2008 is the first year I decided to sign up for the company Flexible Spending Account (FSA). It is an account that is designed to deduct a fixed amount of money each pay period, in which the total amount can be used for most medical, dental, and vision expenses. From that statement, there is no benefit over just a regular savings account, but I will get into the benefits to use to your financial advantage.
Like a 401(k), the amount deducted from a Flexible Spending Account is pre-tax. That means if I make $1000 in a pay period but elect to deduct $50 towards an FSA, then I will only be taxed on the remaining $950. A 401(k) contribution defers taxes for federal and state, but a Flexible Spending Account deduction defers taxes for all taxes - federal, state, social security, and Medicare.
The contribution of a 401(k) can be changed anytime during the year from $0 to the maximum annual limit. With a Flexible Spending Account, the total amount a person wants to contribute has to be decided before the year even starts, and the amount deducted each week is the total amount divided by the number of pay periods. I decided that I wanted to have a total of $250 of Flexible Spending, and because I get paid bi-weekly (26 pay periods per year), I have $9.62 deducted bi-weekly towards my Flexible Spending. But say I want to use $200 of my $250 that I want to contribute to an FSA, and it's only February. At most, I've had about 4 pay periods with a total contribution of just under $40. One good thing about FSA is that you can spend the total amount you elected to deduct for the entire year, even if you haven't contributed to the full amount yet. So I could go ahead and make that eligible $200 purchase towards Flexible Spending. If I left the company, I would not have to pay the difference either. But with one good benefit comes one disadvantage.
Flexible Spending Accounts have limits to when you can use them. The funds do not rollover from year to year. They have the "use it or lose it" rule. Whatever funds that do not get exhausted from Flexible Spending are lost and do not get returned to the recipient. But most plans have a grace period. In my case, the 2008 FSA is good for the entire 2008, plus 3 months grace period until about March 15. The grace period is similar to contributions to an IRA, which can be made to the prior year until taxes are due.
My $250 total Flexible Spending is small because I am single without dependents. I will primarily use it for prescriptions every now and then, but mostly for contact lens solution and accessories. My vision plan at work should cover the cost of contact lenses, otherwise I would have budgeted those into my FSA contribution. Last year I spent about $600 out-of-pocket on prescription glasses. If I had an FSA setup, I would have $150 on federal taxes alone being in the 25% tax bracket. I still would have saved on state taxes, social security, and Medicare.
There are many items that Flexible Spending can be used on - from co-pays to deductibles, to prescriptions, to dependent-care, to medical, dental, or vision. The list is big, and mostly consists of needed medical expenses. Cosmetic enhancements, if not a necessity, are not covered. Some companies even have a debit-card program, so the funds are available to spend right away. Companies that reimburse funds are not the most convenient, but reimbursement method can be used to the advantage of the user.
With my Amex Blue Cash, I get 5% cash back on drug store purchases. So if I had in $50 prescriptions, I would use my credit card to pay for it and receive $2.50 (5%) in cash back. I would then submit my receipts for reimbursement and get back my original $50. I would have made $2.50, for buying something I would have needed anyway.
One of my prescriptions always comes with a rebate. It is a $30 rebate for a very expensive drug. My prescription co-pay is either $10, $20, or $30 depending on the brand, and for the expensive drug, it is $30. I would put the $30 on my credit card, get 5% cash back, submit a copy of my receipt for $30 FSA reimbursement, and submit another copy of my receipt for $30 rebate. Now I just made $30 + 5%.
Today I came up with another technique to use to my advantage. My sister frequently buys prescriptions for her daughter. Her husband's company does not offer Flexible Spending so obviously she can't get reimbursed for her prescriptions. But she can give me the receipts, and I can submit them to get reimbursed for her purchase. I would get the reimbused money back, but because I did not actually pay for my sister's prescriptions, I could use the money for whatever I want. In essence, I received money earned from work tax-free. Now my goal is to get any receipts with Flexible Spending items from other family members. Most of them pay in cash, so credit card names wouldn't show up on the store receipt.
Next year, I will have to increase my Flexible Spending Account to a higher amount to include eligible purchases from my family, that I can use to claim for myself. Just a nice little loophole to avoiding all taxes.
Monday, February 25, 2008
Sunday, February 24, 2008
Career or financial decision?
Yesterday, I was browsing the career sites for Pfizer (PFE) and Johnson & Johnson (JNJ). I used to own shares of Pfizer but sold them when they were not profitable to me. I still regularly invest in Johnson & Johnson by purchasing shares through a DRIP. Anyways, there was no jobs suited for me at Pfizer in La Jolla. There was one position open at Johnson & Johnson that is exactly what I am looking for. Career wise, it would be perfect for me to apply and get the job. Financial wise, I might be throwing away potential money I would have made just by staying at my current job.
At my current job, I invest in the employer stock purchase plan (ESPP) and have received stock options. At its highest point in the last 6 months, my ESPP was worth about $15k and my stock options were worth about $20k. Because of the volatility in the stock market right now, the ESPP is worth $12k and my stock options are worth about $10k. If I changed jobs, I could easily keep the $12k in ESPP because I already own the stock, but I would have to exercise the stock options and only receive $10k gross (~$7k post-taxes). I would lose out on a potential of $10k that the stock options could appreciate to in a bull market.
Comparing salary between my current job and Johnson & Johnson, a former co-worker in my department who made 20% less than me got a job at Johnson & Johnson and immediately made 6% more than me. So in the salary sense, a career change would be an immediate boost.
My 401(k) plan is another issue. I am not fully vested, so if I left before I am fully vested, I do not receive the entire company match. The way my 401(k) vesting schedule works, I get 25% of the company match after 1 year of working, and it increases monthly so that another 25% is vested by the 2nd year. It would take 4 years to receive 100% of the employer match during those 4 years. I am not due to hit the 4 year mark until May. I do not want to throw away retirement money that the employer gave me.
Finances aside, the career change would be a position with higher responsibility in a company that is recognizable around the world. In my current position, I have to explain in detail what my company does because it is not a consumer brand. With Johnson & Johnson, people immediately think "No More Tears" baby shampoo but also realize they make Accuvue contact lenses, Listerine mouth wash, and many other consumer products. In the R&D position, I can help change lives with my knowledge that can help bring a product to market.
