Free checking, a thing of the past

Well, I've finally been cornered by the fee-based checking account. Chase sent me a letter informing me that my checking account will now come with a $12/month fee, unless I meet one of the following requirements:

Have one direct deposit of $500 or more made into my account each month.
Keep a minimum balance of $1,500.
Keep an average balance of $5,000 in my checking account AND a "qualifying" deposit or investment account linked to the checking account (who knows what a "qualifying" account would be).
Pay $25 each month in other Chase checking-related fees.

The simple solution would be direct deposit. Sadly, my small company does not offer this. The next solution would be to move money out of a savings account and hold it in my checking account, to meet the minimum $1,500 balance. This is not appealing. I'd much prefer seeing that money earning interest rather than lying like a lump in my checking account, doing nothing but staving off a rude and ridiculous service charge.

So, I did a little research. Turns out the Chase Total Checking account I am being rolled into is not the most basic option available to me, although the letter I received from Chase certainly makes it appear this way. After speaking with a telephone operator who didn't know what was going on, then IMing with an online support specialist who seemed to, I learned I can switch to a Chase Basic Checking account, which carries a $6/month fee that is waived by meeting one of the following requirements:

Have one direct deposit of $500 or more made into my account each month.
Make 5 debit card purchases per month.

I think we have a winner. I can make 5 debit card purchases each month; I come close to this anyway, at the grocery store, when I need cash for laundry or swimming. And if I don't meet the requirement naturally each month, I will just buy my last set of groceries individually, paying for each item separately with my debit card. Sounds like a plan. I would rather put these charges on my credit card, which has rewards, but I think I can find a way to minimize the damage here.

However, this fee-based checking account phenomenon is quite disconcerting. Thus, I am researching other options. The main problem is my employer's inability to provide direct deposit. If that happened, I would just open an ING Electric Orange checking account. I mean, that thing has interest! Maybe I will open one anyway, to feel it out and decrease my reliance on Chase. If could stand the waiting between getting my paycheck and seeing it post to my account (as it meanders through snail mail) it could work. Although it makes me incredibly nervous to rely on the USPS every two weeks to keep me solvent. Seems I would need to keep a brick-and-mortar account, like Chase, to make ATM deposits each pay period. Then I could transfer the money into ING after it posts. This is an extra complication, but I'm sure I could handle it. Hmmm, this is a head-scratcher. I will continue to mull it over.

Thankful

Happy Thanksgiving, void. I am so grateful for the financial changes of this year; thankful that I realized what mistakes I was making, and thankful that the knowledge I needed to right those wrongs could be found in the personal finance blogs of others. And of course, I am thankful for the windfall that made so many of my financial dreams come true and accelerated my progress beyond my wildest dreams. But windfalls cannot be counted on, and should never be expected. Thus, I look to the future knowing that only hard work, sacrifice, and dedication will bring my financial goals to fruition. No one can fix this but me. And I have to say, I am thoroughly enjoying the journey!

A more concrete breakdown of the finances

As noted in my previous post, I bring home $2,548 each month. My exorbitant rent is my biggest expense. Here is the more specific breakdown of my monthly budget.

Rent: $1,150.00
Car Insurance: $118.82
Student Loan #1: $93.64
Student Loan #2: $87.18
Cell phone: $66.76
Internet: $52.31
Water/Trash: $25.00
BoA: $19.00
Gas: $15.00
Netflix: $9.87

Total invariable expenses: $1,637.58

Subtotal remaining funds: $910.42

Ally Emergency Fund: $100.00
Smarty Pig IRA Fund: $100.00
Smarty Pig Electric Bill Fund: $30.00
Smarty Pig Car/Renter's Insurance Fund: $25.00

Total savings payments: $255.00

Subtotal remaining funds: $655.42

Variable expenses:
Groceries: ~$250.00
Car Gasoline: ~$75.00
Socializing: ~$75.00
Swimming: ~$30.00

Total variable expenses: ~$430.00

Remaining funds: ~$225.42

Somehow, though, I never have this leftover. In the past, it's because I've been diminishing my checking account cushion, either through extra credit card payments or infusions to my savings accounts (such as preparation for my Ireland trip).

Now that I don't have CC debt to pay down or international travel to save for, I will be curious to see if I actually have remaining funds each month. With Christmas coming up, including both air travel home and gift purchases, I doubt I'll be padding the checking account with remaining funds any time soon. But come 2011, when things settle down, I look forward to seeing monthly variances in my budget settle down as well.

(My electricity costs go into a savings account each month. This is due to a mixup with the electric company; I haven't seen a bill in over a year. They are trying to get the paperwork straight, but in the meantime, I am saving for the very large bill I know will eventually be coming. From past experience, I know my electricity costs run about $15 a month, but I am saving double that as a safety net.)

I look forward to putting that ~$225.42 to good use in my savings accounts in the upcoming year!

The living situation

Is this revealing too much about myself?

I make a $40,500 annual salary, before taxes. After taxes and health insurance, I take home $2,548 a month. This is a very fair sum and easily lived on by a single person. That is, IF that person doesn't live in Los Angeles. In this city, my rent is $1,150 a month, or 45% of my take-home pay. Appalling, I know. This is not something I am proud of. I don't live an extravagant life. I live in a one-bedroom apartment with just under 500 square feet, a small balcony, and a parking space (important in LA). My building is safe, quiet, and comfortable. My apartment has a dishwasher and a garbage disposal. The laundry room is across the hall. I have central A/C and heat.

