How to Save and Spend Like this Pollack
This year I've gotten serious about my finances. No more blind deposits and withdrawals from Ye Olde Bank of America, no more back of the head savings calculations. And certainly no more damn 0.2% "savings" interest rates.
In college I'd deposited my student loans into a sub account of my mom's bank account. But managing this money was devilishly difficult, so I started a WaMu account (WaMu's customer service was atrocious but I can talk about that another time). I payed three hundred some dollars for rent; I ate pasta and burritos on alternating nights, eventually running out of spending cash and subsisting on rice, beans, and whatever I could run off with from engineering events (and three pounds of crab meat from an fundraiser Eron and Jenny ran...). My toilet paper was smuggled out of campus bathrooms, and when my car was stolen I got lucky because I'd only put three dollars of gas in the tank. I lived meagerly so I managed to save up some money.
This pile of cash was really good because the powers that be steered this country's economy right into a huge pile of poo. While my other friends either sighed and went back to school, fled the country, or just bummed around it, I and a handful of others sucked it up and just took crap jobs.
So that's why an engineer from UC Davis end up driving a Zamboni in a suburb of San Francisco. This is where I learned about burn rates. With a monthly income of $600 and a monthly rent payment of $700, I learned how to prioritize and put off a lot of the things I supposedly had to spend money on. I learned how to live comfortably with the knowledge that there was a time and a place for everything, and I learned how to anticipate the crises I would be confronting. As the cash started to dwindle I jumped to another low paying job, but at least one with a future.
My fortune grew. I had some fun with the situations I ended up in. Anticipating problems with my car, whose maintenance I had delayed hoping for better financial luck later, I bought a motorcycle, dumped the car on craigslist, and then bought another car a few months later.
Then I got a raise. So off for a year of traveling. I'd reign in my new found financial 'luck' later.
So in March I signed up for HSBCs Internet Savings, which offered an APY of 6.15%. This beat all CDs. I got advice that stocks might provide a higher yield, but I preferred a sure thing to a crapshoot that might net me another percent or two. My mom insisted on real estate, but I hadn't anywhere near the amount to enter into that game.
The APY dropped to 5.15% mid year, and is now down to 4.75%. Irregardless, the effect is noticeable compared to your average chain brick and mortar bank where they give you table scraps. Your money will just sit there and become more money. It's so satisfying to see a nice new chunk of change every month. You don't have to do anything besides shuffle the money between banks with good yields (check out http://bankdeals.blogspot.com/ for more info).
The other thing I did was start a Google spreadsheet of expenses.
I have about 10 different categories of expenses. Rent, insurance, gas, air travel, eating out, misc. bills, etc. I have several lines for income: steady job, side projects, ebay, so on. Add up the income, subtract the expenses, and I have my savings. The next important step was that I set a saving's goal-- a percentage of my income, so that it would aggressively track my income despite any unforseen fortunes.
Anyone with any measure of business experience knows that to achieve a goal you need one of the following:
a) quantitative goals, with a timeline
b) a miracle
Depending on miracles is inadvisable, unless you are running for higher office, or leading a nation. Then by all means cross your fingers and just do it.
But when you're managing your money you should set some goals, attach dates to them, and figure out how you're going to make the goals happen. Breaking it down like this makes it easy.
If I want to have three hundred thousand dollars in the bank so I can put a down payment on a house in three years, I need to save an average of one hundred thousand a year. Ahh, if I make sixty thousand dollars a year I can't possibly do this. I need a better job or a different timeline.
So I thought about things in this way and planned out my year. I penciled in, in italics, the expenses I thought I would have. That gave me a number that I could play with during the year, which I could average out to per month and per week numbers. Numbers I can easily conceptualize. When I spend too much, I know how long it will take to make it up.
Which brings me to a final point. If you are the head of nation, and you've just crossed your fingers, gone and ahead and done something really rash, and then it goes quite badly, how long will it take for the "markets" to forget about your boo-boo?
Having watched my bank account and expenditures, AND traveled internationally, it's painful watching the continuing slide of the Dollar. It's bad to vacation in Paris in October and feel poor; it's worse to come back six months later, stick to the suburbs, and find despite all the above you're poorer yet, as long as you're in the EU, because the exchange rate has easily sliced away all your good work. Time to buy Euros? I think.
