Beating Broke

Personal Finance from the Broke Perspective

Don’t Leave Retirement Savings on the Table

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Retirement can sometimes be like that one cousin at family gatherings.  The one that nobody likes to talk about.  I think that, like that cousin, it’s easier to put our retirements out of our minds simply because, for many of us, it’s still so far away. We’ve still got 10, 20, 30, or even 40+ years before we hit that golden age of 65.5 and start living the good life of retirement.  Naturally, our nearer goals are at the front of our minds and take up most of our thoughts.  After all, which are you more likely to worry about?  Your upcoming performance evaluation next week, or your retirement in 35 years? Retirement never stood a chance. But, like that cousin, you’ve got to think about your retirement sooner or later.  And, the sooner you start thinking about it, and preparing for it, the better off you’ll be when it comes time to face it.

In fact, the sooner you start saving for retirement, the better off you’ll be.  Not only will you have to save less because of the wonders of compounding returns, but you’ll have more to show for it when it comes time to retire.  At an average of 7% return, any money that you save for retirement will double every 10 years.  What does that mean?  If you wait an extra 10 years to start saving for retirement, you’ll have effectively cut your retirement fund in half, and will need to either drastically increase the amount you’re saving each month, or learn to live on less in retirement.

Retirement © by 401K 2012

Saving for your retirement doesn’t have to be complicated either. Sometimes, it’s downright easy!  How do you make the most of your early retirement saving?  Stop leaving it on the table.  Get active with your savings.  Go beyond being active, and be pro-active.  Start with your employer.  If you’ve got a 401(k) through your employer, take advantage of it.  Contribute up to the full amount that your employer will match.  Your HR department will help you get it set up, and give you the information on the match so that you can do that.  Most 401(k) programs will have a set of target date funds that can be used to effectively set your 401(k) on autopilot.  If you don’t want to be involved in the choosing of funds for the money to go into, the target date funds can be a great choice.

Once you’ve gotten the full match from your employer in your 401(k), you might want to look into a private pension plan or an IRA as well.  For most, the Roth IRA, with it’s tax free growth and withdrawals is probably the right choice.  If you’re under 50, you can contribute up to $5,000 every year into an IRA.  Use your tax refund, if you get one, to give yourself a boost each year on meeting that $5,000 limit.  If you’ve still got more retirement saving to do after you’ve met the contribution limit, you can up your deduction into your 401(k).

If you need more help with your retirement, or help figuring out what, how much, and when to save, find yourself a retirement expert.  Your CPA or a certified financial planner should be able to give you a detailed plan for your retirement savings. The most important thing you have to remember with all this retirement talk is that if you don’t save, you won’t have any retirement funds to worry about.  Unless you want to count on Social Security to fund your retirement.  I’ve seen people who have done that.  You don’t want to be in their shoes.  Get your retirement saving started today.  It really is important.  Even more than that performance evaluation.

Ramit’s Big Wins Hype

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There are many people around the country that seem to think that Ramit Sethi is the worlds answer to their financial problems.  If you aren’t familiar with Ramit and his platform, it’s a platform that is based off of a no-nonsense mantra.  Instead of pushing people to count their lattes and create budgets, he pushes them to find ways to make more money.  He does that through several classes, groups, and even a book.  In a way, he’s the polar opposite of Dave Ramsey.  Full of ego, and unabashed vigor for his product, he’s unafraid to let someone know when he has no use for them, or to tell them to get lost because they aren’t the readers he wants. There’s nothing wrong with that, really.  He knows who he’s most likely to help, and knows that he’s unlikely to offend any of them with his ranting.

heart latte © by thepinkpeppercorn

Earlier this week, he posted his Big Wins Manifesto.  I’ll warn you now, it’s a manifesto, which apparently means that it needs to be fairly long.  Like most of what Ramit writes, this manifesto grates at me.  First, he starts off by comparing two fellows who are trying to get themselves a better financial life.  The first, “John”, is his example of someone trying to improve his financial life by way of budgets, latte reductions, and penny pinching.

