“My Experience in . . .” Series Part III Weddings

Part I-Paying for College

Part II-Purchasing a home

Today concludes the “My experience in” series with Part III on weddings. If you have read the about section of this blog you know that I got married on May 16^th 2009 so I have recent experience with this.  Remember I am writing about weddings from a financial viewpoint only, if you want opinions on different styles or presentations there are plenty of other blogs out there that deal with that. J But with that being said weddings are very fun, but sometimes all the joy and stress can cause people to lose their minds and make the wedding become a financial burden. This gets the marriage off on the wrong foot and can take years to overcome. Depending on whom you talk to, the average wedding in America today is between $20,000-$28,000 excluding the rings and honeymoon. Ultimately you can have a nice wedding no matter how much you spend. Below are a few tips, advice, and some things that I learned when planning our wedding with my wife.

The first key is to develop and stick to a budget. You will first need to figure out where your money for the wedding is going to come from. Start with money, if any, from your parents and grandparents and then figure out how much money the two of you will contribute. After you have your number, stick to it and be realistic with it! Remember that you will have the rest of your life to spend together so you do not want your wedding to be the apex of your marriage. In addition, you can start the marriage off on the right foot by not having to make payments on your wedding as soon as you get back from your honeymoon! After you set your budget you will then be able to prioritize what are the most important things that you wish to spend your money on. From my experience the reception is probably the biggest expense for weddings and it is also the most flexible. Receptions can range anywhere from cake and punch to serving a three course meal with an open bar for over 200 people at a banquet hall. Whatever you choose just remember to stick within your budget.

The second thing I learned was to ask around your church, work, or group of friends and find smaller local businesses that do just as good of a job as the mainstream ones. We found the person who did our wedding cake this way. After a few consultations with some local brick and mortar bakeries we just could not find the right ones. After asking around we got the name of someone who bakes cakes out of their home. We ended up having her make our cake and not only did it taste better than any other we sampled, the price was right around half of what the other bakers wanted!

Finally, if you have friends or family who are willing and ABLE to help, then by golly use them!  Please, please notice the emphasis on able.  If your cousin just started a photography service but has never done any weddings, they’re probably not able to do it although they may be willing. However if you have a family member who has been baking cakes for 20 years, then go ahead and use them!  In our case we had a family member who was good at arranging flowers.  She did a great job at a fraction of the cost.  The point is family and friends are usually more than willing to accommodate you on your special day.

That is all I have to say about weddings. Writing this post brought back all kinds of good memories from our wedding. The most important thing to take out of this in my opinion is to remember that weddings are to be fun and special. Do not get stressed in trying to figure out how to fund a wedding that will come and go before you know it. Enjoy your day but do not pay off your wedding for the next five years on your Visa card. You do not have to spend the average to have a good wedding. We did not and still had a nice classy wedding. All in all just remember the important thing is that you have each other to hold each night whether for richer or for poorer. J

Standard Deduction Spreadsheet

The other day I realized that even though the name of this blog is The Balanced Spreadsheet, I have not actually posted any of my spreadsheets that I have developed.  With the deadline for filing your 2009 Federal income taxes being less than 2 months away I thought I would share a spreadsheet that helps calculate your taxes for those who take the standard deduction.

To access the spreadsheet simply click on the link below, then in the browser click on download in the top left corner and then you will have the option to save or open the spreadsheet.  It contains three tabs for each filing status:  single, married, and head of household.  Simply fill in your dependents, W-2’s, interest income, and other information in the yellow cells and your total tax will be shown in cell F12.

Standard Deduction Spreadsheet

Remember that this spreadsheet is not an official IRS spreadsheet so results could vary.  This is to be used simply as a guide.  I have checked this spreadsheet but that does not mean there are any errors, if you do find any please let me know.  It is greatly appreciated.

I hope to keep adding more spreadsheets here and there and will eventually put them all on one page.  So if you file your taxes with the standard deduction, please try it out and let me know what you think.

Impact of the Credit CARD Act of 2009

The new credit card laws that are a result of the Credit CARD Act of 2009 went into effect today.  If you have read this blog for any length of time you know that I do not use credit cards so there will not be any change for me, but I am interested in how these changes will impact the consumer.  As with all new legislation there are opinions on who will actually benefits from these changes and who will suffer.  Below are a few articles that I have read that address some of the changes.

