Review of my status, with #s

[FinanceDude]

Quote:

Originally Posted by Bimmerbill Maybe I'll try to draft up a rough budget? Anyways, how about some feedback? Am I on the right track? Saving too little? Too much?

You need a budget.there's probably $300 a month leaking out of your pocket that you can't track. That could double up the truck payment, and it will go away quick.

I thought you bought a BMW?? Did you pay cash??

[Milton]

Quote:

Originally Posted by FinanceDude You need a budget.there's probably $300 a month leaking out of your pocket that you can't track.

Budgets are tedious and often ineffective. It might be easier and more productive to simply keep track of all of your expenses for, say, three months (cf. Your Money or Your Life). Potential savings will become readily apparent.

[dex]

Quote:

Originally Posted by Milton Budgets are tedious and often ineffective. It might be easier and more productive to simply keep track of all of your expenses for, say, three months (cf. Your Money or Your Life). Potential savings will become readily apparent.

Some rather big generalizations there - care to elaborate?
----
Tracking expenses is the first step - where is your money going.
A good budget is an informed plan as to where you would like to spend your money. (No guarantee.)
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Only tracking your spending is like trying to drive a car by only looking in the rear view mirror.

[Milton]

It doesn't take much time to jot things down on an ongoing basis, so for most people keeping track of expenses will be quicker and easier than preparing a detailed budget (I don't see much real point in a non-detailed budget).

Quote:

Originally Posted by dex Only tracking your spending is like trying to drive a car by only looking in the rear view mirror.

That can be true. I know someone who spends hours on 'Quicken' maintaining a detailed record of past spending, with absolutely zero impact on his free-spending, credit-funded ways. It's rather like buying a book but not reading it, and kidding yourself that you have magically become more knowledgeable.

However, I assume that most people participating on this forum are both intelligent and genuinely interested in saving money. If a person with those characteristics keeps a record of his or her spending, two things tend to happen:

(1) the cumulative impact of unconscious, minor, unnecessary purchases becomes more readily apparent, making them easier to eliminate (David Bach's 'latte factor', although he is not the first person to publicize the concept);

(2) the very act of recording all expenses can tend to reduce spending (one tries to avoid jeopardizing the modest pleasure of writing a '0' at the end of the day).

[Khan]

Quote:

Originally Posted by Milton However, I assume that most people participating on this forum are both intelligent and genuinely interested in saving money. If a person with those characteristics keeps a record of his or her spending, two things tend to happen: (1) the cumulative impact of unconscious, minor, unnecessary purchases becomes more readily apparent, making them easier to eliminate (David Bach's 'latte factor', although he is not the first person to publicize the concept); (2) the very act of recording all expenses can tend to reduce spending (one tries to avoid jeopardizing the modest pleasure of writing a '0' at the end of the day).

That's certainly been my experience.

[Bimmerbill]

Yeah, I know I have some uncategorized spending. Usually shown as ATM withdrawals. Mostly goes to coffee, some food, and other cash purchases. Everything else is tracked pretty well, but not the cash purchases. Some go to food, or docs copays, etc. Some are just blown on coffee, occasional work lunches, my wifes hobbies (bead jewelry making), farmers markets, etc.

Bought the Bimmer with $5k cash/ 10K finance. I could pay it off with the proceeds from my other car sale, but will pay off the truck with its higher monthly payment.

I think I enjoy buying things too much to really lock down a budget to the exact $. I guess I need plenty of "fluff" to keep things interesting. I call it living, tho DW may call it wasting money.

[soupcxan]

Quote:

Originally Posted by Bimmerbill I think I enjoy buying things too much to really lock down a budget to the exact $. I guess I need plenty of "fluff" to keep things interesting.

Quick, someone tie up the blasphemer! I'll get the tar and feathers...

[Bimmerbill]

Yeah I know lol. I think I really enjoy doing product research and selection, then quickly tire of it, and move on to the next research project. Luckily its small stuff most of the time, with the exception of my major car addiction.

I am getting better!

[Milton]

Quote:

Originally Posted by Bimmerbill I think I enjoy buying things too much to really lock down a budget to the exact $.

Dex, please take note. This is not an atypical response to budgeting, and why I suggest that they are "often ineffective" (especially for those who most need them).

