Next Year's Budget

Over the course of 2009 and leading up to 2010, I've done a good job of reducing my expenses. Here are some that I've managed to cut:

Rent: From $1800 to $1675 = monthly savings of $125
Anti-virus: Saved $50 annually by switching to a free one (praying to Internet gods this does not bite me in the butt)
Taxes: Used TurboTax instead of an accountant to save $900 annually
Phone: I finally cancelled my Verizon account. This should save me in 2010 anywhere from $30 to $70 a month.
Personal Care: I started coloring my own hair during the second half of 2009, so that's reduced that category expense in half from about $150-$200 during the months when I would get my hair colored to more like an average of $60.

So, what am I going to do with all these savings? Spend them! haha. But on things I need/want. I"ll allocate more $ in 2010 to buying clothes, entertainment such as dance performances and the opera as well as travel. It should be a fun year! I also plan to move from my current place to a more convinient location and might end up paying a little more for rent again. Not a crazy amount, but for my mental and emotional health, it will be important for me to be a little more conveniently located next year.

End of Year and Holidays

To keep with the theme of the last post, I'm enjoying the holidays and for once am spending money (while still saving of course). Having reached the limit on taxable social security income, I have extra money in my paycheck during Q4, so that's nice. In theory, I will also recieve a bonus in the next few weeks -- something I've been dreaming of all year. And I'm making my end of year charity donations, which is fun. So between extra money and all the fun spending on gifts, charity (and myself), this is a great time of year!

Of course that means I'm not too excited for Jaunary, but I'm thinking of planning an inexpensive trip to try to ward off the winter blues.

I'll post my Q4 net worth post-bonus. I hope the stock market continues this winning streak. Bonus + stock market gains + end of year income bump = nice Q4!

Celebrating Paying off Debt

I can't believe how different it feels now that my student loan is paid off. I didn't realize it, but for the last year I've really been very aggressive about not spending $ so I could pay it off. This weekend I finally felt like I could let myself spend some $ on things I need. I have wanted a fire-proof file box (I'm such a geek) for about a year. So I ordered that online. Mostly though I bought clothes on a shopping trip (spree) with my friend. I realized the last time I really bought clothes, except for the bathing suit this summer, was last January, also with her, when I bought a new suit for work. Most women that I know would not have survived, haha. Anyway, it felt really great to buy some new clothes because I really need them. A lot of my clothes are 10 years old and some are starting not to fit anymore. I've been purging my closet as I switch to winter. That also feels good. To know I've used something for so long, I definitely get my money's worth out of my stuff.

House hunting

Today I'm off to look at a new condo in my neighborhood. The asking price is $569,000. Ouch. That got me thinking about how to gauge whether or not I can afford an apartment. I'd love to be conservative and spend 2x my annual income. I remember reading that that's a trait that rich people have in common. At 569, this place would be a little more than 3.5x annual income (not including bonus). However, I will most likely have to put 20% down, so the monthly payments seem doable. I calculated that if I pay an extra $10,000 a year on the mortgage I could pay it down in 17 years. That would be awesome. Of course paying $329,000 for a 2 bedroom apartment in a less desirable neighborhood that's farther away would allow me to pay down the apartment really fast. However that place is a Co-op and there are definite disadvantages to living in a coop versus a condo.

I loved this post about the Paradox of Choice on Get Rich Slowly this week. It's exactly how I feel about real estate -- paralyzed by too many choices.

School's Out!

I'm so psyched. This month I paid off my last student debt. This was a credit card debt of about $11,000 that my mom had been carrying for me interest free for I can't even remember how long -- probably 2 years.

So, this year I've paid off about $31,000 in student debt. That's great, especially since I paid very little interest on those loans (the one actual loan was $20K at 6.8% but I only accrued interest on it for about 8 months). What is depressing is realizing that my entire last year's bonus, plus a good chunk of my monthly savings this year went to pay off that debt.

Needless to say, I'm looking forward to starting next year being able to keep every penny that I save! If I don't end up purchasing a house, I'd like to save $2,000 a month post-tax, in addition to maxing out my 401K with pre-tax contributions. That puts me at a savings rate of about 30%. Woo-hoo!

I've got a pyramid going with 1/3 spent post-tax, 1/3 spent on taxes and 1/3 saved. Of course I'm always looking for ways to lower the 2/3 that I don't get to keep and increase the 1/3.

NYC: highest tax burden in US?

Being a resident of a NYC borough, I pay not only state tax which is relatively high in NY, but I have the privilege of paying a city tax as well. I estimate city tax alone will be about $5,000 off my base salary this year alone. That's great, right?! Okay, there are some benefits of living in what has to be the most heavily taxed area of the country. Namely, the public transportation. I don't have to own a car, pay car insurance or pay for gas because we actually have public transport, unlike other places in America. However, last weekend I started thinking for the first time about how simply moving across the river to NJ would save me $5,000 instantaneously. Not to mention moving to CT where there's no city tax and the state income tax is in the 5%s instead of the 6%s like NJ and NY.

In reality, I wouldn't get $5,000 for moving, because that money right now is deducted from my federal taxes, lowering my overall taxable income. Also, $5,000 pre-tax is a lot less post-tax (I'm in the 28% tax bracket). Plus, I'd have to pay a smidge more to take the bus or the PATH train in addition to the subway.

In the end, I'm guessing I'd only end up saving $3,300 or so. Not that that's anything to sneeze at, but in the end I don't know if its worth the quality of life sacrifice. However, if I could find a nice apartment at $1500 a month I'd save $1,800 annually so with the tax reduction I could save close to $5,000. An extra $416 a month is nothing to sneeze at.

Seriously?

Okay, the more I research retirement savings the more ridiculous it gets. My favorite is this article on Motley Fool. Check out this handy chart the author has prepared to tell us how much we're supposed to be saving:

our Age	Percentage of Income to Save
20s	10%-15%
30s	15%-20%
40s	20%-30%
50s	30%-40%
60s	40%-50%
70s	50%-60%
80s	Lotto!?

Okay, 10-15% I can see. What 40 year old can save 20-30% of their salary? The author doesn't say, but I assume she means gross salary. Still, most people at that age are raising a family. Their expenses are at their peak. If they started early, they have children in college. This chart is a joke.

There's another article from AP today about how those close to retirement are so off track due to the market crash. This one has yet another metric for retirement savings:

The bottom line is that men will need to have 4 to 6.8 times their annual salary in the bank, separate from Social Security. Women should aim to have 4.5 to 7.5 because they tend to live longer, according to the study.

Overall, I fear these articles just serve to discourage most Americans who have very little in savings without giving any realistic advice about how to save for what we all know will most likely be the biggest expense any of us have.