is foreign or not.

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