But then two good friends start investing in stocks when things are going well, and suddenly they lose a bunch of money. So maybe, since things are going badly, they'll get better soon (like Jan 20th 2009)?
In college I'd deposited my student loans into a sub account of my mom's bank account. But managing this money was devilishly difficult, so I started a WaMu account (WaMu's customer service was atrocious but I can talk about that another time). I payed three hundred some dollars for rent; I ate pasta and burritos on alternating nights, eventually running out of spending cash and subsisting on rice, beans, and whatever I could run off with from engineering events (and three pounds of crab meat from an fundraiser Eron and Jenny ran...). My toilet paper was smuggled out of campus bathrooms, and when my car was stolen I got lucky because I'd only put three dollars of gas in the tank. I lived meagerly so I managed to save up some money.
This pile of cash was really good because the powers that be steered this country's economy right into a huge pile of poo. While my other friends either sighed and went back to school, fled the country, or just bummed around it, I and a handful of others sucked it up and just took crap jobs.
So that's why an engineer from UC Davis end up driving a Zamboni in a suburb of San Francisco. This is where I learned about burn rates. With a monthly income of $600 and a monthly rent payment of $700, I learned how to prioritize and put off a lot of the things I supposedly had to spend money on. I learned how to live comfortably with the knowledge that there was a time and a place for everything, and I learned how to anticipate the crises I would be confronting. As the cash started to dwindle I jumped to another low paying job, but at least one with a future.
My fortune grew. I had some fun with the situations I ended up in. Anticipating problems with my car, whose maintenance I had delayed hoping for better financial luck later, I bought a motorcycle, dumped the car on craigslist, and then bought another car a few months later.
Then I got a raise. So off for a year of traveling. I'd reign in my new found financial 'luck' later.
So in March I signed up for HSBCs Internet Savings, which offered an APY of 6.15%. This beat all CDs. I got advice that stocks might provide a higher yield, but I preferred a sure thing to a crapshoot that might net me another percent or two. My mom insisted on real estate, but I hadn't anywhere near the amount to enter into that game.
The APY dropped to 5.15% mid year, and is now down to 4.75%. Irregardless, the effect is noticeable compared to your average chain brick and mortar bank where they give you table scraps. Your money will just sit there and become more money. It's so satisfying to see a nice new chunk of change every month. You don't have to do anything besides shuffle the money between banks with good yields (check out http://bankdeals.blogspot.com/ for more info).
The other thing I did was start a Google spreadsheet of expenses.
I have about 10 different categories of expenses. Rent, insurance, gas, air travel, eating out, misc. bills, etc. I have several lines for income: steady job, side projects, ebay, so on. Add up the income, subtract the expenses, and I have my savings. The next important step was that I set a saving's goal-- a percentage of my income, so that it would aggressively track my income despite any unforseen fortunes.
Anyone with any measure of business experience knows that to achieve a goal you need one of the following:
a) quantitative goals, with a timeline
b) a miracle
Depending on miracles is inadvisable, unless you are running for higher office, or leading a nation. Then by all means cross your fingers and just do it.
But when you're managing your money you should set some goals, attach dates to them, and figure out how you're going to make the goals happen. Breaking it down like this makes it easy.
If I want to have three hundred thousand dollars in the bank so I can put a down payment on a house in three years, I need to save an average of one hundred thousand a year. Ahh, if I make sixty thousand dollars a year I can't possibly do this. I need a better job or a different timeline.
So I thought about things in this way and planned out my year. I penciled in, in italics, the expenses I thought I would have. That gave me a number that I could play with during the year, which I could average out to per month and per week numbers. Numbers I can easily conceptualize. When I spend too much, I know how long it will take to make it up.
Which brings me to a final point. If you are the head of nation, and you've just crossed your fingers, gone and ahead and done something really rash, and then it goes quite badly, how long will it take for the "markets" to forget about your boo-boo?
Having watched my bank account and expenditures, AND traveled internationally, it's painful watching the continuing slide of the Dollar. It's bad to vacation in Paris in October and feel poor; it's worse to come back six months later, stick to the suburbs, and find despite all the above you're poorer yet, as long as you're in the EU, because the exchange rate has easily sliced away all your good work. Time to buy Euros? I think.
But then two good friends start investing in stocks when things are going well, and suddenly they lose a bunch of money. So maybe, since things are going badly, they'll get better soon (like Jan 20th 2009)?