My Pocket Change

Conventional wisdom says that when the Feds cut rates, mortgages rates go down. However, it is also possible for mortgage rates to in fact increase! This is exactly what happened last week when the Feds provided a second significant rate cut in as many weeks. Why does this make sense? We must separate the long term and short term effects of rate cuts. Continue Reading »

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If you thought the Fed rate cuts were all good news, think again. I received an email today that HSBC would be dropping their online savings account rate to 3.8% APY.  To be honest, I don’t know what it was before (I don’t use that account much), but I also noticed my Emigrant Direct account dropped also.  It looks like rates dropped from 4.7% APY to 4.3% APY.  Don’t get me wrong — if this saves the US economy and makes buying a house more affordable for me, I’m all for it! But we should appreciate that the economy is a very complex system, and Fed rate drops will have some unexpected and undesirable impacts (the biggest of which is the possibility of high inflation).  Fingers crossed!

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In a roller coaster week on the stock market, the market rebound was centered about Tuesday’s announcement that Federal Reserve would cut key interest rates by 3/4 a point. Unless you live under a rock, you know this. What you might not know is what those different rates really mean and their history. Continue Reading »

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Being financially organized is critical to being financially responsible. In order to improve you financial situation, you must first have a good understanding and perspective on it. That’s exactly what organizing gets you. As humans, we live in the present. For example, we consciously understand that a $7 lunch at Chipotle won’t break the bank, but what we might not appreciate is that doing that 5 days a week ends up costing around $150 a month. Financial organization would give us that perspective.

I see three critical pieces to the financial organization puzzle: net worth, budgeting, and retirement planning (not necessarily in that order). Here, I’ll talk about how I plan on tracking my net worth.

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Personal financers universally agree that budgeting is critical to cutting down unnecessary expenses.  A few years ago, I saw the wisdom in this and proceeded to create “the ultimate” financial spreadsheet.  The spreadsheet did it all — tracked my net worth, verified each line item on every credit card statement and bank statement, categorized my expenses, updated my investment performance, etc.  I could tell you where every penny I had went.  But then about a year ago, I basically stopped using my wonderful spreadsheet.  Why?     Continue Reading »

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About a week ago, I wrote about my snowboarding trip to Austria.  I tried to predict what the total costs of the trip would be before hand and came up with a figure of $1600.  Well, now that the dust has settled, I have a final figure.  How well did I do?  Actually, pretty damn well.  My final cost was $1619.80.  I’d say I was more lucky than accurate, but it’s good to know I was in the right ballpark.  Continue Reading »

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This June, one of my two roommates will likely be making the big move from the East Coast to the West Coast.  We’ve been roommates for 3.5 years, and he’s been an ideal roommate.  I will miss him when he leaves, but not as much as I’m going to miss… his 50″ HDTV!!!  So, it looks like I’m going to have to get one myself.  I’ve happened to notice that prices right now are really low. There are tons of deals out there!  So, should I buy now or wait another ~4 months to see what happens? Continue Reading »

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Most people agree that we all need an emergency fund — a safety net in case things get rough financially.  This could mean loosing your job or having a freak accident or other unexpected expense.  But how much do you need in your emergency fund?  Two months’ salary?  Three months’ salary?  Pre tax?  Post tax?  Wait… isn’t that a wedding ring???  I’ve heard lots of rules of thumb, and honestly, I can’t keep any of them straight.  Well, how about six months of living expenses?  This approach gives you a significant amount of time to find a new job, and seems most in line with the “safety net” mentality.

So the next question should be: how much money is six months of living expenses?  I propose two approaches to this: one working forwards, and another working backwards.  Read on to see how I used these two methods to determine my emergency fund.  I have updated this post (Feb. 5, 2007) due to some great comments from the readers. Continue Reading »

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I just got back from a 10 day trip to Austria with my girl friend and best friends from college.  Nine of us in all.  We hit the Alps for some snowboarding and toured the Bavarian and Austrian countryside.  Before I tally up my trip’s final costs, I wanted to first share my predicted costs.  Predicting and planning costs is an important step in controlling and minimizing unnecessary expenses.  Let’s see what I came up with.  Continue Reading »

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 So a little a month ago, I got into a car accident (don’t worry, no one was hurt).  I was rear-ended (not my fault!!!).  It really wasn’t a bad accident at all.  The damage to her car was non-existent, and the damage to my car was very minor. 

However, I knew I had the long process of dealing with insurance in front of me.  And then there was the question of what to do with the insurance money: fix my car now or pocket it (and fix it later).  By the end though, I realized that if I ever wanted to fix my car without using my own money, I’d have to fix it now.  The insurance companies make sure of that… Here’s the story. Continue Reading »

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