Off to the Bahamas!

I am flying out tomorrow to catch my 2 night cruise to Freeport, Bahamas. At $79 + taxes per person I could not pass this up!

I am looking forward to some relaxing on the boat, some cold drinks, and a nice day on the beach with a forecasted 80 F and sunny blue skies when we arrive. This is my first cruise so I can add a new experience to my long list of travel memories.

This cruise is the direct result of my philosphy: Invest in experiences and memories and not more stuff. I will remember this cruise for the rest of my life. I have almost no memory of the stereo I bought in college then sold for $20 to buy books a year later.

My blog will be a little behind until I return and get caught up. I will write up a full report of what it cost me in total for the mini-vacation. Have a great weekend!

Tax refund is in!

WOW that was fast!

Even with the IRS delay of itemized returns (that affected me!) I got my refund 7 days after transmission. Direct deposit showed up and now I am waiting on my GA state tax refund (they always take forever to process).

This is a great little bonus before getting on my cruise this weekend!

My plan for the money are most of it going to my emergency fund and a little towards tuition for a class I need to complete my IT degree from a local technical college. Beefing up the resume never hurts and this will be a nice boost.

Saving Money on Cruises: Watch the small stuff!

I have done some research and founds way to make my cruise vacation cheap and not a budget buster. Thanks to Google and some cruise forums I picked up a few tricks a newbie like me wouldn't think of. I found that on cruises it's the little stuff that adds up fast. Here are some tricks/hacks to save money:

• Skip Excursions: They are usually 2x or more the normal price for the same activity. Find an excursion you like the do some research online to find a local place to do it. It will be cheaper and probably less crowded!
• Drinks: They like to charge a lot for drinks. Aside from moderation you have to remember that the price quoted has an automatic 15% tip added! Depending on the cruise line sodas might also cost money. Bring bottled water with you!
• Skip the upscale dining options unless it is a special occasion. I read reviews of my ship and most people liked the free ones better! That saved me $25 per person!
• Know the fee structure. Taxes and fees go on top of the advertised price (just like airline tickets). Know what the fees are for, if they can be avoided, and look at the all-in price. Shop around!
• Buy the cheapest room on the ship. As it fills up you sometimes get upgraded to a nice room so they can get more people on the boat! This is not always true but being frugal I will roll the dice. I don't plan on spending a lot of time in my room anyway!
• Buy souvenirs at local shops, take your own pictures to print later, and comparison shop. The boat is loaded with expensive trinkets and other ways to take your money. I prefer to support local businesses at my destination. It's also much cheaper that way.

I will put theses ideas to practice this coming weekend when I get on board and figure out the real situation. I plan to keep a log of my costs so I can tally up with the $79 cruise really cost in the end. I do have a budget of how much I can spend and want to see if that is feasible. I will report back here when I return!

Snagged 2x $300 Delta Travel Vouchers!

Sometimes you get lucky!

I just got a call from Delta. They changed the plane type for my return trip from Palm Beach to Atlanta and need volunteers. I immediately called back and got us each a $300 Delta travel voucher for leaving 2 hours later. Looks like we get to chill in the Sky Club for a bit!

I will certainly make great use of this voucher to do some more travel. I am thinking about a weekend in New York in April or I may buy my ticket to Asia in November if I have a good enough year financially (so I can earn miles instead of spend them!)

Score 1 for the Frugal Backpacker!

Frugal Vacation: 2 Day Cruise for $79+Taxes

This coming weekend I am going on a short cruise to the Bahamas! I scored this deal a while back and got a 2-night cruise to Grand Bahama Island form Palm Beach, FL for $79 + taxes and fees. This will be my first cruise experience so I figure cheap and short is the way to go!

I also get to add another country to my list and get a little beach/deck sun time. I admit I need some warm weather for a nice change of pace. I also cashed in my free companion airfare to bring my girlfriend along making it and even cheaper mini-vacation.

Only 4 more work days to go before I leave Saturday morning!