Right now, I will hold off on applying to Johnson & Johnson. I will wait until May so that I can receive 100% of the employer match in my first 4 years of working. From now until then, maybe I can find another position within my current company to allow me to grow in the direction that I can see myself still doing in 5-10 years. That will allow me to hold onto my stock options and exercise them when they are valued higher. My former co-worker at Johnson & Johnson is one of my best friends. Ironically, I was her reference when she got the job there. When I do apply, I will ask her to submit my application internally because that has a better chance of getting reviewed since she can vouch for me.
At my current job, I invest in the employer stock purchase plan (ESPP) and have received stock options. At its highest point in the last 6 months, my ESPP was worth about $15k and my stock options were worth about $20k. Because of the volatility in the stock market right now, the ESPP is worth $12k and my stock options are worth about $10k. If I changed jobs, I could easily keep the $12k in ESPP because I already own the stock, but I would have to exercise the stock options and only receive $10k gross (~$7k post-taxes). I would lose out on a potential of $10k that the stock options could appreciate to in a bull market.
Comparing salary between my current job and Johnson & Johnson, a former co-worker in my department who made 20% less than me got a job at Johnson & Johnson and immediately made 6% more than me. So in the salary sense, a career change would be an immediate boost.
My 401(k) plan is another issue. I am not fully vested, so if I left before I am fully vested, I do not receive the entire company match. The way my 401(k) vesting schedule works, I get 25% of the company match after 1 year of working, and it increases monthly so that another 25% is vested by the 2nd year. It would take 4 years to receive 100% of the employer match during those 4 years. I am not due to hit the 4 year mark until May. I do not want to throw away retirement money that the employer gave me.
Finances aside, the career change would be a position with higher responsibility in a company that is recognizable around the world. In my current position, I have to explain in detail what my company does because it is not a consumer brand. With Johnson & Johnson, people immediately think "No More Tears" baby shampoo but also realize they make Accuvue contact lenses, Listerine mouth wash, and many other consumer products. In the R&D position, I can help change lives with my knowledge that can help bring a product to market.
Right now, I will hold off on applying to Johnson & Johnson. I will wait until May so that I can receive 100% of the employer match in my first 4 years of working. From now until then, maybe I can find another position within my current company to allow me to grow in the direction that I can see myself still doing in 5-10 years. That will allow me to hold onto my stock options and exercise them when they are valued higher. My former co-worker at Johnson & Johnson is one of my best friends. Ironically, I was her reference when she got the job there. When I do apply, I will ask her to submit my application internally because that has a better chance of getting reviewed since she can vouch for me.
Monday, February 18, 2008
Shareholder meetings
Publicly-traded companies have an annual meeting of shareholders to discuss the year ahead and to vote on items on the ballot. Each share of a company is worth one vote, and the vote can be placed by absentee ballot or in person at the shareholder meeting. Anyone that owns stock directly in the company can attend these meetings. Stock ownership through mutual funds do not count.
Even though the company I work for holds its shareholder meeting in the same location I work at, I have never attended one. Maybe because the industry that I am in, it isn't that exciting compared to larger companies that the public would recognize. I own exactly one share of the Walt Disney Company (DIS), which I bought through OneShare. That one share I own is not for investing pictures, but I like the art of the stock certificate itself. I have it framed at work, and everybody always asks me about it. Last week, Disney sent me their 2007 annual report and a ballot for items to vote on. Their shareholder meeting will take place in Albuquerque, New Mexico, on March 6, 2008.
I have no intention of going to the Walt Disney Company shareholder meeting, but in the past, they are known for giving away free items. When the shareholder meetings regularly took place in Anaheim, they would give away tickets to Disneyland for each shareholder that physically showed up to the meeting. They have done away with that in recent years, but if they had the shareholder meeting in southern California, I would take my chance at a nice freebie, whatever it may be.
At shareholder meetings, Disney has been known to show upcoming previews of their films. Disney characters also show up for autographs, but photography is not allowed so there is no way to capture that Disney moment, albeit in a corporate setting.
I do not own any of the shares of Berkshire Hathaway (BRK.A and BRK.B), but one day I will purchase their B shares. Even though their shares are costly, it is like buying a mutual fund with a basket of stocks because Berkshire Hathaway is just a shell corporation that owns stock in other companies. Buying individual stocks of Berkshire Hathaway is like automatically buying a diversified portfolio of stocks. Many shareholders of Berkshire Hathaway make the annual trip to Omaha for the shareholder meeting. They come to hear the the words of the world's greatest investor, Warren Buffet. That is something I want to do soon because it is unknown when Buffet will step down as the CEO of Berkshire Hathaway.
Even though the company I work for holds its shareholder meeting in the same location I work at, I have never attended one. Maybe because the industry that I am in, it isn't that exciting compared to larger companies that the public would recognize. I own exactly one share of the Walt Disney Company (DIS), which I bought through OneShare. That one share I own is not for investing pictures, but I like the art of the stock certificate itself. I have it framed at work, and everybody always asks me about it. Last week, Disney sent me their 2007 annual report and a ballot for items to vote on. Their shareholder meeting will take place in Albuquerque, New Mexico, on March 6, 2008.
I have no intention of going to the Walt Disney Company shareholder meeting, but in the past, they are known for giving away free items. When the shareholder meetings regularly took place in Anaheim, they would give away tickets to Disneyland for each shareholder that physically showed up to the meeting. They have done away with that in recent years, but if they had the shareholder meeting in southern California, I would take my chance at a nice freebie, whatever it may be.
At shareholder meetings, Disney has been known to show upcoming previews of their films. Disney characters also show up for autographs, but photography is not allowed so there is no way to capture that Disney moment, albeit in a corporate setting.
I do not own any of the shares of Berkshire Hathaway (BRK.A and BRK.B), but one day I will purchase their B shares. Even though their shares are costly, it is like buying a mutual fund with a basket of stocks because Berkshire Hathaway is just a shell corporation that owns stock in other companies. Buying individual stocks of Berkshire Hathaway is like automatically buying a diversified portfolio of stocks. Many shareholders of Berkshire Hathaway make the annual trip to Omaha for the shareholder meeting. They come to hear the the words of the world's greatest investor, Warren Buffet. That is something I want to do soon because it is unknown when Buffet will step down as the CEO of Berkshire Hathaway.
