Economic Stimulus Here I Come

I received $600 from the IRS this week, and I plan to spend every penny of it.

For nearly a year, I have scrimped and saved to meet my financial goals. 

Yes, I do budget a bit of fun into my life each month. I also allow an occasional purchase. (I have made two since January - a shirt from a thrift store that cost less than $20 and a chair from a used furniture store that cost less than $100.)

Nevertheless, I have dutifully delayed gratification on numerous fronts. No more, at least with this stack of cash. So here is how I plan to spend my stimulus money at locally-owned businesses:

1. Buy a compost bin - I want to turn the mound of leaves and my vegetable scraps into fertile soil. I could probably save money by building one, but I rent my house and want the bin to be mobile when I move.
   
2. Buy a new battery for my laptop - My current one has been kaput for months. (I will place an order with the independently owned Mac shop, not the one at the Mall.)
   
3. Repair my broken TV - I dropped it off at a shop a few weeks ago. Hopefully it will be fixed soon.
   
4. Have fun with my friends next weekend when we get together in Baltimore. (The airplane ticket has already been purchased.)

These are the rewards I am giving myself for diligently sticking to my budget and meeting my debt/savings goals so far. 

They may cost more than $600. We'll see. If anything, the battery purchase can be delayed.

But I feel the need to grab the carrot and take a bite at least once in a while. Is that really so bad?

Up go the savings

May is going to be a glorious month. 

Today, I can happily report that my emergency fund has reached $4,000. By the time the month ends, I will reach the magic mark of $5,000 - the halfway point to my goal. Woo hoo!

The frugal me is developing biceps of steel. 

Oh how my life has changed in a year.

While I had stopped using my credit card last January, I continued to shop regularly for $100 pair of shoes. I was no longer adding to my credit card debt, but I wasn't really paying it off either.

Today, I can say that I have purchased only clothing item this year -- a $16 shirt from a second-hand store. My credit card debt is gone. And my savings are sky rocketing.

Today, I feel unstoppable!

Double Payment Whammy

I am still in my 30s, so why I do I keep forgetting that I already made my monthly student loan payment? This has happened twice this year!

The first error occurred in January. I scheduled my payment online about a week before it was due. I checked back a few days later and saw no payment pending, so I reentered the automatic withdrawal request thinking I had made a mistake earlier. Yeah, I was wrong. 

The second one happened this week. Same situation.  Its as if my financial responsibility is on overdrive, or perhaps battling a case of dementia.

Why is this even a problem if I am working to be debt free? I have set strict monthly savings goals to make sure I meet the big target of $10,000 in my emergency fund by Oct. 1. The $200 over payment could make me miss it.

I think it is time to find something new to sell on Craig's List.

My 401(k) fees doubled - have yours?

It may seem like a small amount to charge -- $2 a month to "manage" my retirement account. 

It is nearly double, though, what I paid at the beginning of the year. My company quietly raised the fees about a month ago, or rather, allowed the financial services company that oversees our 401(k) program to boost them. 

The only reason I noticed is because I painstakingly enter each investment transaction in my Quicken program.

The costs add up over time, especially if you consider the eight percent annual rate of return I could have earned had I been allowed to keep that extra dollar a month. 

At a minimum, the added fees likely mean I will have almost $1,000 less when I retire. The loss could be much greater over time, though, since the standard fees being assessed as fractions of shares I hold, not dollar amounts. As the market recovers, the cash value of these deductions will increase. Many financial companies also increase the share charge as the balance of your account grows.

I have asked for detailed cost information from the firm that manages my company's program. I'll let you know when I hear back from them.

If you need a reason to be concerned, or at least well informed about what is being deducted from 401(k) account, read this Los Angeles Times series published in 2006. 

Some charges are not being disclosed at all.

The paper noted that people like John Fuchs, an IT manager, are paying about $500 a year in hidden management fees. For him, the charges mean more than $300,000 in lost savings by the time he retires. 

A bill is pending in Congress to require 401(k) participants at least be told what they are being docked, but according to a Times editorial today, "The measure has drawn still opposition from securities firms, which have complained that employers and workers would be confused and even deterred by a detailed disclosure of the various categories of fees."

The editorial also goes on to argue, "Arrangements between employers and retirement plan providers that hide fees from those who pay them prevent market forces from holding down those charges."

I am glad I never transferred my retirement savings from other employers into the program where I currently work. I instead chose to move it into a rollover IRA at a brokerage company. It is at least required by law to tell me what is being taken from my account.

Carnival-A-Go-Go

I am a featured link on the Carnival of Debt Reduction, the 136th edition. No Debt Plan is the host, and I would like to thank Kevin for including me this week.

If you have a moment, check out the selections. They can be quite inspiring.

Update: The Carnival of Personal Finance linked to my Sharper Image? post below. Thank you, Frank at The Happy Rock!

Check out his other picks, too.

Give me a distraction

I reduced my debt by one percent this week. Oh how that increment pains me.

As much joy as I take in seeing my emergency fund build, it is still difficult for me to delay making the huge payments needed to quickly kill the rest of my debt.

Dwelling on this, though, accomplishes nothing. Since I will probably feel it acutely again next month -- when I make the minimum payment on my student loan -- I think I have found a way to distract myself from the frustration.

Besides the twin pillars of saving and eliminating debt, there are a host of other things I could be doing to secure my financial stability and peace.  They are the kind of tasks that are important but are about as enjoyable as cleaning out a rank refrigerator.

So perhaps of the double whammy of a burgeoning cash nest egg AND a dwindling list of castor-oil shoulds will do the trick.

Here are the items I would like to see accomplished over the next five months while I await reaching my $10,000 emergency fund goal:

• Create a will 
  
• Create a living will
• Create a power of attorney
• Review employer-paid life insurance and boost coverage if necessary
  
• Review employer-paid disability insurance and boost if necessary
  
• Do household inventory for my renter's insurance policy, the one I will need in case of fire or theft and have never, ever done
• Organize personal financial records 

Just seeing the condensed list on my blog is cringe inducing. Still, I think it is worth a try. This goal things seems to be working for me.

The Beauty

Thursday has become one of my favorite days of the month, when my salary is deposited into my checking account. 

In the old days (less than a year ago), I used to begin thinking about what I "needed" to buy over the next two weeks, until my next pay day arrived. 

Now, the first thing I do is transfer a huge chunk to savings. Today that amount equals $1,000. My glee overfloweth.

The transformation from spender to saver did not occur immediately. I felt deprived, but focused, during the first seven months I made sacrifices to quickly eliminate my credit card debt. 

Like all creatures of habit, though, I have adjusted. Living way below my means is no longer quite the arduous task it once was. 

At the same time, the benefits are growing sweeter. I can now survive almost three months of unemployment. This is no idle accomplishment, given the uncertainty at my company.

The change is beautiful, at least to me. I have my first taste of financial peace, and I love it.