Bye-bye, Investment Fund!

For a few years, I’ve had a taxable investment fund that, in the back of my mind, I’ve marked as my “home downpayment fund.” I took some of the money out of it to help pay off some of my debt a while back, and with the market downturn, it’s fallen down to about $1800. Despite my gut reaction to buy, buy, buy right now (stocks are on sale! ), I closed out that fund today and sent the money to my savings account. There were a couple of reasons I chose to close it out:

1. I’m paying fees because the balance has fallen below the minimum of $5000 to avoid account maintenance fees.

2. There’s a possibility I’ll need the money soon if I go ahead and buy an apartment, and the stock market is waaay to volatile to depend on right now. (Or ever; if you’re as close to buying as I might be, you shouldn’t be in the market, anyway.)

So, there it is! I’ll have to figure out cost basis for my taxes next year, but I don’t at all regret moving the money into my savings account. If I don’t end up buying the apartment, I’ll just shuffle that money to my emergency fund, which is probably a better place for it now, anyway.

A Home is NOT an Investment

I’ve come across several heated debates recently on TV and the internet about whether it’s better to rent or own, with each side slinging mud in an attempt to convince people (themselves?) that their choice (rent/buy) is the “right choice.”

One thing that we’ve heard over and over in the past 10 years or so is that your home is an investment. “Lookie here: renters are THROWING THEIR MONEY AWAY, and buyers are PUTTING THAT MONEY TO USE. Why, real estate has grown at X percent for the past X number of years. Think about all that equity!”

Put aside the fact that the bubble is bursting (some places more quickly than others). Put aside the fact that rents are rising (as evidenced by my predicament). There is no right or wrong thing to do; there are many reasons to rent, and many reasons to buy. As someone toying with the idea of moving from a rental into a home purchase, I am acutely aware of the reasons on both sides of the fence, both financial and personal.

What I take issue with is not the people who are proponents of buying a home. I myself would love to own my own little piece of Manhattan one day. What I take issue with are the people who say that the reason to buy a home is because it is a smart investment. You’ve probably heard variations on this theme: renting is throwing your money away, a home is “the surest” road to wealth, etc.

Ummm…No, it isn’t.

Making more than you spend is the surest road to wealth. Renting is paying for shelter, in the same way that paying (lots of interest on) a mortgage is paying for shelter. And a home as investment? Not unless you’re ok with tying up your money into an “investment” that has traditionally returned about 1-1.5% annually after inflation. And even that ROI can only be touched if you: (a) use your equity like an ATM (ask Joe Schmoe in Foreclosure City how smart that is) or (b) sell your house, leaving you homeless and needing to–rent? Buy another house? I guess you could downgrade your home to keep some of the profit from your home, but again, that’s only if you’re ok with your ROI being around 1.5% annually. I’m not ok with any of my investments performing like that.

Buying a primary home as an investment is like buying high quality jewelry as an investment. It will probably go up in value over a long period of time, but to access that increase in value, you’d have to get rid of the home or jewelry. In both cases, the value is in the use of the item, not the equity that builds as time goes on. Certainly there are financial advantages to buying a home (as there are to renting one), but the home itself is not an investment if you are living there.

A home is not an investment. It is a home. Just that. No more, no less.

Secrets

I’ve been thinking a lot lately about the secrets about money that we keep. I’ve been carrying around this debt for almost a year and a half, and no one except my mom (and you guys) knows about it. Part of that is because I have a reputation in my family as the financially responsible one, and I don’t want to tarnish that reputation.

But there’s another reason, too: a large amount of the debt I’m about to pay off (woohoo!) is because of money I spent on my sister’s wedding. I don’t regret spending that money, but I don’t want her to find out that I had to go into debt to make her day special.

That got me thinking about my sister and me and money. My sister is one of my closest friends, one of the first people who I turn to when I need someone. I feel guilty keeping this secret from her–that’s a huge part of the reason that I can’t wait for it to be paid off–but I also remember a time that we weren’t so close.

