NinjaPigeon - My Flight to Financial Independence

Tuesday, August 30, 2005

Asset Juggling

Long entry since I have done a lot with finance these last two weeks.

I opened my Scottrade account with a 1k investment recently. I haven’t actually bought any stock yet, since I’m still not that certain what I want to get.

I did try a limit order just to see how it worked. Put in a limit for $2.45 on an internet stock, but it didn’t trigger that day. I had marked it Good Till Cancel, but decided to cancel as the stock just wasn’t a strong pick. After canceling it occurred to me that I wasn’t sure if the $7 fee would apply since I hadn’t actually purchased any stock. I got a message saying that management would approve the cancellation or something similar. However, since this was my first attempted trade, and I don’t have any pattern of trying to score cancels all the time, I think I’ll be okay. So far there are no charges against the account.

Okay, so for a while I had also been content to keep paying on my student loans as normal. However, last week I was going through The Box and noticed that the interest rate on my smaller student loan had jumped to 6.5%. Since I always pay them online, I never look at the paper bill, and hadn’t realized that the loan wasn’t a fixed rate. After looking through a few more bills, I found one that showed it was now at 7%! Those sneaky guys… So, I decided that since I’d already paid off my credit cards, it was time to put an end to these bad debts (read: debts with variable rates).

So, I pulled $3.2k out of my ING and cut a check to Citibank. This will only pay off one of my three student loans, although the other two are at a fixed 3.65%, which with the inflation rate and the current rate of return on CDs and such, makes sense to leave alone. The disappointing part about paying down that loan is that I lose a large chunk out of my liquid savings just to cut out a $50 bill each month. Though, to be realistic, my net worth doesn’t change, simply my cash on hand. And it was way too conservative for my age anyway. Hopefully the check to Citibank clears in the next few days.

Also last week, after paying off the credit card and the variable rate student loan, I decided I should follow some of the good advice I’ve read and heard about my large cash reserves. In other words, I decided I needed to start investing more. The first and obvious choice was a Roth IRA. The reasons I went with Roth rather than a traditional are because 1) I’m close to the cap for tax deferred savings already through my 401k, 2) I wanted to reduce my current cash value and not just future cash value, 3) I wanted to be able to get to my money if I lost my job, and 4) I didn’t want to miss the 2005 Roth contribution like I did the 2004.

So, I knew I wanted a Roth, but wasn’t sure where to get one. Thanks to some helpful entries from MyMoneyBlog, I decided that Vanguard would be a good choice since my 401k is already through Fidelity. The next step was funding it. Calculating the 4k per year contribution, and dividing it by the 26 paychecks I receive per year, I realized I need to contribute about $150 per check to reach the cap.

Since I want to get into the habit of setting aside this payment each paycheck next year, I decided to go ahead and start now. Given that there are 9 pay periods left before the end of the year, and that on Jan 1 I need to start planning for my 2006 contributions, I decided to fund my Roth with $2.65k from my savings. I transferred that from ING and then opened the new account online with Vanguard. Total time from application to funding was about a week.

The Vanguard signup process was pretty easy, and I picked the fund with the 2045 retirement target. Although I would like to return in 2035 or maybe 2040, I wanted a more aggressive fund, hence the choice of the 2045 one. The asset allocation on that fund seems to be a good fit for my age and goals.

As for the interface for the site, it’s very comparable to the Fidelity one in terms of ease of use. The only thing I couldn’t figure out was how to add new funds as needed, and a 5 min phone call to their support line solved that. So far, I’m very pleased based on the signup process, the speed of opening an account, and the prompt and courteous support.

I also decided that my savings account with Wachovia wasn’t doing much for me. I want to have liquid money, but I honestly haven’t touched that account for almost a year. So the pathetic .15% interest just isn’t worth it. I was originally planning on moving it to ING, but realized my cash reserves are already more than sufficient. Instead, I’ve decided to open a 12mo CD with the money.

Ideally, my goal is to have a $1k CD maturing every 1-2 months. I am not ready to try CD laddering, as I don’t want to tie my money up for more than a year at a time right now, so this is a nice solution to get good rates and stay somewhat liquid. So, I checked out the list of top 12mo CDs on and narrowed down my choice to either Ascencia or GMAC. As GMAC was a better name and Ascencia wanted me to mail in the application, I tried GMAC first.

GMAC had a really easy and quick signup process online. However, for some reason they denied my application. I called to ask why and was informed it was because my phone number didn’t have an area code matching my address, nor was it able to be reverse looked up. I told the lady that I had provided my parents’ number because I did not have a land line and only a cell. The response was that I would need to mail a copy of my cell phone bill in for verification. That seems fairly ridiculous to me. I’m trying to GIVE them my money for a year and they require me to have a phone number they can reverse lookup? They already have my driver’s license number, social security number, and can verify my address against my credit report. What is the point? So I cancelled my app. Good thing too, as they don’t lock rates and dropped from 4.35 to 4.21 an hour later.

So, I’m back to looking at Ascencia. Although they require me to mail in an application with lots of documentation, they have a good rating on, they have higher interest rates (4.40) and they give a 20 day lock in period for the rate. So, Tuesday morning at work, I’m gonna go ahead and complete their application.

I also heard back from Emigrant Direct this week. My application was successful and I only need to wait on the paperwork to arrive in the mail with my account information. Once it arrives I’m gonna transfer all the money from ING over and take advantage of the higher rate. I’m gonna keep ING open though and use it for taxes and short term savings.

