Green Minded Wallet

So I ended up getting my car fixed. It turns out that some animal managed to devour a number of important wires and switches. Since it definitely qualified as an emergency and not something that had to do with the age or wear of the car, I didn’t really have a problem spending the money to fix it.

On an unrelated note, the budget that I set up for myself this year is not really working anymore. It’s been breaking down over the last few months and became pretty much unhinged in July. Some allocations are working well, while others are failing miserably. The basic problem is that I have some expenses that are important to me, but I didn’t do a good job in estimating them. Part of this stems from incomplete information or changes in pricing. For example, the cost of allergy serum jumped up from $300 to $500. While my insurance does kick in after my deductible, my budget does not reflect a $400 annual charge for an allergy visit and new serum, since I didn’t start getting shots until recently. When I had a real full time job, there was enough flexibility that I could reallocate funds without having to make any major sacrifices. Given that my spending allocation isn’t very beefy to begin with, along with the fact that it covers many categories including gas and gifts, I am having a difficult time. I’ve read the websites, I’ve read the books, but it still isn’t making things a whole lot easier. I’m trying to step back and work out some goals for the next two years of grad school and plan on tackling it again (perhaps this weekend). We shall see.

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Well the new I-Bond rates were announced on May 1st and they come with both good and bad news. The earnings rate is the combination of the fixed rate and the applicable variable rate. The good news is that the variable rate is 4.84%. So if you already own I-bonds with fixed rates over 1% like I do, you’re probably fairly pleased. The bad news is that the new fixed rate is 0%. Seriously ZERO. As the fixed rate lasts for the life of the bond (while the variable rate changes every six months), this isn’t the most attractive gamble for a long-term savings strategy. It might be worth purchasing new I-bonds for a year (minimum required holding term), but after a 3-month interest penalty you might not fair much better than with a online savings account or CD. I really think it’s too bad that the US government seems to be discouraging people from saving.

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So I started a post on my financial goals for 2008, well at the start of 2008, but I never quite got it finished. Since however the first quarter is already over (yikes) I thought I would post what my goals are so that perhaps before the year is halfway over I can post on how well I’m progressing. Here are my goals:

1. Reduce the principal balance of my student loans by $1500
2. Save $1200 for long-term savings (I don’t have a specific goal in mind but I might have need of money for a car or wedding in the (fairly distance) future)
3. Increase my emergency fund by $1000

These are in order. If you’re wondering why the emergency fund is last it’s because I already have more than four months of savings specifically dedicated to an emergency fund as well as other savings that could be used in an emergency. At the beginning of the year I felt that these were fairly ambitious; if however I manage to meet them all, I’m not quite sure what I will do with the “excess”.

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I was thinking about this the other day and I got to wondering, why is it that you have to qualify for other types of loans like car loans and home loans, but you can go on the hook for tens of thousands of dollars with little guarantee of ability to pay. So I starting thinking, what would happen if people had to qualify for student loans? In the system that I envision in my mind, qualification would be based in part on the ability to succeed in college and beyond (based on grades, etc.) and the ability to find suitable employment which can pay off the loans afterwards without causing undue hardship. I know that there was some talk around the web this summer because some schools wanted to charge more for certain degrees like engineering because the earning potential was higher. I can’t help but wonder if part of the solution is not charging certain groups more (isn’t college expensive enough), but not letting other groups go on the hook for as much. For example, if a civil engineer has a higher earning potential than an environmental philosophy major, then why not allow the engineering student more latitude in loan amounts since he/she can pay it back more easily. If a student didn’t do all that well in high school but they are guaranteed entrance to their local state school, does it really make sense to let them take out a bunch of loans only to have them cave under the pressure and leave after three semesters on the hook for 15 grand. I’m not trying to say that we shouldn’t allow certain people to go to school, but college like other financial decisions needs to be considered carefully. Just as there are situations when buying a house or financing a car don’t make sense (though they might in the future), the same is true for college.