When we were little, my sister and I were inseparable. We were best friends, always together until she went off to school, two years ahead of me. I remember being heartbroken that my best friend was leaving me to go to this new world, and even more upset when she and her “cool” friends wouldn’t let me hang out with them.

This rift in our relationship continued for a long time, well into adulthood. It wasn’t until I was about 25 or 26 that we became friends again. (As opposed to acquaintances, who put up with each other on holidays.) How we repaired that rift and became close enough that I was the first person she told when she got engaged is another story, but something else happened when I was in college that I keep remembering.

At the time, I was going to school in Manhattan, and my sister had graduated and was living and working in Brooklyn. Despite living a (relatively) short subway ride from each other, we still only saw each other once or twice a year. At the time, I was working and going to school, and had more money than I needed (though, in typical college fashion, I was spending all of it instead of saving).

When my sister moved to the city, she spent her first weekend exploring and doing the typical tourist/new to NYC things. She had started her new job already, but hadn’t gotten her first paycheck, and she found herself on that Saturday with $25 to her name and nothing to do. So…she went to a museum.

She was in the city doing something before she went to the museum, and (not knowing the city well) she decided to splurge on a cab ride to the museum. She figured she’d be able to get to the museum on $5 and that would leave her $20 for admission and grabbing something to eat on her way back to Brooklyn. When she got to the museum, sure enough, the cab meter was around $4, so she grabbed her five out of her wallet, handed it to the cab driver, and said, “Keep the change” as she jumped out of the cab.

After he drove off, she realized she’d given him her twenty dollar bill, not her five. There she was, new to the city, scared and alone and completely broke. She had no money in her checking account, no paycheck for another week. Even now as I remember it (it’s been some 8 years), I feel the horror, disappointment, and crushing loneliness that she must have felt. She called my mom, crying, who couldn’t do anything from Texas except try to comfort my sister.

My sister never told me that story.

To this day, she doesn’t know that my mom relayed it all to me. And the crazy thing is, I could have lent (or given) her money if she’d needed it. But we weren’t really friends then, we didn’t really know each other, and even now when we are friends, we don’t talk about money problems, except in general terms.

I don’t know what made me think of this, only that I’ve been feeling the weight of the secrets we keep from the people we love, especially when it comes to our finances. We put up these walls and say, “This is for you to know,” or “This is off limits.”

I think–I hope–my sister knows I would be there for her if she ever got to that point again. But I also know that sometimes all these secrets (mine and hers) seem like bricks in the walls between us. And even though we’re closer now than we were then, how close do we have to be before we’re able to share moments like these with each other?

Frugal Eating

In answer to Wanda and English Major, and because I’ve promised to post some more recipes in the “Recipe” tab here, I decided to write a post about how I keep my food costs down to ~$100 per month. So, here goes…

First off, just for reference, my grocery bill so far this month is $55. I have enough food to last me to the end of the month, but I’ll probably spend another $10-15 on food that I want, instead of substituting for what I have on hand. If my grocery bill or my eating out bill ($27 so far) were higher, I’d probably just work with what I have. Also note: I’ve eaten out lunch twice this month so far, but that isn’t included in the “eating out” bill, since I used my allowance for that.

Below, you’ll find some of the specific things I do to keep my food bill low. Not all of these are right for everyone, so pick and choose which will work best for you, and feel free to leave comments with more frugal eating tips!

1. Skip the meat (and dairy and eggs and vegan substitutes). I’m a vegan, which means no animal products (no meat, eggs, dairy, or honey). That right there keeps my bill low, because I don’t have to buy expensive meat or dairy or eggs, which are more susceptible to inflation caused by high oil prices than non-animal products(the reason behind that is a whole ‘nother post…). That also keeps my bill down when I go out, because a lot of times I only have a couple of options, and the non-meat, non-dairy options are usually the cheapest. I also only eat one type of vegan substitute on a regular basis, and that’s the most expensive thing I have on my regular grocery list. That’s my tofu cream cheese, which I slather on a bagel every morning. An 8-oz. tin of that sets me back $2.99. Most of the other things I buy are less than $2.