John, 28, earns $62,000/year as a project manager. He used to have $8,200 in credit card debt from overspending, but he’s been slowly paying it down over the last two years and now it’s at $6,400. How? He tried all the typical personal-finance advice: He set up a budget, he tried to cut back on his daily lattes, and he made sure to make a list of goals he wanted to achieve. Yet last week, he took an honest look at his life and realized he’s still treading water. Despite paying off part of his debt, he still has years ahead of being in debt — plus no real savings, no investment, and something always comes up, causing him to yo-yo back and forth on his goals.

Are you kidding me?  The dude makes $62,000 a year and only managed to reduce his credit debt by $1800 in 2 years?!?  That’s barely the minimum payment.  If that’s the best you can do on $62,000 a year, you aren’t even trying.  And, Ramit?  That’s one of the worst examples you’ve ever used.  I understand you’re using some psychological sales pitch or whatever, but at least make it realistic.  Seriously?  You’re trying to tell us that the dude used a budget, cut his lattes, set goals, and he only managed to reduce his debt by $75 a month?  That’s got to be the most self-destructive example you could come up with.

Then, his counter example.

Chris, 32, earns approximately $120,000. Four years ago, Chris was making about $60,000/year but he was barely getting by — he had $50,000 of student-loan debt and, most days, would eat the free snack bars at his office instead of buying lunch. Yet within 4 years, Chris paid off $50,000 of debt, amassed a savings account of tens of thousands of dollars, and more than doubled his salary. To do this, he set up automated systems to pay off his debt. He turned his skills into a side income to earn over $1,000/month on the side. He knew he was slightly socially awkward, so he spent time joining courses to improve his social skills and ended up negotiating multiple salary increases — including over a $50,000 raise two months ago.

Chris is the MAN!  Can you believe he paid off all of that debt, and increased his income by that much!?!  OMG!  It gets better though.  As you can guess, Ramit would have you believe that Chris did all of that while doing actions that he prescribes in his book, or any of his programs.  The funny thing, in both examples, is that Ramit never once talks about anything other than the people’s financial situation.  Here’s John, his financial situation, and how terrible he did at setting a budget and sticking to his new spending habits.  Here’s Chris, his financial situation, and how AWESOME he did when he followed Ramit’s teachings!  But, when you really get down to it, Chris worked his butt off, both in his full-time job, but also in a side job (the $1000/month on the side), and then spent time taking courses to improve his social skills.  How ambitious.  Parts of me wonder how much free time he found himself with during that time.  Or how much he finds himself with now that he’s successfully negotiated multiple salary increases.  Can anyone give me an example of any place that would give you a $50,000 a year raise where your responsibilities at work wouldn’t increase at least on the same scale?  I’ve got news for you.  Nobody is going to pay you twice as much to do the same amount of work.  They’ll just fire you and hire John instead.  But, hey, if you’re only objective is to make a ton of money so you can say you have a ton of money, then by all means, follow Chris in his journey.

But, the manifesto isn’t about the life quality.  It’s about “BIG WINS”!  It’s about making changes that produce results, now!  By far, the best part is towards the end.

Next time you hear the same old tired advice of keeping a budget, or cutting back on $2 lattes, ask yourself: Has that really worked for the millions of people who’ve tried it? Are they really not “trying hard enough”? Or is there perhaps a systemic problem urging people to waste their limited cognition on near-meaningless tasks with little reward…and should we instead focus them on high-leverage areas that will result in massive payoffs?

Define reward, Ramit.  Also, while I’m sure you can find plenty of people for whom a budget and cutting back on lattes hasn’t worked, you can also find plenty that it has worked for.  Many of whom are the experts that you so easily scoff at for suggesting others do the same.