Sunday, February 17, 2008
Allocating my paycheck
I have two jobs, but I budget my spending around my primary job only. With an annual salary of $49,600, I make about $1908 gross each week. Because my employer offers 50% matching on the first 6% contribution to my 401(k), I contribute 6% to gain the full employer match. I also contribute 15% of my pay to the Employee Stock Purchase Plan (ESPP). I set up my Flexible Spending Account for an annual $250 contribution, which is deducted bi-weekly from my paycheck. After contributions and taxes, I receive a direct deposit of $1055 every other week. Sometimes it is higher if I work overtime, but I count overtime as surplus.
$1055 is directly deposited to my Citi E-Savings account on Friday. It eventually gets divided two ways. On Saturday, $540 is automatically transferred to my Citi Ultimate Savings account, which offers a higher interest rate than my E-Savings account. On Sunday, $515 is automatically transferred to my checking account.
The $515 from my checking account gets transferred to other savings accounts on Monday. $15 is automatically sent to ING Direct, and $500 is automatically sent to EmigrantDirect. EmigrantDirect offers a higher interest rate than all my other savings accounts. That $500 funds my house deposit fund. $15 funds my emergency fund.
The Citi Ultimate Savings account, which receives $540 from every paycheck, is my payment account. On the 15th of every month, it will automatically transfer $200 to my checking, because I automatically purchase $100 of FIGRX and $100 of FCVSX on the 15th. On about the 20th of the month, I will manually transfer the exact amount of money to pay the entire statement balance for my Merrill+ Visa credit card. On about the 30th of the month, I will manually transfer the exact amount of money to pay the entire statement balance for my Charles Schwab Visa credit card.
But what about my other bills? You may ask how I pay for them. Well for accounts that accept credit cards, I will pay by credit card (not just using the Merrill+ Visa or Charles Schwab Visa) and have those accounts setup to be paid automatically. See my previous post how I determine which credit card to use. For accounts that do not accept credit cards directly such as electricity, gas, sewage, and water, I can use the BillPay feature of either the Merrill+ Visa or the Charles Schwab Visa. Lastly, I can use the BillPay feature to pay other credit cards. This allows me to extend the period in which I pay off a purchase, and consolidate all my payments from my checking account to just the Merrill+ Visa and the Charles Schwab Visa.
After payments, any extra money in my Ultimate Savings account just sits there for months in which I have larger payments to make. Basically, the spending money is still spending money. If I get overtime and my direct deposit is larger than $1055, the extra money sits in the E-Savings account. I choose what to do with this money, and it varies when and how. Sometimes I save it (any account) and sometimes I'll contribute it to my Roth IRA.
Because I have a second job, I allocate that paycheck too. Because the job is per-diem, I may not get shifts to work from time to time. Sometimes it would be months between paychecks. I never counted on my second job as a second income so I don't allocate it the same way I do as my primary job. After taxes, 100% of the net wages are deposited to my checking account. I immediately contribute 100% of the deposit into my Roth IRA account. If I reach the yearly limit for IRA contributions, I start to send it over to my EmigrantDirect savings account.
It may seem like a complicated setup, but I configured almost everything to be automatic. I have only to manual payments to make. This configuration allows me to maximize interest by letting the money used for payments sit in my savings account up until the payment due date. And automatic saving for a goal is easier than trying to budget around spending. My spending revolves on what I have leftover after the automatic savings and investing. I automatically save 6% towards my 401(k), 15% towards ESPP, $515 bi-weekly towards house deposit and emergency fund, and $200 monthly for mutual fund contributions. Because this budget revolves around 2 paychecks per month, I end up with two months out of the year with 3 paychecks per month. An extra paycheck means I can do whatever I want with it, but in most cases I won't spend it.
$1055 is directly deposited to my Citi E-Savings account on Friday. It eventually gets divided two ways. On Saturday, $540 is automatically transferred to my Citi Ultimate Savings account, which offers a higher interest rate than my E-Savings account. On Sunday, $515 is automatically transferred to my checking account.
The $515 from my checking account gets transferred to other savings accounts on Monday. $15 is automatically sent to ING Direct, and $500 is automatically sent to EmigrantDirect. EmigrantDirect offers a higher interest rate than all my other savings accounts. That $500 funds my house deposit fund. $15 funds my emergency fund.
The Citi Ultimate Savings account, which receives $540 from every paycheck, is my payment account. On the 15th of every month, it will automatically transfer $200 to my checking, because I automatically purchase $100 of FIGRX and $100 of FCVSX on the 15th. On about the 20th of the month, I will manually transfer the exact amount of money to pay the entire statement balance for my Merrill+ Visa credit card. On about the 30th of the month, I will manually transfer the exact amount of money to pay the entire statement balance for my Charles Schwab Visa credit card.
But what about my other bills? You may ask how I pay for them. Well for accounts that accept credit cards, I will pay by credit card (not just using the Merrill+ Visa or Charles Schwab Visa) and have those accounts setup to be paid automatically. See my previous post how I determine which credit card to use. For accounts that do not accept credit cards directly such as electricity, gas, sewage, and water, I can use the BillPay feature of either the Merrill+ Visa or the Charles Schwab Visa. Lastly, I can use the BillPay feature to pay other credit cards. This allows me to extend the period in which I pay off a purchase, and consolidate all my payments from my checking account to just the Merrill+ Visa and the Charles Schwab Visa.
After payments, any extra money in my Ultimate Savings account just sits there for months in which I have larger payments to make. Basically, the spending money is still spending money. If I get overtime and my direct deposit is larger than $1055, the extra money sits in the E-Savings account. I choose what to do with this money, and it varies when and how. Sometimes I save it (any account) and sometimes I'll contribute it to my Roth IRA.
Because I have a second job, I allocate that paycheck too. Because the job is per-diem, I may not get shifts to work from time to time. Sometimes it would be months between paychecks. I never counted on my second job as a second income so I don't allocate it the same way I do as my primary job. After taxes, 100% of the net wages are deposited to my checking account. I immediately contribute 100% of the deposit into my Roth IRA account. If I reach the yearly limit for IRA contributions, I start to send it over to my EmigrantDirect savings account.