2. Be boring. I generally eat the same thing for lunch and dinner for up to a week at a time. That’s because most of my recipes allow me to make a huge quantity of something for very little. Take my chili: if I cut out the tofu meat (I often do), it costs me about $7-8 to make 6 (very filling) portions, or $10-11 to make 12 (very filling) portions. If I take the time to make or buy bread to have with it (estimate the cost of that at about $2), then the portions will stretch even further. Because it makes a lot, the per-portion cost is lower, but I have to resign myself to eating basically one thing per week.

3. Plan ahead. Planning meals is the single best thing I do to keep my grocery bill low. Instead of planning what I want to eat week-to-week, though, I simply plan to have on hand the ingredients to make most of the things I would normally make anyway. At any given time, you can find the non-perishable ingredients for my chili and penne al’arrabiata in my cupboard, and because I know I’ll be making those fairly regularly, I can stock up on those ingredients when they’re on sale. (A good example of this: March’s grocery bill would have actually been lower, except that my grocery store had big bottles of olive oil on sale for $7 from the normal price of $18, so I bought 2 bottles. Those (plus the bit I have left in my current bottle) will probably last me about 2 years.)

4. Eat in. Eating out is not my priority. If it was, I’d have a vastly different food budget, but since I enjoy cooking, I can limit myself to one or two meals out per month, which keeps the food budget low. (And Wanda, you’re right: Candle Café is amazing! I probably go 1-2 times per year, but I’m always overwhelmed because there’s so much I can eat there! I’m used to having 1-2 items on a menu that I can eat, and there I can eat everything. It takes me about an hour to decide. )

5. Order appetizers. When I do eat out, I usually eat an appetizer in lieu of an entrée. A small salad and an appetizer usually cost me about half what my friends pay for a meat entrée. If I’m with a vegan (or even vegetarian) friend, then usually we can split an entrée for the same effect.

6. Throw dinner parties. I can throw a dinner party that costs less than $5 per person. (Sample menu: garlic bread, pasta, and salad.) If I have four people over, at an average of $4 per person, that means I can throw a dinner party that costs me less than eating out, and usually gives me leftovers, as well. Not only that, but people usually bring a bottle of wine, and often I’ll end up with a bottle or a bottle and a half of leftover wine, so my wine collection grows. Often my guests will reciprocate with either a dinner at their place or by buying me dinner one night, which means the actual cost of my dinner party is significantly lower than what I pay for ingredients. (Plus, who doesn’t like to have people oooh and aaah over a dish they’ve made?)

7. Drink water. Think about it: how much do you spend on juice or soda or coffee? At home or in restaurants, I almost always drink water (often with a splash of lemon juice in it). Occasionally I’ll drink tea (1-2 times per month) or buy the powdered lemonade mix (3-4 times per year). When I do buy mix, I water it down more than is recommended to make it last longer. I used to have a once daily Starbucks habit, which I’ve dropped to about five times a month, saving me about $60 per month on my food bill.

8. Skip snacks. If I have crackers around the house, I’ll eat them. If I don’t, I don’t miss them. The snacks that I do keep around are high-protein snacks that (frankly) I only sort of like, such as unsalted nuts. Knowing that they’re good for me, but that I don’t like them enough to eat a lot of them, means that I don’t spend very much on snacks and that, when I do buy them, they last me a long time.

9. Eat strategically. I hate wasting food. Really hate it. So, when I’ve just gone shopping, I make it a point to eat the fresh produce first and the nonperishable goods last. (All things being equal, that is.) That means that I eat a lot of salads for the first few days after I’ve gone to the store, and a lot of frozen or canned veggies in the last few days before my next grocery trip. I will also eat all the leftovers of something before I make anything new. This means that I very rarely have to throw out spoiled food.