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I love my family and friends. But there are times, when frankly, I just can’t go there. And depending on the person and the issue, finance is often one of those areas that makes those times occur. One of the problems with personal finance, is that it is well, personal. And despite the fact that you might have a perfectly rational, objective opinion, that’s not what people often want to hear when it comes to things as personal as their money. The hard part is that even if you don’t necessarily bring up the topic, it will just come out in general conversation. Someone will tell you how they dumped money into their useless car or how they’re planning a vacation (which you know that they really can’t afford). So you hem and haw and try to change the subject, because the last time they asked your opinion and you gave it, they were really affronted.

Sometimes it bugs me that I take this approach, that if I truly believe in something, or know that someone’s course of action is not the right approach, then doggone it I should tell them. I’m not talking about things like quibbling over different mutual funds, but responding when someone informs you that they are going to spend most of their small savings on buying new furniture or putting concert tickets on their recently un-maxed out credit card. However, I have found that harmonious relations are better than letting someone know they that are wrong, even if they are. I have also found that I’m not the only person who takes this line of approach. I like to read a number of different blogs, many with a slant towards personal finance. In one of the blogs I read, posters have no problem criticizing people in newspaper articles for poor financial decisions, but many also admit having limited success with friends and family, and just letting topics drop. While some may see that as hypocritical, I don’t. People who volunteer their financial information for newspapers have basically invited critiques of their situations, essentially I feel that they are allowing themselves to be used as a case study. However, if someone you care about asks for your opinion on a financial matter, they are looking for information before the decision is made. As such I feel there’s nothing wrong with giving them basic advice, or pointing them to a good book or website. If you feel that the decision is beyond you, then say ‘I really don’t feel that I can help you with that.’ Some people will take the advice, some won’t. But you put it out there. It’s then up to them to be responsible and process the information; if they choose not to listen to it, fine. And sometimes people aren’t asking for advice, but simply making a statement, and you’ll just cause all sorts of drama if you break down why they are making the wrong decision.

Personally, I won’t hound anyone with information once they know my feelings on the matter. If someone hasn’t specifically asked for my opinion, I may express a concern, and then I move on. I’ve found that saying the same thing over and over is not effective if people are determined not to hear what you have to say and it just puts a strain on your relationship. The true challenge though is after they’ve made a bad decision and they want you to commiserate with them, once things don’t work out. However, that’s a whole different topic for another day, and I don’t even think that I am equipped to give advice on that anyway.

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People often talk about having emergency funds; in fact I would say that the idea is one of the cornerstones of modern day personal finance. And I will admit, I have a set of funds designated solely to true emergencies. However, I’m starting to think that I seriously need a fund, that consists of perhaps a few hundred dollars, that is there when I have an accident or mistake and I want to replace something but it isn’t really an emergency. The idea is that it would be used for unexpected, non-emergency situations that represent a personal inconvenience. Here are two real examples of things that would be covered with the Oops Fund.

• Last month I did a triathlon and somewhere in between the car and my house I misplaced my sports bra. I have no idea how this happened (especially since it is the only yellow piece of clothing that I currently own). I certainly didn’t mean to lose it, but I guess in the excitement of the day it fell out of a bag or something. So now I’m short one sports bra that wouldn’t have needed to be replaced for a couple more months or so, definitely a candidate for the Oops Fund.

• Remember last week when I talked about my fabulous fifty-cent bike. Well, unbeknownst to me the key to my bike-lock key fell off of my key ring. Of course I only discovered this after I had already locked my bike outside of the library. Yeah, oops. So I had to cut the lock off, but I can’t really ride my bike anywhere until I get a new lock.

If these were just isolated incidents, I would say that the money could come out of my pocket money. But since these are just a few examples of the silly things that I’ve done in the past month alone, I think that there might be a need for some sort of revolving fund. How about you, could you see a need in your life for an Oops Fund?

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