It may seem like a complicated setup, but I configured almost everything to be automatic. I have only to manual payments to make. This configuration allows me to maximize interest by letting the money used for payments sit in my savings account up until the payment due date. And automatic saving for a goal is easier than trying to budget around spending. My spending revolves on what I have leftover after the automatic savings and investing. I automatically save 6% towards my 401(k), 15% towards ESPP, $515 bi-weekly towards house deposit and emergency fund, and $200 monthly for mutual fund contributions. Because this budget revolves around 2 paychecks per month, I end up with two months out of the year with 3 paychecks per month. An extra paycheck means I can do whatever I want with it, but in most cases I won't spend it.
Credit card limits and strategy
So I've got 10 credit cards with a total limit of $186,700. Here is a breakdown of all the cards from high to low:
$55,000 American Express Blue Cash
$27,000 Charles Schwab Visa
$26,300 Merrill Lynch Merrill+ Visa
$19,500 Chase Freedom Visa
$10,000 American Express Blue
$10,000 American Express Blue Sky
$10,000 Chase Amazon.com Visa
$10,000 Navy Federal nRewards Visa
$10,000 Shell Mastercard by Citi
$8,900 Citi Diamond Preferred Rewards American Express
Having 10 cards is probably more than most people need, but I actively use 8 of the cards. I'm not sure what to do with the other 2 cards but will keep them open for other reasons. I'll will break down I how use each account.
American Express Blue Cash: This is my primary card. For the first $6500 per year, I earn 0.5% cash back. For anything after $6500, I earn 1.5% cash back. After the $6500 tier has been met, I would use the card for gas (other than Shell), groceries, drug stores, and USPS, in which I would get 5% cash back.
Chase Freedom Visa: This is my second primary card. If I have not met the $6500 tier for the Blue Cash card, I would use this card for gas (other than Shell) and groceries to get 3% cash back. In addition, I use this card for fast food and quick service restaurants and telecommunications such as AT&T Wireless and Vonage. I would get 3% cash back for those categories. As an extra bonus, if you wait until you have $200 in cash back, you get a $50 bonus for a total of $250, or an effective 3.75% cash back.
Shell Mastercard: I use this card exclusively for gas purchases at Shell. I receive 5% credit towards next month's Shell purchases.
Chase Amazon.com Visa: I use this card exclusively for Amazon.com purchases. I receive a 3% credit towards an Amazon.com gift certificate.
American Express Blue Sky: I use this card for for travel purchases such as airline, train, car, cruises, or hotel if I have not passed the $6500 tier for Blue Cash. I get points for future credit towards travel purchases at a rate of 1.33%.
Merrill+ Visa: I use this for all other purchases that does not accept American Express and do not fall into the categories above. I also use the BillPay feature to pay merchants that do not accept credit cards. I earn points at a rate of 1%.
Charles Schwab Visa: Like the Merrill+ Visa, I use the BillPay feature to pay merchants that do not accept credit cards. I earn points at a rate of 1%.
American Express Blue: I do not use this card, but I have authorized users that do use the card. They make a purchase, and they pay me back cash. If I ever wanted to make a long term purchase that I had to carry a balance, this would be my choice of card because the rate is fixed at 7.99%. I earn points at a rate of 1%.
Navy Federal nRewards Visa: I don't really use this card, but I keep it around because I've had this card since 1999, the card with the longest history. I earn points at a rate of 0.5%.
Citi Diamond Preferred Rewards American Express: I don't have a use for this card either. I signed up for it because I took advantage of a 0% APR offer for 12 months, in addition to 10,000 Thank You Points on signup, which I used for a $100 gift certificate at Macys. I earn points at a rate of 1%.
$55,000 American Express Blue Cash
$27,000 Charles Schwab Visa
$26,300 Merrill Lynch Merrill+ Visa
$19,500 Chase Freedom Visa
$10,000 American Express Blue
$10,000 American Express Blue Sky
$10,000 Chase Amazon.com Visa
$10,000 Navy Federal nRewards Visa
$10,000 Shell Mastercard by Citi
$8,900 Citi Diamond Preferred Rewards American Express
Having 10 cards is probably more than most people need, but I actively use 8 of the cards. I'm not sure what to do with the other 2 cards but will keep them open for other reasons. I'll will break down I how use each account.
American Express Blue Cash: This is my primary card. For the first $6500 per year, I earn 0.5% cash back. For anything after $6500, I earn 1.5% cash back. After the $6500 tier has been met, I would use the card for gas (other than Shell), groceries, drug stores, and USPS, in which I would get 5% cash back.
Chase Freedom Visa: This is my second primary card. If I have not met the $6500 tier for the Blue Cash card, I would use this card for gas (other than Shell) and groceries to get 3% cash back. In addition, I use this card for fast food and quick service restaurants and telecommunications such as AT&T Wireless and Vonage. I would get 3% cash back for those categories. As an extra bonus, if you wait until you have $200 in cash back, you get a $50 bonus for a total of $250, or an effective 3.75% cash back.
Shell Mastercard: I use this card exclusively for gas purchases at Shell. I receive 5% credit towards next month's Shell purchases.
Chase Amazon.com Visa: I use this card exclusively for Amazon.com purchases. I receive a 3% credit towards an Amazon.com gift certificate.
American Express Blue Sky: I use this card for for travel purchases such as airline, train, car, cruises, or hotel if I have not passed the $6500 tier for Blue Cash. I get points for future credit towards travel purchases at a rate of 1.33%.
Merrill+ Visa: I use this for all other purchases that does not accept American Express and do not fall into the categories above. I also use the BillPay feature to pay merchants that do not accept credit cards. I earn points at a rate of 1%.
Charles Schwab Visa: Like the Merrill+ Visa, I use the BillPay feature to pay merchants that do not accept credit cards. I earn points at a rate of 1%.
American Express Blue: I do not use this card, but I have authorized users that do use the card. They make a purchase, and they pay me back cash. If I ever wanted to make a long term purchase that I had to carry a balance, this would be my choice of card because the rate is fixed at 7.99%. I earn points at a rate of 1%.
Navy Federal nRewards Visa: I don't really use this card, but I keep it around because I've had this card since 1999, the card with the longest history. I earn points at a rate of 0.5%.
Citi Diamond Preferred Rewards American Express: I don't have a use for this card either. I signed up for it because I took advantage of a 0% APR offer for 12 months, in addition to 10,000 Thank You Points on signup, which I used for a $100 gift certificate at Macys. I earn points at a rate of 1%.
Turning $3.01 in pennies into $10.7 million
Here's a link to a story of a man showing that a penny saved is worth more than a penny earned.