My Goals for Retirement

Retirement is a subject I think about a LOT but I still don't feel like I have a clear path and goal for it. At this point I see myself in retirement doing a fair bit of travel abroad and spending at least half the year outside of the USA. If I do spend time within the USA I will most likely be visiting with family and friends for shorter periods of time.

What I want in retirement:

• Passive Income: I want enough money coming in to cover my basic costs
• No outstanding loans or liabilities
• No need to work 40 hours a week to cover my costs
• Projects to give me focus and self enjoyment (ex: volunteering abroad)

Figuring out what I wanted was the easy part. I do have a vision of where I want to be in life. The unclear part is 1) How much money do I need to have saved? and 2) How will I earn and invest the money I do save in order to meet that target?

Assumptions:

• Annual Rate of Return: 8%
• Monthly Income needed: $2,100 (in today's dollars)
• Desired rate of withdrawal 4%

Based on my assumptions that means that if I were to retire today I would need $630,000 invested at 8% return in order to be able to draw 4% ($25,200) annually. This is assuming taxes are already paid and my take home is $2,100 month.

If I factor in an assumed total tax rate of 20% then I need to withdraw $31,500 per year to be able to have $25,200 in spendable cash. That raises my total assets target to $787,500 if I were to live completely off investments with no other income source.

This raises yet another issue for me. I am considering having some rental properties that will generate income and therefore reduce my need for investment. I like the idea of paying a mortgage each month and gaining rent where I keep the difference. The homes are still investments and I have the added advantage of not needing to pay FICA taxes on the income. I also will find side work from time to time but have decided that will be bonus "play money" for splurges that I will want at the time.

Looking at the big picture I am a long way off from this goal. My main goal for this year is to increase my income as much as I can this year and beyond. Each dollar I save is another dollar closer to the above dream. I will have to keep the focus and not fall victim to too much lifestyle inflation a long the way.

When it pays to outsource chores and tasks

Being frugal is about saving money. Most people associate it the being cheap. The true spirit of being frugal is being selective on what you spend your money on while getting the most out of what you do buy. Everyone has a point where time becomes more valuable than the money saved. I am a fan of "spend on what you are passionate about and skimp on the rest."

Personally I choose to outsource oil changes since I can find coupons that make the total cost of the service less than buying my own oil alone. I get to not get dirty working on my car and it is also cheaper. Now that is a frugal choice! I had to get my home pressure washed for insurance purposes. I priced out renting the equipment and found that for $20 more I could pay a company to do it. It was worth $20 to me to not have to get on a 20' ladder and save me hours of work.

On the other hand I do a lot of other home maintenance myself. Changing air filters, cleaning, etc. are all more financially savvy to spend time on. I have done some minor repairs and air sealing to help reduce my monthly utility costs. Having done the remodel on my house myself (with my Dad's help) has taught me a lot and saves me money in the long run.

Everyone's situation will be different. We all have different skill sets where it is more cost effective to outsource a particular chore versus doing it yourself. The best way to decide is to run the numbers and see if it makes sense to you and your budget.

Striking a balance: Saving for future wants while maintaining current wants

There is no clear cut solution to this problem. Being highly frugal and watching every dollar I spend sometimes creates an imbalance for me. I catch myself penny pinching a little too much every now and then and later realize that my happiness is declining as a result. I am still trying to figure out the "magic formula" where I can be happy now and later.

My main solution is to be sure I travel overseas at least once per year and also do a long weekend on a fun domestic trip. Last year was Cambodia for a month and Myrtle Beach, SC for a long weekend. This year I have the 2 day Bahamas cruise at the end of this month and a month in Thailand with a few days in Malaysia and Singapore thrownin.

That is great but what about the day-to-day stuff? Being an ethnic food buff is a really fun hobby but restaurants get expensive. I limit myself to 1 nice dinner out a week and try to have dinner at home the rest of the time, if possible.  I also do my homework to find the best restaurant for a particular type of food and it usually is very reasonable. I tend to stay away from $30+ (per person) meals as it is simply not worth it to me no matter how good it is.