10. Buy in bulk. Sure, we all know that buying nonperishable items and non-grocery items in bulk is wise, assuming we’ll use it all. But also think about the things you eat a lot of that might be perishable. For example, I can eat massive quantities of fruit, and so it makes sense for me to buy a big bag of apples or a crate of clementines, because I know they’ll be gone before they go bad.

11. Buy in season, at farmer’s markets, if possible. Being aware of what’s in season, as far as produce goes, keeps costs down. Buying directly from the farmers at a farmer’s market also keeps costs down. Buy local, and in season, and your produce costs stay low. (Not to mention the fact that it tastes fresher and keeps longer!)

12. Substitute. I eat a bagel with tofu cream cheese almost every morning for breakfast. My favorite kind of bagel is the whole wheat mini-bagels that are $3-5 or so for a (decent-sized) bag. Occasionally, I’ll get those, but often I’ll buy a bag of six non-whole wheat, regular-sized bagels for about $1. Half of one of those is about the same size as a mini-bagel, and I just have to deal with the fact that it’s not whole wheat. The price difference makes it worth it to me. ($5 for about a 10-day supply, or $1 for about a 12-day supply…) Substituting for things that are (almost) comparable in your grocery cart allows you to splurge on certain things (like tofu cream cheese).

There are many other frugal eating tips that I don’t use or haven’t yet used: coupons, for example, aren’t something I usually dabble with, because it’s too much effort for me (though I know many people who get great deals with them). My biggest grocery expense, by far, is fresh fruit, and one of these days I’m going to start an apartment garden with a hanging tomato plant, and a couple of indoor “dwarf” fruit trees. When I do try it out, I’ll keep you posted on how it works.

$500 a month? Here’s how…

I didn’t realize that my offhand comment about my budget would generate so many wonderfully supportive comments. To my surprise, I learned that I was spending less than a lot of my pf buddies. All this time, I’ve just been assuming that my spending’s been pretty closely aligned with everybody else’s. Anyway, so in case anyone’s interested, I decided to show how I break down my budget.

What I DO NOT include: rent, pretax spending like my flex spending account, health insurance, and metrocard (the transportation $$ there is for taxis and/or travel out to NJ to visit friends or family), charitable giving (I admit, I give too little $$, though I like to think I make up for it in volunteer hours), and occasional expenses such as travel or things like the shower I’m hosting next month. Since wedding expenses are part of what got me into debt, I’ve set up a separate savings account for occasional expenses like that (and travel), and I’m slowly building it up so that $$ won’t come out of my monthly budget.

What I DO include: Spending that I do to get me through the month, each month.

Here it is, averaged out over the past 3 months, and rounded in most cases to the nearest five dollars:

*These are shared 50/50 with my roommate. I’ve listed my 1/2.

**This is all the cash I take out of the bank. I can spend it any way I want, but when it’s gone, it’s gone. This gives me some freedom, and is often where lunches out and happy hour drinks come from.

***This is a “floating category” that alternates each month between entertainment, clothing, and home decor.

To the girl crying on the uptown 1 this afternoon:

I hope, whatever happened, it works out for the best.

If I had had a tissue, I would have passed it to you.

Just so you know.

Thank you, Mr. Bernanke

Ok, ok. I know that the Fed cut yesterday isn’t actually a good thing, because it weakens the dollar, sets us up for a lousy 2009, and passes breaks onto banks who aren’t keen on passing the cuts onto their customers.

Still…

Between what my investments did yesterday and the (slight) possibility that if I buy now, I could get a better rate, I’m feeling a little better today.

I’m not saying I’m irrationally exhuberant or anything, but I guess this is what they mean when they talk about investor confidence. I’m feeling pretty durn confident today.