Link
Link
Wednesday, February 13, 2008
Made $1080/hr today
In my last post, I mentioned I bought a $300 sportcoat as an investment in my career. When I got home, I saw my package waiting for me. Naturally, I opened it up and tried it on. I immediately went to the Nordstrom website to compare the picture I saw online with the product I received.
The first thing I noticed was a price drop of what I paid. The original MSRP was $400. I bought it on sale for $264 (plus ~$30 for 2-day shipping and taxes), and I obviously felt comfortable paying for it at that price. Today's list price was $197.
I immediately called Nordstrom, and within 1 minute I was talking to a live operator. Nordstrom has excellent customer service. Not once did I have to go through an array of menus and make a selection, and my wait time was quick. I mentioned the price drop and asked for a refund. I knew they would process it because I have done this in the past, not just with Nordstrom but also with other merchants. It is just like returning an item at the price you paid, and then repurchasing that item at the lower price.
In the end, I was able to get back ~$72 in a span of about 4 minutes. That's the equivalent of making $1080 an hour. It pays to compare prices paid for an item for up to 30 days after purchase. For big ticket items where time is minimal, the savings potential is a high hourly rate.
The first thing I noticed was a price drop of what I paid. The original MSRP was $400. I bought it on sale for $264 (plus ~$30 for 2-day shipping and taxes), and I obviously felt comfortable paying for it at that price. Today's list price was $197.
I immediately called Nordstrom, and within 1 minute I was talking to a live operator. Nordstrom has excellent customer service. Not once did I have to go through an array of menus and make a selection, and my wait time was quick. I mentioned the price drop and asked for a refund. I knew they would process it because I have done this in the past, not just with Nordstrom but also with other merchants. It is just like returning an item at the price you paid, and then repurchasing that item at the lower price.
In the end, I was able to get back ~$72 in a span of about 4 minutes. That's the equivalent of making $1080 an hour. It pays to compare prices paid for an item for up to 30 days after purchase. For big ticket items where time is minimal, the savings potential is a high hourly rate.
Monday, February 11, 2008
Clothes as an investment
This month I already spent over $800 on clothes. Earlier this year, I had set my budget to $100/month. Last month, I was over by 90%, but that was before I had set a budget. Right now, I have spent about $820. I spent $520 last week on a suit, shirt, tie, and shoes I needed for a wedding I went to this past Saturday. I haven't bought a suit in 5 years since I graduated from college, so it was a purchase that can be justified.
However, just minutes ago I spent $300 on a navy pinstripe sportcoat. I am justifying this cost as an investment in my career. I have strong intentions on attending next week's career fair at Amylin (see my previous post), and the suit I just bought might be too formal for a career fair. A sportcoat with dress shirt and dress pants will be business casual, the attire proper for a career fair. If this $300 sportcoat helps me get a job, the cost will be well worth it. Even if it doesn't get me that particular job, it can help in future job interviews that are business casual such as internal job interviews at my present company. If anything else, it adds another dimension of sprucing up my wardrome.
However, just minutes ago I spent $300 on a navy pinstripe sportcoat. I am justifying this cost as an investment in my career. I have strong intentions on attending next week's career fair at Amylin (see my previous post), and the suit I just bought might be too formal for a career fair. A sportcoat with dress shirt and dress pants will be business casual, the attire proper for a career fair. If this $300 sportcoat helps me get a job, the cost will be well worth it. Even if it doesn't get me that particular job, it can help in future job interviews that are business casual such as internal job interviews at my present company. If anything else, it adds another dimension of sprucing up my wardrome.
Sunday, February 10, 2008
Career Fair
I was browsing today's edition of the Union Tribune like I do every Sunday, but something stood out in the Job section. A ad section for the Amylin Career Fair. Amylin Pharmaceuticals is one company I am willing to work for. I have applied there in the past but never got a response back. Sometimes it seems as if resumes get sent out into a black hole which you never hear from again 90% of the time.
The career fair is on February 21, and more information can be found at www.amylincareerfair.com. It lasts from 2 to 7 pm, which I can attend after work, but I am contemplating of taking the day off. It gives me ample time to prepare and dress. If I went to work, I would have to go home to dress if I did not want anyone at my work to find out I was looking elsewhere for a position.
The reason I would like to work for Amylin is that I strongly believe in their products and have confidence in their future pipeline. They are an established company with actual products in the market, so I can be assured with stable employment. I am currently in the biotech sector, but being in the pharmaceutical sector allows for more growth potential in a bigger market sector.
I have never been to a career fair like this before. I got my very first job at Sea World through a career fair they held, but they basically hired anyone with a pulse since it was a seasonal position over the summer. In addition to preparing for this career fair, I will now have to dedicate my time in preparing my resume and looking at my wardrobe to find something, which I can dress with to impress.
The career fair is on February 21, and more information can be found at www.amylincareerfair.com. It lasts from 2 to 7 pm, which I can attend after work, but I am contemplating of taking the day off. It gives me ample time to prepare and dress. If I went to work, I would have to go home to dress if I did not want anyone at my work to find out I was looking elsewhere for a position.
The reason I would like to work for Amylin is that I strongly believe in their products and have confidence in their future pipeline. They are an established company with actual products in the market, so I can be assured with stable employment. I am currently in the biotech sector, but being in the pharmaceutical sector allows for more growth potential in a bigger market sector.
I have never been to a career fair like this before. I got my very first job at Sea World through a career fair they held, but they basically hired anyone with a pulse since it was a seasonal position over the summer. In addition to preparing for this career fair, I will now have to dedicate my time in preparing my resume and looking at my wardrobe to find something, which I can dress with to impress.
Fair Tax
Right now, the US is in the middle of primary elections, which will decide each party's candidate for President. One of the candidates still in the running for the Republicans is Mike Huckabee. He is in support of changing the current tax system into the Fair Tax system.
The Fair Tax system would get rid of the IRS, tax brackets, income taxes, social security taxes, Medicare taxes, capital gains taxes, and many other things. Instead, taxes will be applied on purchases of new goods and services.
For example, if I made $50k in a year, I would receive $50k in my pocket under Fair Tax, with none of that deducted for taxes. If I made that much in 2007 as a single filer in the current system, I would only receive $39.5k after deducting federal income tax, social security, and Medicare. That does not include deductions for state taxes.