Quote:

Originally Posted by Bimmerbill I guess I need plenty of "fluff" to keep things interesting. I call it living

Fair enough. If life were stripped down to absolute essentials, it would be a pretty mean existance. Despite the 'latte factor' talk, I'm not convinced that saving two or three bucks a day on coffee or food is necessarily a good idea, if you find that it gives you pleasure.

We all need a few luxuries ... although if the latter become too frequent or too extravagent (I'll leave it to you to decide whether a "major car addiction" falls into this category), one must realize that one's savings will suffer, and early retirement will likely become impossible. You can't have your cake and eat it too.

One thing you might try is to identify what Joe Dominguez and Vicki Robin call the "gazingus pins" in your life (see their book Your Money or Your Life, pp. 27, 28, and 113). These are small, repeated purchases of trinkets, gadgets or baubles that typically wind up unusued and add little or no lasting fulfilment or happiness to our lives. Men might smile and say that this only applies to women (e.g. shoes, craft supplies, handbags, kitchen accessories, Hermès scarves, jewellery, etc.), but we have them too (e.g. tools, wristwatches, pocketknives, books, guns, DVDs, whatever). If you're honest with yourself, you may be able to identify and avoid some unnecessary purchases: the cost does add up, and doing without these sort of addictive purchases usually takes nothing away from the quality of our lives.

[Bimmerbill]

Thanks Milton. I've cut down on my "gazingus pins" a lot. Been trying to consider a purchase for 1 week or so before doing anything about it.

I guess I want my cake and eat it too. I should say I think I'm recovering from my car addiction, or at least getting better. Last purchase I actually made $500 after driving the car for 3 years and 50K miles, not counting repairs and other routine maintenance.

It is strange tho, I'm capable of extraordinary disciplie and self restraint (first born, 20 years in the Army, etc). Maybe I'm scared that if I do a zero balance budget I'll suck all joy out of my life?

My goal is to hit as many of the BIG things as I can.

[slouch]

Quote:

Originally Posted by FinanceDude get a quote from New York Life or Northwestern Mutual.

Last I knew (2002) NYL and NMFN had the highest and second highest agent commissions, respectively. Not saying they are not good companies, just an FYI (your first year's premium is almost 100% commission for the salesman). Anyone you talk to there will be a lifeinsurance salesman that calls himself a financial planner; again, I'm not saying don't do business with them - just be careful and be on the lookout for them pushing products on you that you do not need.

[Bimmerbill]

Funny you mention NMFN, my buddy just started selling for them. I prefer the do it myself approach.
I usually go thru USAA for most of my insurance, but they don't offer disability. I have a pending term life application (I'm starting to lose patience with their local contractor who I've been playing phone tag with for amost a month for my blood work), car insurance, home, umbrella, boat, and personal property thru them.

[Milton]

Quote:

Originally Posted by Bimmerbill I guess I want my cake and eat it too.

If you can find out how to do that, please let us know.

My own experience has been that at least some compromises and sacrifices are necessary to achieve FIRE. A 0%, or low %, savings rate cannot magically translate into a significant net worth.

If you decide that current consumption is more important to you than future independence and security, that's your choice and you will have plenty of company (sometimes it seems like the great majority of people have no plan and are relying on the government to bail them out. With the US federal debt climbing at its current rate, that is highly unlikely).

Quote:

Originally Posted by Bimmerbill Maybe I'm scared that if I do a zero balance budget I'll suck all joy out of my life?

Read Your Money or Your Life.

[Gworker]

Quote:

Originally Posted by Bimmerbill I usually go thru USAA for most of my insurance, but they don't offer disability...

Let us know what kind of numbers you come up with if you find some LTD. I looked around for it a little while but gave up. Many companies won't offer LTD to federal employees.

I'm almost in the same boat as you but don't have kids. I have a small Roth and need to fund it some more but don't want to change my TSP. Some days I would like to work in the private sector but I like my hours and some aspects of my work.

[saluki9]

Quote:

Originally Posted by slouch Last I knew (2002) NYL and NMFN had the highest and second highest agent commissions, respectively. Not saying they are not good companies, just an FYI (your first year's premium is almost 100% commission for the salesman). Anyone you talk to there will be a lifeinsurance salesman that calls himself a financial planner; again, I'm not saying don't do business with them - just be careful and be on the lookout for them pushing products on you that you do not need.