I thought I had a pretty good balance but I do seem to go back and forth a bit. Sometimes I will eat out more than my budget allows. I will see the busted budget the next month and pull back and "suffer" a little as a result. Part of it comes down to willpower and also comes down to if I have achieved the right balance or not. It's an ongoing process but I have noticed that it does seem to even out some over the long haul. I must say that my budget has come a long way since I started it and I will just have to keep tweaking until I get it right.

February 2011 Prosper Update

It is the middle of the month again and it is time for my update on prosper.com lending. It has been another quiet month with business as usual. I have 1 late loan and 0 more have paid off completely. I no open bids at this time.

I have decided to completely abandon Prosper. They have gone to a fixed rate system and that does not appeal to me at all. My ability to earn extra interest has been eliminated. I will continue reporting on my experience until I have emptied the account.

I "write off" all loans in collections as a loss.

Here are my stats as of today:

Outstanding Loans:

Late: 0 (< 30 days)
In Collections: 1 (written off)
Current: 35

Closed Loans:

Charged Off: 10
Paid Off: 22

Open Bids:0

Total currently invested: $716.35 (Principal Value)
Cash in Account: $7.50 (includes open bids)

Total Principal: $723.85

2011: The year of miles and points!

This year I am going to work on accumulating tons of frequent flier miles, hotel points, and other rewards points I can use for travel. I will be getting all of the credit card and debit car bonuses that are worth it to me, with as many airlines as I can, so I can continue to see the world on someone else's dime!

Last year I grabbed some great bonuses for Continental Airlines since they will soon merge with United. Once that happens I can do the same with United offers and double up! I am also looking out for bonuses for Delta (my current primary airline) and any others that can get me to Asia. Using miles to travel saves me thousands in airfare each year. Even if I have to pay a couple of annual fees for the cards it works out much cheaper over the long haul.

The award programs can be complicated and have funky rules but that is part of the game. You learn all the tricks to get the most out of your points and make them go as far as possible. There are tons of great forums and websites of other people doing the same thing. Luckily I am good with small details and have used that to my advantage over the years.

Turn your checking account into a cash management system

As a former financial planner I implement and use a tool called the Cash Management System. This idea is more of a cash flow diagram that utilizes your primary checking account as the main source of your income and expenses. It incorporates your budget and gives you the "big picture" of your monthly cash flow.

The purpose of the Cash Management system is to have a plan for your income and a guide you can refer back to and adjust as needed. The basic formula for the system looks like this:

Income = Monthly Expenses + Savings Transfers + Debt Payments (if any)

It also assumes that by month end the account balance will be $0. This means that every dollar that comes in will have some purpose. It guides you so that if you have lower expenses one month you can transfer it to savings such as an emergency fund, retirement, vacation savings, and so on. By keeping your "extra" money out of your checking account you won't be able to spend it as easily.

This system only works if you carefully track and budget your money. You have to look at your income versus expenses each month and make transfers accordingly. You should also set up automatic transfers to savings each month so you are sure to save something. At the very least you need a percentage budget (such as 50% needs, 30% wants, 20% savings) so you can calculate the amounts and set up transfers.

Secondly you have to maintain some sort of self control. If you get a windfall, gift, bonus, etc. you need to be able to not spend it or immediately move it out of the cash management account. Personally I take extra income and immediately add it to my savings account(s). In December I examine my tax situation and transfer money to retirement accounts that give me the best overall tax advantage (Usually a Roth in my case). The point is to get it out of your spending account ASAP.

Once you get the hang of things the cash management system is a simple, helpful tool that keeps you on track and also keeps you aware of how you spend or save every dollar. It takes some getting used too but the time investment is worth the return of peace of mind and not worrying about paying rent or buying gas next month. Invest in your future!