When it comes down to purchases, Fair Tax impose a 30% sales tax, or 23% effective tax. Imagine a $100 jacket in today's prices costing $130 under Fair Tax. You can either look at it as $30 more than $100, which is 30%, or look at it as $30 of $130, which is 23%. Under the current system, I would have to use my $39.5k after-tax dollars to purchase a $100 item, but pay about 8% more for sales tax.
The Fair Tax System would be a change to make taxes progressive. Richer people would have more money to spend, and their spending means more money to tax funds. In the current system, taxes are regressive because effective tax rates are lower for the rich compared to the poor. Social security and Medicare taxes are only imposed on about the first $100k of income reported on a W2. People making less than $100k will be paying the majority of this. Capital gains are currently capped to be taxed at no more than 15%. Rich people can have lots of assets and rely on primarily capital gains instead of defined income from a W2. Therefore they can be exempt from federal tax brackets as high as 35%, not to mention social security and Medicare taxes. Steve Jobs, founder of Apple, has an annual salary of $1 from Apple. He makes all his money from Apple via stock options, which when played right, are only taxes at 15% because of capital gains. None of that will go towards social security or Medicare.
The current system favors other people besides the super wealthy. Under the current tax system, people can claim deductions to offset taxable income such as interest paid on a mortgage. There are many other deductions to claim and are very helpful to those who take advantage of it. There will be no deductions under Fair Tax.
As it stands right now, I'm not ready to switch to Fair Tax. Even though I claim the standard deduction, I plan to have a mortgage sometime in the future to offset my taxable income, and I plan to take advantage of capital gains and hopefully rely on that as income more so than salaried income. I am also contributing the max to my Roth IRA. Since that money was already taxed and any earnings would be tax-free, under Fair Tax I would still have to pay the hiked up sales tax. However, Fair Tax would mean any income from tax-deferred accounts such as 401(k)s or traditional IRAs would be tax deferred indefinitely until spent on new goods or services.
All in all, Fair Tax is something we shouldn't worry about at this moment. John McCain is the leading front runner for the Republican Party with Mike Huckabee far behind. The nation is not willing to have a change so dramatic that even with it's intended benefits, the benefits may not be so easy to understand therefore the cons just stand out.
The Fair Tax system would get rid of the IRS, tax brackets, income taxes, social security taxes, Medicare taxes, capital gains taxes, and many other things. Instead, taxes will be applied on purchases of new goods and services.
For example, if I made $50k in a year, I would receive $50k in my pocket under Fair Tax, with none of that deducted for taxes. If I made that much in 2007 as a single filer in the current system, I would only receive $39.5k after deducting federal income tax, social security, and Medicare. That does not include deductions for state taxes.
When it comes down to purchases, Fair Tax impose a 30% sales tax, or 23% effective tax. Imagine a $100 jacket in today's prices costing $130 under Fair Tax. You can either look at it as $30 more than $100, which is 30%, or look at it as $30 of $130, which is 23%. Under the current system, I would have to use my $39.5k after-tax dollars to purchase a $100 item, but pay about 8% more for sales tax.
The Fair Tax System would be a change to make taxes progressive. Richer people would have more money to spend, and their spending means more money to tax funds. In the current system, taxes are regressive because effective tax rates are lower for the rich compared to the poor. Social security and Medicare taxes are only imposed on about the first $100k of income reported on a W2. People making less than $100k will be paying the majority of this. Capital gains are currently capped to be taxed at no more than 15%. Rich people can have lots of assets and rely on primarily capital gains instead of defined income from a W2. Therefore they can be exempt from federal tax brackets as high as 35%, not to mention social security and Medicare taxes. Steve Jobs, founder of Apple, has an annual salary of $1 from Apple. He makes all his money from Apple via stock options, which when played right, are only taxes at 15% because of capital gains. None of that will go towards social security or Medicare.
The current system favors other people besides the super wealthy. Under the current tax system, people can claim deductions to offset taxable income such as interest paid on a mortgage. There are many other deductions to claim and are very helpful to those who take advantage of it. There will be no deductions under Fair Tax.
As it stands right now, I'm not ready to switch to Fair Tax. Even though I claim the standard deduction, I plan to have a mortgage sometime in the future to offset my taxable income, and I plan to take advantage of capital gains and hopefully rely on that as income more so than salaried income. I am also contributing the max to my Roth IRA. Since that money was already taxed and any earnings would be tax-free, under Fair Tax I would still have to pay the hiked up sales tax. However, Fair Tax would mean any income from tax-deferred accounts such as 401(k)s or traditional IRAs would be tax deferred indefinitely until spent on new goods or services.
All in all, Fair Tax is something we shouldn't worry about at this moment. John McCain is the leading front runner for the Republican Party with Mike Huckabee far behind. The nation is not willing to have a change so dramatic that even with it's intended benefits, the benefits may not be so easy to understand therefore the cons just stand out.
Saturday, February 9, 2008
Suze Orman is not for me
In 2004 when I had more free time, I watched TV a lot. As I flipped channels, I stumbled across the Suze Orman show on CNBC. I was drawn to learning about personal finance. I watched her show for about a year.
In 2005, I was already a year or so into my job and already had gained a lot of information about personal finances and investing. I already had paid of my small credit card debt that I had from college (~$3000) and was living within my means. Because of that I was watching less and less Suze Orman.
Her show focuses on primarily getting out of debt, how to manage debt, or stupid mistakes to avoid when it comes to personal finance. Because my net worth was positive and growing, her show became useless to me. I needed shows that helped me grow my net worth, how to increase my assets, and how to limit my liabilities.
Suze Orman does not address any of those needs, so whenever I see her show, I flip to another channel within a nanosecond. I can't stand her "in your face" personality that comes off as preachy. Maybe that's just the lesbian in her. Whatever it is, it just isn't for me. I'm not a big individual stock investor, but watching Jim Cramer is more informative for those with money to invest instead of those trying to get out of debt.
In 2005, I was already a year or so into my job and already had gained a lot of information about personal finances and investing. I already had paid of my small credit card debt that I had from college (~$3000) and was living within my means. Because of that I was watching less and less Suze Orman.
Her show focuses on primarily getting out of debt, how to manage debt, or stupid mistakes to avoid when it comes to personal finance. Because my net worth was positive and growing, her show became useless to me. I needed shows that helped me grow my net worth, how to increase my assets, and how to limit my liabilities.