Cash Commons provides a list of all the major changes going into effect.

The Christian Science Monitor describes the ways consumers will benefit from the new legislation.

The Cleveland Plain Dealer has opinions on how this will impact the credit card industry.

Michelle Singletary from the Washington Post warns of how the banks will use loopholes in the new law.

Finally, CNN Money has an editorial questioning if there is a double standard as the Credit CARD Act of 2009 only covers consumer credit cards and not business credit cards. 

Whichever ways you slice it up, changes are coming for credit cards.  Feel free to post any changes you have received from you credit card in the comment section.

“My Experience in . . .” Series Part II Purchasing a Home

Part I-Paying for College

Welcome to Part II in The Balanced Spreadsheet’s “My Experience in” series.  This series is designed to discuss big financial events that occur to most people while at the same time sharing my experiences with them and hopefully letting you learn from my mistakes. 🙂  After covering my experience in paying for college in Part I, I am switching gears and going into my experience in purchasing a home.  This is an important topic I believe because purchasing a house is probably the most expensive purchase you will ever make in your lifetime and there are ways to make home ownership a blessing and ways to also make it a nightmare. 

So far I only have experience with purchasing one house and that was in August of 2006 when I bought my current residence.  A lot of mistakes were made on my part the least of which is that I had the great foresight to buy at the peak of the real estate bubble.  🙂  In addition I did not do a lot of research that I should have done and rushed through the process.  That probably led me to overpaying for the condominium, but with that being said I have since learned from my mistakes and will be a better buyer the next time I am in the market.

The main thing I learned was that you need to do your research ahead of time before you even talk to a realtor.  What you want to research include issues such as the market tendencies where you are looking to purchase, the current interest rate market, and most importantly knowing how much you can afford.  There is a lot more that goes into the price of a house then just plugging the purchase price into a mortgage calculator as there are other factors to consider like home owner’s insurance, taxes, and in my case monthly condominium dues.  By doing this research there will be less surprises on your end and when it comes to negotiating the purchase price, those with the most knowledge usually win.

Another thing I learned was that it is important to take your time and be patient and not rush things.  The moment you get “house fever” is the moment when you make a bad mistake that costs you money.  Taking your time gives you more bargaining power which allows you to get a better deal.  By being patient you will also have time to build up a bigger down payment which will help you avoid carrying Private Mortgage Insurance (PMI).  It will also lower your monthly payment and decrease the chance that your house value will drop below your mortgage balance, which is commonly referred to as an underwater mortgage.

Finally as mentioned above it is important to not fall in love with the first house you visit and like.  You always need to be able to walk away from a deal if necessary and being attached to a certain house will usually cost you more money at closing.  By going for the first nice house you find you could be turning your back on other houses with better deals. 

With all this being said I will definitely be more prepared next time when my family decides to purchase another home.  I will have more knowledge of the market that I am looking at including the area’s property taxes and price trends.  When I bought the condo I did not do this and wound up buying into an area with larger property taxes then the surrounding area.  Also I will visit more homes for comparison.  The condo I bought was only the second of three that I looked at.  Finally I will have more money to put down on the condo.  No money was put down on the condo I have now even though I did have $15,000 that could have been put down.  This means I am still paying $58.00 a month in PMI and as mentioned before the condo has dropped about 16% in value since 2006.  Thankfully I am in aggressive pay down mode so the condo is not currently underwater, but if I had just made the monthly minimum payments only I would be currently $18,000 underwater!

Writing this post made me cringe when adding up all the mistakes I made, but it definitely was a learning experience.  Hopefully if you are in the market for a new home you picked up a thing or two and will not repeat what I have done.  Next week we will discuss My Experience in paying for a wedding!

Are Reward Checking Accounts worth it?

If you have been paying attention to your savings account interest rate lately you have noticed a very depressing looking rate earned on your money.  Most of the time it has been less then 1%, but there is good news for those who want to earn a decent rate on their checking.  Many small local banks and credit unions have started to offer reward checking accounts that let you earn anywhere from 3-4% APY depending on the bank.  Reward checking has been around for 2-3 years and there are some hoops that need to be jumped each month to receive the desired interest rate but for many including myself it is worth the effort.