Now, I’ll be plain, I’m not Ramit’s target audience.  I’m in my early 30’s, with a family, a house, and a dog.  I choose those things over the freedom to be as mobile as I would have to be to take advantage of most any of the methods that Ramit professes.  I choose to have quality time with my family over working the hours it would take to negotiate anything resembling a significant raise.  I don’t let money have that kind of control over me.  If it has that kind of control over you, I suggest you think twice about that.  Money has plenty of use, but not at the expense of the quality of life that I desire.  Further, Ramit likes to paint the picture in black and white.  He rails against budgets, cutting back on lattes, and basically any of the advice that doesn’t fit into his “Big Wins” philosophy.  Just like the rest of the world, the world of personal finance isn’t black and white.  What works for you, might not work for me, and what works for me, might not work for you.  And, what works for Ramit doesn’t work for me.

Here’s the bottom line, folks.  A budget, cutting back on lattes, and pinching pennies can, and does, work.  It isn’t instant.  It takes hard work and dedication.  The same hard work, and dedication that anything that Ramit teaches does.  In fact, I’d say a combination of the two is likely a good solution.  But, to write off one for the other is very much like saying that a bicycle won’t get you the same place as a motorcycle.  They both go the same places, it’s just that the method, effort, and reward are slightly different.

Trying a Container Garden This Year

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In years past, we’ve tried futilely to grow a variety of vegetables, fruits and flowers in our designated garden areas of our yard.  Each year, some part of that has been a tremendous disappointment.  Part of the issue is the soil itself.  We have a large evergreen tree in the back yard that provides and excess of shade, an excess of protection from rainfall, and an excess of needles that lend a terrible acidity to the soil.  Between not getting enough shade, not getting enough rain and poor nutrient values in the soil, everything we plant has a terrible time trying to grow.

We’ve tried several things over the last few years.  Much more regular watering helps, obviously.  We’ve added better quality soil to try and make the soil better for growing.  We’ve even fertilized the plants. Each year, something happens to throw the wrench in the cogs.  Last year, we had a major slug infestation, and what did grow was quickly eaten by the slimy creatures.  With each year’s problems, we learn something new that we won’t repeat in future years.  Last year, we learned that, while fallen leaves do provide good insulation for plants over the winter, a abnormally wet spring makes them a wonderful breeding bed for slugs.  Maybe, after we’ve learned enough lessons, we’ll finally get a decent crop out of our garden.  Until then, we’re changing it up a bit.

This year, we’re giving a container garden a go.  We purchased several (8-10) containers of various sizes and shapes, filled them with potting soil and topsoil and purchased all the seeds we thought we might need for the year.

Gardening Supplies © by thatedeguy

I started the seeds nice and early (perhaps a bit too early) and quickly encountered my failure for the year. Not only did very few of the seeds sprout, but those that did quickly died and began to mold. Nothing that I grew in that first batch of seeds is currently still with us. I bought some different seed starting supplies, and tried again. I got slightly better results, and a majority of those seeds survived. Any that still didn’t grow, I replaced with plants from a nursery.

So far, we’re only a few weeks into the growing season, but several of our containers are doing quite well.  The potato planters are growing very well, and the onions (note: all not seeds that I started.)  are doing well.  Of the things that I started as seeds, the only things that are really doing well so far are the carrots.  But, the other stuff is growing, and hopefully, will continue to.

I’d be remiss if I didn’t discuss the financial side of all of this a bit.  When you stop to consider the burden of having to buy most of the supplies this first year, it would have been far more economical to just buy the produce from the farmer’s market.  But, should we pull it off, and produce a good enough crop, we’ll continue it in future years.  Each successive year will make it a bit cheaper, as most of the containers and supplies are reusable.  This year, it’s probably creeping up to about $100 in total expenses, but next year will likely be a lot closer to the $20-$30 mark.  For $20-$30, the produce grown will be very cheap compared to what we could get it for at the farmer’s market.  Plus, it will have that little extra bit of flavor that gets added from having grown it yourself.

How do you garden?  Do you have the luxury of a large plot for a garden, or do you make do with containers?  Do you have any great tips for container gardening (or gardening in the presence of a evergreen) that you’d care to share?