2011 Project: Curb Spending, Increase Income

I am working on a "project" of sorts where I come up with a working plan to curb spending and increase my income. This is always a work in progress but I hope to form some good habits as a result. I have been thinking about this a lot lately and come up with some adjustments to help me get there:

• Don't go out on weekdays (unless there is a special event I need to attend)
• Use Coupouns/Certificates/Groupons whenever possbile
• Eat all leftovers
• Cook in bulk for easy meals on busy days
• Actively seek out side IT clients
• Find things at yard sales, thrift stores, goodwill, etc that I can sell for a profit (ebay)

My current job does not provide the income I want so I am looking for other means. I am also looking for a higher paying job but that is not easy to come by with today's economic situation. I also want to be picky and make sure I am making the right move before I switch jobs. No matter where I work or how much I earn I can still apply these "rules" and "habits" to get ahead and stay that way!

Time for a new job?

I am weighing some options and am looking for a new job. I like the people I work with--which is important--but other factors are becoming more and more bothersome to me. I am getting to the point where it is affecting other aspects of my life. I need to either find a balance or move on. Problems:

• Underpaid: I fell way underpaid for the work I do. Comparable jobs pay more than what I earn.
• Unpaid Overtime: The salary system is crap. If I work an extra 4 hours to get a project done I don't see another dime.
• Bored: The work is becoming monotonous. I do the same things over and over. I also work in an industry (marketing) that I despise.
• Micromanagement: It is not constant but I have a boss who tries to micro manage sometimes. 
• Feel lied too: I was told when hired I would be doing one thing. Now I am doing the job I don't want.

That said there are some good aspects to the job:

• People: I have no problem with the people I work with (with some exceptions, as always). 
• Travel: not nearly as much as I want but I do get some work travel
• Small Company: The good side of this is flexibility.

Overall I am in a pretty good position. I am getting to the point where savings is slowly increasing and I am starting to gain ground again. I am looking for another job but being very selective. I feel the need for change and expect that to increase as time goes by. I took the job hoping pay would increase a lot than it has.  My goals require more than I currently earn. If I stay here life will pass me by!

Mini-Goals completed!

I had a few miniature goals that I got done recently. I like to mix working on long term goals with small ones so I can "see" some real progress. I had a few nagging items that I have finally knocked out. None of them were worth their own post here so I just combined them into this post!

Achieved:

• SIMPLE IRA moved to Schwab. I now have all investment accounts in one place. Simple!
• Reinvested all of my retirement assets into a better stock/bond mix for me.
• Racking up airline miles bonuses to get more free flights overseas
• 2010 Income taxes filed ahead of schedule!
• Adding extra money each month to savings
• More side work to earn extra cash

All of these small moves are helping me to get to my ultimate goal of no full time job and the ability to travel as I please faster. I am also working on another November month off to go to Asia again. I am staying focused on my main goal but need some road time to keep my focused!

2010 Taxes Filed!

I had a busy weekend and managed to get my taxes filed. It took me nearly 3 hours to complete but well worth the $1845 refund I am due. That will certainly be a nice addition to savings.

I also had some side work this weekend, family in town, and the super bowl to take up a good deal of my time. I will have a bit of a delay on my refund as the IRS has to make changes to their system to process the return correctly. This is due to congress passing new tax law at the last minute.

That said I will be watching my account for the direct deposit of my refund. The bulk of it comes from the IRS with the rest coming by check from the state of GA. I hope to be able to put the bulk of it in my emergency fund. I may use some for tuition for a class I want to take.

Taxes are done! Now I can move on with life.

Vacation Planning Time!

I always plan my vacations early. I usually use my airline miles to book tickets so I usually get them far in advance so I can get the dates and flights that I want. Using miles for travel can be real work but the payoff is great. I like going to southeast Asia which is a $1200 airfare on a good day. I usually pay around $80 in taxes + miles.

I am shopping around for 2 tickets for myself and my girlfriend. I normally spend 2-4 hours total with phone agents to book my tickets at the lowest level for the dates I want. $2400 total airfare / 4 hours = $600 per hour saved. Not bad!