You want to pay HOW MUCH?!

Apparently, I quit teaching too soon. Check this out.

Wow. I’ll be interested to see how it works. I like the idea, not because I think that throwing money at everything works, but because the fact that they’re going to be paying teachers so much more means that they can demand more from their teachers.

Just look at their website, for example. The requirements to apply to teach–just the first round of applications–weed out 89% of the population, because you have to have scored 90% or better on the verbal section of a grad school entrance exam. The requirements go on from there: they are rigorous, and as a result, this school will likely get the cream of the crop.

Not only are the qualifications stringent, because they are being paid so much more, teachers at this school will be required to give more time, working 7:30-6 every day and giving up all but 3 weeks of their summer for professional development. Of course, when you’re making over twice what the other teachers in NYC are making, you don’t mind all the extra requirements. And if you do, move over. There’s a stampede to apply, anyway.

I do like this idea, but wonder if it would work were it widespread. I mean, if every teacher in NYC made $125k, then we’d be in the same boat we’re in now: still needing teachers and taking what we can get, still having the more experienced and better teachers moving to the Upper East Side, etc. I think this could work because it’s the only school doing it.

Then again, if I had been making $125k when I was teaching, I would probably still be teaching, whether the rest of the teachers in NYC were making that or not.

Budget Challenge

Krystal’s doing an April budget challenge, where everyone chooses an area of their budget to cut back in. I generally do pretty well on my budget (I spend ~$500 on non-rent categories each month, including student loans), but here’s my budget secret:

I am over my budget every single month.

It’s true; even if I do really well in other areas, I am over my written budget every month, no matter what. For that very reason, I’ve always kept a really tight written budget. Otherwise, if I raise it up, I still overspend, and then I’m really in hot water!

Still, the psychological toll of seeing red marks on my budget spreadsheet each month is wearing thin. So, instead of cutting back in one area of my budget in April, my overall goal will be to not go over in any area of my budget. It’ll be hard, and I’ll have to really watch my spending closely, but I think I can do it.

Good News/Bad News

Ever notice how good news and bad news just seem to go together? When I’m having a rough time of it, I enjoy that symmetry: I can revel in how (though I may be dealing with bad news at the moment) somehow something good will come of any situation. Of course, the opposite is true, too: when something good happens, sometimes I’m stuck waiting for the other shoe to drop, so to speak.

Good news: My landlord is giving me a two year lease. Hooray! That’s what I really wanted, the secure knowledge that I have a place to live for two more years. That’s twenty-four months of good nights’ sleep, knowing what my rent will be and that they can’t kick me out (without cause) or raise my rent until 2010.

Bad News: For the two year lease, they want more per month than they wanted for the one year lease. It’s not much more, $100, but on top of the $300 they already wanted to raise me, it’s a lot. All told, now the increase will be 19%. Argh!

Good News: I found a beautiful 2-br coop for sale in the neighborhood just north of mine for an incredibly low price. Haven’t seen the actual apartment yet, but the pictures on the site look beautiful. If I were to take the leap and purchase it, my monthly outgo would be about the same as if I resigned the 2-year lease.

Bad News: I’m not sure if I’m ready for homeownership yet. To get the downpayment together, I’d have to get some $$ out of my Roth IRA, which I don’t want to do. Though, it’s such a good deal (if it turns out to be all that it looks like online) that I’m not sure I could pass it up.

Good News: If I do end up buying the coop, and my roommate moves with me (she has said she wants to), then I’m pretty sure I can pay off the 30-year mortgage in 6-8 years.

Bad News: If I do end up buying the coop, I will need a lot of money upfront. Mom has agreed to chip in for closing costs, and possibly I could borrow from Dad, too, but I hate relying on them, and there’s still the looming question of paying for movers…

So, who knows? I’ll let you know what I think when I actually see the coop, and keep you updated on negotiations with my current landlord.