The 3-4% may not seem a lot but when compared to 1.25% the results are pretty significant:

Based on the example on the right, if you had $20,000 in a checking account you would receive about $45 more a month in interest using a reward checking account compared to a regular savings account.  I would recommend first going to either checkingfinder.com or depositaccounts.com to where you can do a search to find the closest bank or best deal.  Just like certificates of deposits or savings accounts, each bank has its own rate and requirements.  While the higher interest rates are nice, there are some drawbacks that should be considered before going through the paperwork and hassle of switching banks. 

The first drawback is the balance limit.  Most of these accounts have a cap of $25,000 (some have $50,000 cap, with lower rates) meaning you will only get the high interest rate up to the cap limit then anything above the cap receives a low rate, usually below 1%.  Therefore there is a limit on how good of a deal this can become.

The next drawback is the monthly requirements.  You will want to make sure that the requirements are met each month because if you do not, the interest rate earned plummets to around .25% for that month.  Most of the requirements are pretty simple and convenient, enroll in monthly electronic statements, have direct deposit or online bill pay once a month.  But the debit card requirement is the one that trips most people up.  The requirement is that you must make anywhere between 10-14 debit card purchases a month.  Those who use multiple credit or debit cards can sometimes find it hard to keep track of how many purchases a month you have made.  Remember missing the purchases by just one means you forfeit the interest rate for the entire month.

Finally the last drawback is that usually the interest rate drops a few months after the introduction of the account.  This happened to me with my reward checking account through Charter Bank of New Mexico.  I signed up in the winter of 2008 with the rate at 6%, which it later dropped to 5%, then 4%, and as I wrote about back in November it dropped all the way down to 1.25%!  The bank ended up getting bought out and the rate today is a depressing .25%.  While this is an extreme example just remember that the nice looking rate might drop a percentage point in a few months. 

Overall I find that high interest reward checking to be a very nice feature.  I just recently opened a new account with Farmer’s Citizens Bank that pays 4.01% APY with a $25,000 limit and 12 required monthly debit card purchases.  The purchases requirement does not bother me much because I use my debit card anyways on most of my purchases so there is nothing that I need to do special to meet the requirement.  The interest earned will not make me rich but it is still nice to get about $50.00 extra a month more than I would if I just left it in a regular savings account. 

Are there any other interest rate chasers out there that have tried reward checking?

Update to 79.9% Credit Card

Back in December I commented on First Premier Bank and their 79.9% APY subprime credit card that is being marketed to those who have very poor credit.  Well with the new credit card laws going into effect soon, First Premier is back in the news.  So far the response to their new card has been greater than anticipated:

“Has First Premier gotten any takers on the 79.9 percent cards? [CEO Miles Beacom] called the response ‘phenomenal,’ adding 2 percent of people receiving the offers have applied for the cards. Their normal response rate is 1 percent to 1.2 percent, he says. ‘It’s double what our normal product was.'”

“‘Our goal is really to keep these lines controlled because these are people who have had problems in the past,’ Beacom says. ‘It’s really to help build up the discipline without them getting into credit trouble again.'”

Not getting this card in the first place would be a better act of discipline in my opinion.  Hopefully, the 2% application rate is an inflated statistic as those who apply for this card will most likely be stuck again on the vicious cycle of getting into credit card debt and getting ripped off on the interest rate.  My best advice to those who are feeling the need to apply for this card is best summed up in this quote:

“‘Anyone who feels they have no choice but to get one of these should get help from a credit counselor,’ advises Sandy Shore, a counselor with Novadebt, a New Jersey-based consumer credit counseling agency. ‘There are other alternatives, like a debit card or even a secured card.’”

Can not add much more to that, except there is always another way out of a bad situation instead of using a rip off 80% credit card.  It might be easy to use the card now, but in the long run this will do serious damage to your financial health.  Hopefully enough people will learn their lesson and cards like these will cease to exist due to nobody using them.