Looks like I will be going to Asia again this year! I am looking at Thailand (parts I have not been too), Malaysia, and Singapore. This will add 2 new countries to the list and will cover the span of a month. I am going in November once again. I am already looking forward to the awesome food and beaches!

I am also going to try out some other airlines. I will have enough miles to book a ticket with Star Alliance. I am going for the Thai Airways Bangkok to Los Angeles direct flight. I want to compare it to stopping in Tokyo or Seoul and see which I prefer. I earned a lot of bonus miles with Continental so it should cost me very little to make this happen!

I also have my 2 day Bahamas cruise at the end of this month. I have never been on a cruise before so I can check that off my list. I figure a 2 day cruise that cost $80 per person is a good way to try out the whole cruise thing! The 2 of us are flying down to Palm Beach, FL and taking the cruise for under $500 all in. Extras: cab from airport to docks, drinks on the ship, the day on the island. I can't wait!

Clearance Aisle Shopping: Save tons!

This is another small shopping hack I use when I am shopping. I always check the clearance area for what I need. This works well for groceries, home supplies, office stores, clothes, and the like. I have done well and it saves me around 50% of the normal cost or more.

Examples of clearance items:

• Post-it notes: $2 for a $10 package of 10 pads
• Canned Soup: 50 cents for a can normally $1+ (check dates)
• $4 for 24 rolls of toilet paper (clearance)
• Closeout copy paper: $1 per ream
• Clothes: Out of season stuff is always marked way down

I could go on forever. Deals are to be had for one with a good eye. I always check the clearance area of my local grocery for stuff that is still within the good by date and I will actually use it before then. Make sure it is an item you actually need. Even on clearance it is not a bargain if you do not need it!

Focus Reminders: The basic principles

I write a good bit of very specialized and specific posts here. I realized that sometimes it is good just to get back to basics. I have compiled a simplified list of principles that drive my financial decisions on a daily basis. I realized I never put them all on one post to summarize.

Principles that I believe in:

• Pay yourself first: Add up your life sustaining expenses, set an amount, and save it first. Then remainder is the budget for incidentals and "fun stuff". Payday is a good time to transfer to savings.
• Set goals. You cannot get anywhere if you don't have a defined direction to go! You have to take the time to workout where you want to be, financially and otherwise, and create goals and a deadline to get there. Chances are most of the goals require money at some stage and financial planing to reach them.
• Exercise frugal practices: Find a second use for everything (food containers, shopping bags, etc.). Use coupons when you can. For going out use sites like groupon and half off depot to save money. Be sure to use up all gift certificates so they don't go to waste!
• Save for and invest in experiences. This is the big one. Stuff costs us money. More than just the price tag. Storage, electricity, gas to go buy it, etc. Experiences create memories and conversation topics. My favorite is world travel. I do it as much as I can. You will certainly enjoy skydiving way more than an iPad or the $300 boots you want.
• Track your spending. This is probably the most important principle! In order to get and stay out of debt and save money you must track every penny you spend. There are tons of options that range from paper and pencil to Quicken to the various online tools. None of the other stuff matters if you cannot see where your money is going and do something about it!

These are the most basic principles that drive everything and I do.  I curb spending by reminding myself that "If I buy this then it ultimately slows down my goal of traveling the world and not having to work full time." In my case this is an easy sell for me as I would rather be out there enjoying life instead of sitting at a desk!

February 2011 Net Worth Update

It is the 1st of the month again and it is time for my net worth report card. I had a slow month due to extra expenses and planned spending this month. I am also waiting on a few rebates that will boost later numbers.

As of today my current net worth is $5,111.67. That is an increase of $174.98 over last month. The major contributing factors extra planned spending, holiday expenses, and remaining focused on my big picture goals!

I expect next month to be a bit better. I have tax refunds on the horizon and I am working on increasing my income on a special project. It is the shortest month of the year!

Alternative Income this past month:

IT Consulting: $0
Focus Groups: $40
eBay: $35.50