Do you love Myles Nye? I know I do! Myles is currently competing to be the next voice of NPR, and let me tell you, he deserves it. He is intelligent and witty, and very well-spoken--a prime candidate if you ask me! Help him move on to the next round here, and listen to his 2 minute "application." He rules.
A few more things before I move on to today's financial treasures...1: The Governor of Oregon recently decided to call attention to the state's hunger problem by living on $21 a week (the equivalent of food stamps). It's pretty interesting. 2: There's a movie I want to see, partially because it looks nice and pleasing and not scary, partially because it's the last movie Adrienne Shelly (actress/filmmaker) made before she was murdered last year, and partially because I think Kerri Russel is adorable. 3: It's rainy. I am going to Stitch N Bitch at Espresso Roma and will make deviled eggs tonight. So there, rain! 4: I started reading Unhooked. It's really good.
On to finance...
Our intern meeting today was hosted by a board member, and was basically a small group Q&A about personal finance. Sound like something I'd be interested in? Heck yes. It was incredibly useful, and very informative. I present to you a bullet-pointed list of the highlights:
- You only get to keep approximately 60% of your paycheck (the rest goes to Social Security, Medicare, State Disability, and Federal/State Withholding Taxes). I knew that some of your paycheck gets taken away (whether you eventually get it back or not), but I didn't fully realize how much is taken out until today--and I was never really able to make sense of what all the deductions were anyway. Yes, I could have asked all those years working at Western Bagel, UCLA, The Olive Garden, etc...but I wasn't in Think About My Financial Future mode back then.
- Always pay yourself first. This is a rule my parents have always told me to live by. Always save at least 10% of your pay check, and do it as soon as you get paid so the money doesn't get spent. This is a little more difficult when you make, say, $400 a month, in which case bills have to be paid first, and you have to think of other ways to save. My current goal has been $100 a month (I try to make at least $300 in babysitting, bartending, house sitting, etc.), and I generally just save gradually throughout the month when I have some extra cash and am not on gas or groceries--after bills have been paid, of course.
- "If you can't pay cash, you can't afford it." This is a fantastic rule, courtesy of Phillip Trapp (our speaker at today's meeting). He makes the exception of buying a house, which most people (unless you're superrich or something) don't do with cash anyway. Don't buy things on your credit card unless you are absolutely going to pay it off within the month. (this is actually a good idea, because it helps you build good credit--just be careful and don't rack up a bunch of credit cards and a bunch of debt)
- If your interest rate on your student loans is lower than your interest rate on your credit card, pay off the credit card first. In general, always be paying things off, but if you're going to pay more than the minimum somewhere, do it wherever the interest rate is the highest. Makes sense.
- Dividing savings into Long-Term and Short-Term.
- Long-Term Savings is the "don't touch this" savings, money you want to save for retirement, buying a house, or other large expenses far in the future. Things like a 401k or 403b (now I know the difference!) plan are generally reserved for retirement, but can also be used for a mortgage--though sometimes with a penalty, especially if you withdraw before you turn 59 1/2. There's a 529, which I've mentioned before, to save for your kids' education. There should be a separate plan for saving for a house, I think, because I'm guessing most people don't tap into their 401k plans for mortgages, but maybe that's as simple as setting up an automatic withdrawl from your paycheck into a high-interest savings account.
- Short-Term Savings is the "I'm saving for something I want to buy soonish" money. Things like a new car, or a vacation, or a security deposit on a new apartment (and maybe some stuff to go in it as well...) fit into this category. There seem to be a few ways to save: Certificates of Deposit (CDs) and High-Interest Savings Accounts. The savings accounts sound like the easiest option to me, and the interest appears to be higher than that of a CD, but CDs have their benefits as well. A CD has a set time-limit, so let's say you want to save for a vacation you are taking in just over 3 months. You put your money in a 90-day CD, and right when you're getting ready to leave for the vacation, voila! You have all the money you had set aside initially, plus interest (usually around 4%). I think this is good for specific savings for time-sensitive things like a vacation or a security deposit, where you want to make sure you have X amount of money by a certain date. On the other hand, the high-interest savings account is a great place to keep your savings that you just want to sit there, earning interest, hanging out until you have a need for it...this is also where you want to keep that 3-6 months worth of living expenses storing up in case you get laid-off, or quit your job on a whim.
Here are a few more links if you're interested...things from The Simple Dollar (man, I'm like a walking ad for this site) that are relevant to my recent posts.
- Setting and Reaching Immediate Term Personal Finance Goals.
- Setting and Reaching Short Term Personal Finance Goals. I especially liked this one.
- A Reader Runs In Place. Finally! He writes about someone my friends and I can really (instead of hypothetically or "in the future") relate to! I'm just glad my debt isn't as high...
- Nourishment on a Desperate Income. One of the reasons this guy is so great is his combination of perspective and experience. He was broke. Broke broke. He has hit rock bottom (pardon the cliche) and come back from it, slowly but surely (pardon the cliche again). This article tells how he ate in a reasonably healthy way when he literally had around $10 a month to spend on food. It's pretty incredible.