“My Experience in . . .” Series Part I Paying for College

Well after the success of the Financial “How to . . . .” series in January, I thought I would start a new series for the month of February titled “My experience in . . .”  Topics will include paying for college, buying a house, and paying for a wedding.  This series is not being done because I am an expert on these topics, but because I have done these events and have made my share of mistakes in each. 🙂  My goal is that you find these posts informative and might learn from one or two of my mistakes .  Today’s topic is my experience in paying for college.

Back when I graduated from high school in 2000 I really had no idea where I wanted to go to college.  Accounting was something I was always interested in because I had taken it for three years in high school, and it came naturally to me and I really enjoyed it.  I eventually enrolled at one of The Ohio State University’s branch campuses close to home and started taking classes during the day while working at night.  I paid for classes and books out of my account and after my sophomore year transferred to the main campus in Columbus.  There I continued to work nights and weekends while paying for tuition and board and two years later I graduated from Ohio State with my degree in accounting not only in four years, but also completely debt free!

There were several keys that enabled me to be able to pay for college.  The first was that I picked a school that I could actually afford.  For my budget, public school was the only option.  Now I am not advocating that everyone must to go the Big State University.  But you have to do a cost benefit analysis when considering the price of college.  With private schools costing anywhere between two to four times that of a public school you have to ask yourself, do you think that your starting salary will be double that of someone who has a public school degree? 

The second key was that I lived at home my first two years at the branch campus and simply commuted each day.  Granted that was not always easy at times but I estimated I saved about $12,000 over two years that way.  Most big schools and technical schools have branch campuses now that make it very easy to commute and live at home for the first few years.  In addition to saving money on living costs, the branch campus usually offers cheaper tuition than the main campus.

Finally, the last key was that student loans were never an option.  Therefore I only had one option and that was to work; and work a lot.  My parents gave me a grant: They granted me the right to work. 🙂 And you know what?  Most people do work while in college.  I averaged anywhere between 25-30 hours a week while school was in session and around 40 hours a week while on break.  I still had fun and a social life and I think it even made me appreciate my education even more. 

While the above is what I did to pay for college is certainly not the be all end all when it comes to paying for college as there are plenty of other options to choose.  The first is scholarships.  There are plenty of scholarships out there; you just need to apply for a lot of them instead of just one or two.  You might not land the big $10,000 scholarship, but a few $500 scholarships add up pretty quickly.  Another way is by going to college part-time as a Junior or Senior in High School.  As mentioned in a recent New York Times article this is a growing trend as it allow students to get a head start in their education at a fraction of the cost.  Finally, if you are a parent, you can plan with your child on how to pay for college.  College should not sneak up on anyone, you know when your child is graduating so be ready and start thinking now instead of the summer after they graduate.

I know statistically about 2/3^rd of graduating undergrad students have student loans, but I do believe that going to school debt free is possible.  Granted tuition does keep increasing but with a little planning ahead of time plus some hard work either in the classroom or in the work force, you can go throughout school without any loans.  Next time we will talk about My Experience in purchasing a home!

Customer’s disagreement with Bank of America

Ever been mistreated by a credit card company? You are not alone. A poster at Cash Commons recently posted their story of being totally mistreated from Bank of America’s credit card division. You can read the full post on the site 2DogCasa. Reading her story makes me really glad I do not have any credit cards. Treating a good paying customer like they did is really ridiculous. My advice was to close the account and get rid of BOA forever. It is simply not worth putting up with the garbage.

On a side note USA Today had a wonderful cover story in their Money section on Monday on the decline of credit card use in America. With stories like the one above it is a wonder why it has not happened sooner.

Has anybody else have horror stories dealing with credit card companies?