Suze Orman does not address any of those needs, so whenever I see her show, I flip to another channel within a nanosecond. I can't stand her "in your face" personality that comes off as preachy. Maybe that's just the lesbian in her. Whatever it is, it just isn't for me. I'm not a big individual stock investor, but watching Jim Cramer is more informative for those with money to invest instead of those trying to get out of debt.
Tuesday, February 5, 2008
Can TurboTax be wrong?
I have received everything I need to file my taxes - W2s, 1099-DIVs, 1099-INTs, 1099-Bs. I have entered in all my information into both TurboTax for the Web and TaxActOnline. Using TaxActOnline, I will owe more taxes compared to when I use TurboTax for the Web.
The discrepancy I noticed was the calculation of the sale of stock from ESPP (Employee Stock Purchase Plan). TaxActOnline calculates the amount the way I have read the calculation is suppossed to be, including the description of the TurboTax website itself. However, TurboTax for the Web follows the same description to calculation the net gain, but then subtracts any trading fees paid from that net gain. It does not make sense, because the trading fee was already subtracted from the total proceeds. TurboTax for the Web is deducting the amount twice when it should only be done once.
I am going to have to do more digging around to get this ESPP tax situation straigtened out before filling. At least I've got about 2 months to figure it out still.
The discrepancy I noticed was the calculation of the sale of stock from ESPP (Employee Stock Purchase Plan). TaxActOnline calculates the amount the way I have read the calculation is suppossed to be, including the description of the TurboTax website itself. However, TurboTax for the Web follows the same description to calculation the net gain, but then subtracts any trading fees paid from that net gain. It does not make sense, because the trading fee was already subtracted from the total proceeds. TurboTax for the Web is deducting the amount twice when it should only be done once.
I am going to have to do more digging around to get this ESPP tax situation straigtened out before filling. At least I've got about 2 months to figure it out still.
Sunday, February 3, 2008
Extra income
At my previous job, working 10-12 hours per day was the norm, and it wouldn't feel like a long day until after the 12th hour. It was not uncommon to work for 6 or 7 days in a 7 day work week. My shift was scheduled for 1pm to 10pm, but I got a 5% differential for working that shift.
The problem with 2nd shifts is that the timing of your day gets messed up. For example, I would work from 1 to 10pm, go home, stay up late until 2 am or later, then sleep for about 8 hours. By the time I get up, it would be about 10 am or so. That would leave about 3 hours to get things before work, but after getting dressed and eating a late breakfast or early lunch would leave only 2 hours before work. That wasn't usually enough time to go out and do other things so I just sit around before work or show up to work early because there was so much to get done. Basically 2nd shifts take away a lot of free time to do for other things so I would personally not do it again as a full time position.
The job that I started in 2004 was a standard 40 hours per week job. Very rare was there overtime. Overtime would only happen if something had gone wrong, and we had to start over. To this day, I've never had to come in on the weekend.
I started my job in 2004, and I got a regular day shift, which I worked from 7am to 3:30pm. Since my shift was done in the afternoon, I had more free time in the late afternoon and evening hours. I also had weekends free to do as I please.
Having free time was nice, but I also thought I was unproductive. Hours doing nothing could have been spent working and making extra income, so I began searching for a part-time job. I tried working at a concession stand at PETCO Park for Padres games, but I quit after the first day. Making $9/hr for 6 hours, with almost non-stop action is not worth $54.
I found something in May 2005. The position wasn't some minimum wage position. It was for a per-diem research assistant in a clinical research setting. The hours and days were flexible. Originally I had set weekday hours from 5-11pm and weekends anytime, but I later switched it to just weekend hours. Because it was per-diem and not part-time, hours were not guaranteed week to week. Sometimes it would be months between shifts. However with per-diem, the employee does not have to fulfill any hours that were scheduled, if advance notice was given to cancel. Since the employer can't guarantee hours like part-time staff, they can't expect per-diem staff to give them availability when needed.
The best part about weekend shifts was an extra 15% differential. In 2005, I made about $1580. In 2006, I made about $5250. In 2007, I made about $12500. 2007 was an exceptional year, but I had to really work for it. There were lots of staff shortages on the weekends, and I always volunteered for double shifts. Eventually, they began to schedule double-shifts for me because they knew I would accept.
Working double-shifts on the weekends had lots of benefits. For the first 8 hours of work, I made regular wage + 15% differential. For the first 4 hours of over-time, I would make regular wage times 1.5 times + 15% differential. And for any hours after that, I would make regular wage times 2 + 15% differential.
Doing that for twice a week (Saturday and Sunday), I would make more money than someone who worked Monday through Friday, 8 hours a week. Not only more money per week, but with less hours worked. In essence, I made 58% more per hour than the weekday person or 27% more per week.
Since I relied primarily on my weekday job for budgeting, all of this extra money is just extra savings. I felt my savings were enough at the time, so it went straight to investing.
The problem with 2nd shifts is that the timing of your day gets messed up. For example, I would work from 1 to 10pm, go home, stay up late until 2 am or later, then sleep for about 8 hours. By the time I get up, it would be about 10 am or so. That would leave about 3 hours to get things before work, but after getting dressed and eating a late breakfast or early lunch would leave only 2 hours before work. That wasn't usually enough time to go out and do other things so I just sit around before work or show up to work early because there was so much to get done. Basically 2nd shifts take away a lot of free time to do for other things so I would personally not do it again as a full time position.
The job that I started in 2004 was a standard 40 hours per week job. Very rare was there overtime. Overtime would only happen if something had gone wrong, and we had to start over. To this day, I've never had to come in on the weekend.
I started my job in 2004, and I got a regular day shift, which I worked from 7am to 3:30pm. Since my shift was done in the afternoon, I had more free time in the late afternoon and evening hours. I also had weekends free to do as I please.
Having free time was nice, but I also thought I was unproductive. Hours doing nothing could have been spent working and making extra income, so I began searching for a part-time job. I tried working at a concession stand at PETCO Park for Padres games, but I quit after the first day. Making $9/hr for 6 hours, with almost non-stop action is not worth $54.