Monday, August 29, 2005

Paying Off Credit Card

After reading a lot about finances lately, particularly in some blogs and on the fatwallet forums, I decided that I needed to pay off my credit card. I had paid it off last year (a check for over $4k) and promptly charged it back up. So, I pulled $3.7k out of my ING account and cut a check to my credit card company to get it back to $0. All charges on the card now will be paid off promptly.

I’ve also decided to start using some of my older cards that I haven’t used in years. I don’t want the accounts to get closed. So I’ve decided to put small daily charges on each of them every couple of months so they stay open and active.

Sunday, August 28, 2005

My Background

Okay, I probably should have started keeping records of what I was doing financially a long time ago, but in all honesty, It just didn’t occur to me until now. Unlike many of the bloggers out there whom I read, I have a negative net worth. So, I’ll try to give a basic background of where I started and how I got to here.

I was a bit of a slow starter in my industry, as I just wasn’t that focused on classes. I enjoyed working more than studying, and it took me a couple years longer than it should have to finish my degree.

Anyway, I graduated in December 2002 and was unemployed until April of 2003, when a college friend scored me a job at his company. Technically my degree was in Computer Science, but I had always wanted to do Networking. However, the job was as a helpdesk guy with the premise that I would be switching to the role of a programmer after a few months. Unfortunately, the pay was lousy. I was started at only $38k, which in Atlanta, is pretty poor.

I got a modest apartment, settled into my new professional job and bided my time. Eventually I rediscovered my joy of programming and decided to focus on moving forward in my career. I got a modest raise to $41.5k after about 6 months, and to $43575 about 6 months after that.

After my car died on me in February of 2004, I decided I’d had enough of the used car life and wanted to “treat myself” to a new one. The old car had lasted 8 years and I had stuck with it through lots of work. I knew I should probably buy a used car, but 1) I didn’t have the skills or time to deal with repairwork, and 2) I was already living really conservatively. So after getting the car, I was still able to save a few hundred dollars a month.

In April of 2004, my lease was up at my apartment and I moved in temporarily with the friend who’d gotten me the job. We’d both been reading the Kiyosaki books and had bought into all of his theories. We decided to get a house to rent out, though neither of us could afford to pay for a house and keep up an apartment. So, we decided we’d move into the house, fix it up as needed, then move out and start renting it.

We got a house at the end of May for about $137k that needed modest work. Unfortunately it’s harder than we thought it’d be, and we just didn’t have time to work on it, so to this day, it is still in need of some work.

Around October, my friend left our company and got a pretty good raise, maybe 40%. Armed with this knowledge I told my boss that I knew the market was paying and I wanted to be making $55k. He told me he didn’t think the market was that good but he’d raise me to $50k early next year. I said okay, and decided I’d stick it out a bit longer. A week later, I got a random call on a Sunday night for a contract to perm job paying $32/hour.

I took the job and stayed on contract for about 4 months before moving to permanent and negotiating a salary of $70k. While still not the greatest salary, it was a great increase over the $43.6k I’d been making a few months earlier, and the new company matched 401k to 4%. My last company didn’t match at all.

So, I decided to open a 401k. I’d had one before but had to cash it in when I was unemployed. I wanted to contribute up to the matching limit but realized 3 months of the year were already gone. I did some funky math thinking if I contributed more then my company would “catch up” so I got the full 4% for the year. Apparently they match up to 4% per pay period. So if you skip 6 months of payment, you are only gonna be able to get matching for the remainder months.

Anyway, that mistake left me putting 10% into my 401k each pay period, which, while more than I anticipated, was not such a bad thing. I decided that since I didn’t really miss the money (I was still bringing home about $700 more per month after the deductions), I’d just leave it alone.

I also opened up an ING account about that time at the advice of my brother. That turned out really well and over the last 6 months I’ve made almost $50/month off that account. That also helped me to notice the big problem I had of hoarding money.

See, my father is one of those old fashioned guys that believes you just save money in the bank and keep no debt. Great advice, but it neglects the power of things like 401k programs, mutual funds, etc. My mom on the other hand understood the investment vehicles, but was terrible at budgeting. Between the two of them they had no money. So from their examples I gathered some good habits – 1) Hoard your money, 2) Invest your money. The problem is I could never figure out how those two could coexist.

Well, that’s how I got started on this path of finances. I wanted to avoid the pitfalls my mother had made in squandering the money she made, and avoid the shortsightedness of my father in not getting my money to work for me. So for now, I’m trying to find the right balance of the two.

Saturday, August 27, 2005

Who am I?

Just to get a quick idea of who I am and to keep things in perspective, here is a quick summary.

I’m a 27 year old .Net programmer in Atlanta, Georgia. I live below my means, but still have a fairly new car and a lot of student loan debt. I own a house with a college buddy and hope to rent it out sometime next year. I currently live in the house and manage the bills while he lives somewhere else.

I am seeing a woman who lives in Canada and although we are not “serious”, it is certainly a subject we have considered. Whenever I make financial decisions I try to keep in mind that I very well might end up living in Canada with her in a few years, leaving behind my “high paying American job”.

I don’t tend to go out very often, which helps with my bottom line, although I also spend a bit here and there on frivolous purchases. I also spend way too much on food, as I am both lazy and overweight. Surprisingly enough, the food actually hurts my bottom line more than the frivolous purchases.

I do not have a specific goal of retiring by a specific age, though I would like to retire early. In order to achieve those goals I am trying to work harder as a young adult, saving as best I can so that compound interest will be my ally moving forward.