This is a joke right? NY Life and NML have some of the LOWEST agent commissions. That's why they lose so many experienced agents. The typical sale of a whole life policy in NML creates a first year commission of 55% of the first year premium. Renewal commissions follow a pattern of 9,8,7,6,5,4,3,2.... (% per year) 2% as long as the policy is in force.

A typical whole life policy sold in a brokerage situation would pay a first year commission of over 100%

[slouch]

Quote:

Originally Posted by saluki9 This is a joke right? NY Life and NML have some of the LOWEST agent commissions. That's why they lose so many experienced agents. The typical sale of a whole life policy in NML creates a first year commission of 55% of the first year premium. Renewal commissions follow a pattern of 9,8,7,6,5,4,3,2.... (% per year) 2% as long as the policy is in force. A typical whole life policy sold in a brokerage situation would pay a first year commission of over 100%

Not a joke. This was according to some friends who were NML partners during that time period. Also it was my understanding that new agents had much higher comission rates than senior agents. Regarding the numbers you are quoting, are they for senior agents or newbies? If you don't mind sharing, what is the delta?

[saluki9]

Quote:

Originally Posted by slouch Not a joke. This was according to some friends who were NML partners during that time period. Also it was my understanding that new agents had much higher comission rates than senior agents. Regarding the numbers you are quoting, are they for senior agents or newbies? If you don't mind sharing, what is the delta?

You are correct that new agents do get a higher scale in order to make it easier to break into the business. When I worked for the mothership it was 90% the first year and 75% the second year. This of course was on whole life only. NML seriously discourages their agents from selling term and only pays a measly 30% commission on it. These rates help a little, but don't forget that the general and district agents that you work for charge you for everything from your business cards down to each copy you make.

As for the initial claim, again it's totally false. If it was true then nobody would want to be an independent agent. The reason NML and NY Life lose so many captive agents is because the commission are so low compared to brokerage standards. The only thing they have going for them (as far as being an agent is concerned) is that they still train people, and they will help you with a lot of back office tasks. But the commissions are pathetic compared to brokerage.

When I worked on their investment side we always laughed at the hoops the life agents would do in order hide their brokerage business from NML. the only way you were allowed to use brokered carriers was if your case got turned down by NML's underwriters.

[Canadian Grunt]

Quote:

Originally Posted by Bimmerbill Yeah, I know I have some uncategorized spending. Usually shown as ATM withdrawals. Mostly goes to coffee, some food, and other cash purchases. Everything else is tracked pretty well, but not the cash purchases. Some go to food, or docs copays, etc. Some are just blown on coffee, occasional work lunches, my wifes hobbies (bead jewelry making), farmers markets, etc. Bought the Bimmer with $5k cash/ 10K finance. I could pay it off with the proceeds from my other car sale, but will pay off the truck with its higher monthly payment. I think I enjoy buying things too much to really lock down a budget to the exact $. I guess I need plenty of "fluff" to keep things interesting. I call it living, tho DW may call it wasting money.

Retirement is still a long ways off. I was focused on living for the future too much and realised I was missing the big picture. Life! I adjusted my lifestyle/saving habits for the long haul so I can live better now.

Figure out how much you need to save to enjoy retirement, and what insurance you require. Save that off the top and spend the rest. In 14 years you can reassess work/retirement issues again. Too much focus on retirement will burn you out.

[Bimmerbill]

OK, paid off the truck so only a $180/mo car payment left. Dropped the 401K to 5% to get the match, freeing up $280 per bi-weekly paycheck. Cut cable bill by $60 mo too.

So, given economic turmoil, think I should start saving an EF or start paying off:

9K auto loan, 5 years, 6.25%
37K LOC, 4.75% variable (locks available at 7.14%)- paying int only right now
6K student loan
3K cc, oil prebuy.

Want to kill the CC as I haven't run a balance for quite some time and don't want to pay int, even at low rates thru USAA.

Sold some stuff on ebay ($1.5K), 4 of my guns for $2400 (maybe 2 more for $1K) so far.

[segfault]

72% loan-to-value on the house... Sometimes, you can rely on a HELOC as an emergency fund, but in the current market, they may cut off HELOC advances, especially if it's an 80% HELOC rather than a high-LTV HELOC.

I'd pay off the credit card first, then amass an emergency fund, then the auto loan, then the LOC.