I found something in May 2005. The position wasn't some minimum wage position. It was for a per-diem research assistant in a clinical research setting. The hours and days were flexible. Originally I had set weekday hours from 5-11pm and weekends anytime, but I later switched it to just weekend hours. Because it was per-diem and not part-time, hours were not guaranteed week to week. Sometimes it would be months between shifts. However with per-diem, the employee does not have to fulfill any hours that were scheduled, if advance notice was given to cancel. Since the employer can't guarantee hours like part-time staff, they can't expect per-diem staff to give them availability when needed.
The best part about weekend shifts was an extra 15% differential. In 2005, I made about $1580. In 2006, I made about $5250. In 2007, I made about $12500. 2007 was an exceptional year, but I had to really work for it. There were lots of staff shortages on the weekends, and I always volunteered for double shifts. Eventually, they began to schedule double-shifts for me because they knew I would accept.
Working double-shifts on the weekends had lots of benefits. For the first 8 hours of work, I made regular wage + 15% differential. For the first 4 hours of over-time, I would make regular wage times 1.5 times + 15% differential. And for any hours after that, I would make regular wage times 2 + 15% differential.
Doing that for twice a week (Saturday and Sunday), I would make more money than someone who worked Monday through Friday, 8 hours a week. Not only more money per week, but with less hours worked. In essence, I made 58% more per hour than the weekday person or 27% more per week.
Since I relied primarily on my weekday job for budgeting, all of this extra money is just extra savings. I felt my savings were enough at the time, so it went straight to investing.
Saturday, February 2, 2008
Income and how I got here
Yesterday I posted my net worth, but out of context, the number is worthless. My career is in chemistry, and my current salary for being a chemist is $49.6k yearly or about $23.87/hour. I am eligible for over-time pay. My salary is a result of my career advancement.
Here's a breakdown of my salary history:
Jun 2003: $13.50/hr ($28k/yearly) - first job post-graduation
Jan 2004: $15/hr ($31.2k/yearly) - moved to San Diego, accepted temp-to-hire position
May 2004: $17/hr ($35.3k/yearly) - converted to permanent position
Oct 2004: $17.85/hr ($37.1k/yearly) - promoted, 5% increase
Jan 2005: $18.77/hr ($39k/yearly) - effective 5.18% yearly increase
Jan 2006: $19.92/hr ($41.4k/yearly) - effective 6.08% yearly increase
Mar 2006: $20.58/hr ($42.8k/yearly) - 3% position adjustment to industry standards
Jun 2006: $22.64/hr ($47.1k/yearly) - promoted, 10% increase
Apr 2007: $23.87/hr ($49.6k/yearly) - effective 5.5% yearly increase
I did not include bonuses but will save that for another time. From January 2004 to present time, I have been working the same position in the same department, just with increasing responsibilities. I would like to move to another department or another position, but there hasn't been one available for me. I will always continue to look as I could advance my career and hopefully increase my salary in the process.
Here's a breakdown of my salary history:
Jun 2003: $13.50/hr ($28k/yearly) - first job post-graduation
Jan 2004: $15/hr ($31.2k/yearly) - moved to San Diego, accepted temp-to-hire position
May 2004: $17/hr ($35.3k/yearly) - converted to permanent position
Oct 2004: $17.85/hr ($37.1k/yearly) - promoted, 5% increase
Jan 2005: $18.77/hr ($39k/yearly) - effective 5.18% yearly increase
Jan 2006: $19.92/hr ($41.4k/yearly) - effective 6.08% yearly increase
Mar 2006: $20.58/hr ($42.8k/yearly) - 3% position adjustment to industry standards
Jun 2006: $22.64/hr ($47.1k/yearly) - promoted, 10% increase
Apr 2007: $23.87/hr ($49.6k/yearly) - effective 5.5% yearly increase
I did not include bonuses but will save that for another time. From January 2004 to present time, I have been working the same position in the same department, just with increasing responsibilities. I would like to move to another department or another position, but there hasn't been one available for me. I will always continue to look as I could advance my career and hopefully increase my salary in the process.
Friday, February 1, 2008
February Net Worth
Well my Net Worth is down compared to January 1st, but for the sake of my blog, February 1st will be the first starting point of my financial progress. To keep track of my financial accounts, I use Yodlee Moneycenter. It is like a free web-based version of Microsoft Money or Quicken.
Total Net Worth: $84,737.67
Net Worth Breakdown:
Total Assets: $94,769.22
- Banking: $18,561.19
- Investments: $76,208.03
Total Liabilities: $10,031.55
- Credit Cards: $10,031.55
My Banking category includes everyday checking and savings, online savings accounts, and certificates of deposit (CD). My Investments categories includes 401(k) accounts, Roth IRA, Employee Stock Purchase Plan (ESPP), company stock options, stocks, and bonds.
Lastly, my Liabilities category only has credit cards. I do not carry a mortgage or have any outstanding debt such as a car payment. My credit card balance may seem high, but in 2-3 months should be back to normal. I was carrying a large balance at 0% interest, but otherwise, I pay off all my credit cards in full each month.
Next month, I will discuss any changes and breakdown the categories even further. This month was just creating a baseline.
Total Net Worth: $84,737.67
Net Worth Breakdown:
Total Assets: $94,769.22
- Banking: $18,561.19
- Investments: $76,208.03
Total Liabilities: $10,031.55
- Credit Cards: $10,031.55
My Banking category includes everyday checking and savings, online savings accounts, and certificates of deposit (CD). My Investments categories includes 401(k) accounts, Roth IRA, Employee Stock Purchase Plan (ESPP), company stock options, stocks, and bonds.
Lastly, my Liabilities category only has credit cards. I do not carry a mortgage or have any outstanding debt such as a car payment. My credit card balance may seem high, but in 2-3 months should be back to normal. I was carrying a large balance at 0% interest, but otherwise, I pay off all my credit cards in full each month.
Next month, I will discuss any changes and breakdown the categories even further. This month was just creating a baseline.
Introduction
Since this is my first post, let me introduce myself as Watson. It is an alias for my blog. An anonymous identity will allow me share personal finance figures without revealing confidential salary information tied to the company I work for.
I give lots of financial information in person, and I hope to continue to share my knowledge to those on this fad known as the internet.
Well I hope my blog and journey will encourage any professional, rookie or veteran, become a useful tool for understanding personal finance and living life with no regrets.
I give lots of financial information in person, and I hope to continue to share my knowledge to those on this fad known as the internet.
Well I hope my blog and journey will encourage any professional, rookie or veteran, become a useful tool for understanding personal finance and living life with no regrets.
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