Book Review “48 Days to the Work you Love” by Dan Miller

48 Days to the work you love

As mentioned before earlier in the week, I have been reading a lot of good business/personal finance/career books lately and wanted to take some time to review one.  “48 Days to the Work you Love” by Dan Miller is probably one of the best career books I have read.  The book does a good job of giving you purpose for finding work that has both passion and meaning.  The job seeking advice is not just a “How to Interview” or “How to get your resume noticed” but rather goes into defining what work is and how to face this current job market that is constantly changing.  Next the book goes very in depth on how to seek the great job you have always wanted with very practical, detailed advice.  The end of the book contains sample resumes, cover letters, etc that you can model after.  The book does have a spiritual tone to it, but it is not an overbearing one.  A few of the key points in detail:

The book starts off with describing the difference between work and play and asks the question, can work and play mix?  Yes, it can as work does not have to be a necessary evil that just pays the bills, but rather something that you enjoy getting up to do each day.  The next chapter goes into the challenge of change in the market place.  This is not our grandparents’ or even our parents’ job market, as people now change jobs on average once every 3.2 years.  We are currently in a shift from a production based job market to a knowledge based market and you need to be prepared to be able to respond.  Dan then addresses questions such as “What is real job security?” and “Is it bad to get laid off from a job you hate?”  

After diving into change, Dan switches gears and goes into finding your calling and discusses the difference between vocation, career, and job.  According to Dan one must find a career that has purpose, in addition to having a life plan that incorporates your job, instead of centering in it.  Too often we are defined by “what we do” instead of “who we are” and you want to achieve success in all areas of life and not just your career.

To achieve success in all areas of life, you then must create goals. The key is to write down these goals down on paper.  Goals can include short term and long term (up to 5 to 10 years).  After writing these goals down, the next step is to work backwards and take steps to figure out what you will need to do to achieve your goals.  Goals should not just be for your career but also in other areas of your life such as well. The seven areas of life he recommends to make goals in are:

1. Finances
2. Physical
3. Personal Development
4. Family
5. Spiritual
6. Social
7. Career

This all leads to the process of starting your job search.  There is a great deal of information and tips about creating a resume, finding jobs leads, the dos and don’ts about interviewing, and negotiating.  Each of these topics has its own chapter and breaks each down into detail and gives advice on such things as how to be confident without being cocky, when is the right time to talk about compensations, etc. 

To sum it all up, this book to me is an absolute must read.  The chapters on developing and creating goals really stuck out to me.  I wish I would have known most of the career information when I graduated college because it took me a while to get a job offer after college.  Dan wrote a follow up books which I am about to start called “No More Mondays” which is all about starting your own business.  I hope to review that one soon.  Again, I highly recommend this book to anyone looking for career advice.

Cash Breakdown January 2010

Sorry for not making any posts in a week but I have not had time to do any posts due to being busy at work this week as well as being out of town this past weekend.  I thought I would just post a cash update that I try and do every two months or so.  Normal posts will resume this week as I have been reading some good business/financial books that I want to review in addition to having some other goodies.  

 

Emergency Fund-No changes here with the amount staying at the same at $10,000.  It is great to know that we have ten grand in the bank in case of medical emergency or job loss.  Currently there is no discussion to increase or decrease this amount.

Working Funds-With January being the first month of the quarter I have two months in the “Working Funds” category to cover the $1,667 that is taken out of my paycheck each month to participate in my Employers Stock purchase program.  Each month this drops by $1,667 until the end of the quarter when it goes to zero, but goes back to $5,000 at the beginning of the quarter.

Insurance Accrual-This currently includes 8 months of our life insurance accrual as well as 2 months worth of Car Insurance.  Since we pay our car insurance semi-annually (June and December) and the life insurance annually (June), I need to “accrue” monthly the cash needed to pay the bill when it is due instead of having to come up with the full amount on the month it is due.  I simply just take premium due and divide by the number of months in the payment period for my accrual.

IRA Funding-No IRA funding accrued.  I think we are done with this for now as we have caught up on all of my wife’s IRA funding for 2009 and her 2010 funding is funded in the same month as the pay check.

Car/Vacation-The remainder of the cash balance goes in this fund.  The balanced did not increase much since November but that is mostly due to Christmas in December.  Good to see this fund almost hitting over $11,000 but it probably will not be there for much longer.  We are planning on taking our one year anniversary trip in May at a yet to be determined location.  I am also planning on going to a training seminar to learn how to become a financial counselor in April which I will discuss more in detail soon.  Some of this should be offset by a 2009 bonus from my employer, but how much is yet to be determined.  With all that being said, there are no plans to purchase a new car but it is nice to have the money in the bank just in case.