It is possible to live in Los Angeles for less than this. I did it for 15 months. Three months with a roommate when I first arrived in LA. That was $975/month for a nice apartment in a safe neighborhood with no dishwasher, no A/C or heat, no garbage disposal, and no parking space. However, I honestly prefer living alone. And I'm 30, which is a bit too old for a roommate, in my personal opinion.

Then I lived alone in a slum. $995/month for a 400-square-foot studio with no parking in a shady neighborhood. No dishwasher, no A/C (but a small space heater), no garbage disposal, no security in the building (front door didn't even lock), no laundry on premises, and a rowdy bar out back. Cockroaches, loud neighbors, overflowing dumpster, and, at the very end, mice. MICE!

Thus, I am more than willing to pay an extra $150/month to live in peaceful, quiet, safe, and sanitary conditions. We all have our priorities, and my home being a haven is mine. I pay for it, but it is money well-spent, in my opinion. I could save myself $200 a month and move in with a roommate. I could save $100 a month and live alone somewhere that I'm unhappy. However, it's not worth it to me. It's just that simple.

I hate that 45% of my income goes to the roof over my head. I am a house-poor renter. LA isn't easy. I pay a premium for the diversity of people, thriving art scene, and beautiful weather I enjoy year round. This is a choice I have made, and I am happy with it. There are those who cannot endorse my lifestyle. I don't blame them. But I have never been happier than here in LA, and I am over the moon about my apartment. This is my home, and it puts me at peace.

Sunset over the Pacific Ocean

Nonetheless, this makes saving and building a retirement fund on my modest salary a challenge. Hence, I don't go out much. I don't shop much. I cook at home and rarely eat meat. I buy generic whenever possible. I make coffee at home and don't buy Pumpkin Spice Lattes from Starbucks, despite how much I love them. And in return, I go for bike rides on the beach. I keep my windows open ten months out of the year. I hike at Griffith Park and look down on the city I call home. And other than a larger salary, I wouldn't have it any other way.

(Not my house)

Goals revisited

I'm feeling grateful for the change in my financial picture, and I think it's a good time to revisit the goals laid out back in August:


Short term goals
Enjoy Ireland without creating new debt (October 2010): ACCOMPLISHED
Pay off my AMEX card (March 2011): ACCOMPLISHED

Long term goals
Pay off BoA card (before 0% APR ends in June 2011, or ASAP after that): ACCOMPLISHED *in spirit*
Build E-fund to $1,500 (August of 2011): currently at $608. At $100/month, I am on schedule to meet this goal.
Create SmartyPig sub-account to grow the $3,000 required to open my Vanguard Roth IRA (end of 2011): currently at $1,525. At $100/month, I am just shy of meeting this goal. Leftover funds each month will be added to make it happen.

Long, long term goals
Build E-fund to $7,000: still a long, long term endeavor
Fund Roth IRA to max of $5,000 each year: ditto the above
Aggressively attack student loans: ditto, but on track to prioritize this


I am feeling good about my progress and have renewed energy to make the sacrifices required to accomplish my long term goals. However, I cannot deny that windfalls like my holiday bonus make all the difference in the world.

Net worth update

Alright, let's do this.

Liabilities
Student Loan #1: $10,382.79
Student Loan #2: $5,646.58
AMEX: $0.00 (yippie!!!!)
BoA: $1,862.00

Total debt: $17,891.37

Savings
Ally E-fund: $608.65
SP BoA payoff: $1,748.00
SP Roth IRA: $1,525.00
SP Car/Insurance: $300.00
SP Electric Bill (oops, haven't mentioned this one yet; next time): $155.59
SP Christmas fund: $100.00

Total savings: $4,437.24

Overall net worth: $-13,454.13

Positive change since last update: $4,900.94

Wow, I can't quite believe so much has changed since August 25th. As previously mentioned, I am a lucky gal.

Now that I'm not funneling hundreds of dollars a month toward my most toxic debt, I am refocusing my funds to tackle the goals laid out in my August 26th post. To that end, I have upped by Ally e-fund automatic transfer amount from $45.81 each month to an even $100. I also have an automatic debit of $100 a month into my SP Roth IRA account and $30/month into my SP Electric Bill account (again, more on this later).

Next, I'm going to figure out my student loans. I don't have plans to eradicate this debt any time soon, but I would like to see my monthly payments going primarily toward my principal, rather than interest. I need to contact my loan provider to discuss this. I will report back.

With the burden of my credit card debt lifted, I feel lighter. Everything is easier. Saving is more feasible. Using my paychecks to benefit my future has never felt simpler. I will never go back. Never. Next thing I want is a Dyson vacuum; I will save for one, and it will never gather interest on a credit card. Barring some horrible, unforeseen circumstance (which I am trying to prepare for with my e-fund) I will not incur any new debt. Come to think of it, my current car should last me at least five more years. I should start saving for the next one now, shouldn't I? Honestly, just imagining setting up a savings account for an expense years and years away makes me really happy. Into the future!

P.S. I forgot to mention, I went to Ireland and paid off every dime immediately! Brilliant. And one of the best weeks of my life.

Windfall

So, I have been hesitant to post, as something lovely and unexpected happened to completely alter my financial landscape: a very generous holiday bonus. How much? $5,000. More than 10% of my annual salary. This was wildly unexpected and, while of course certainly appreciated and joy-inducing, not in the spirit of this blog, which was designed to track my progress slogging toward the goal of fiscal fitness slowly, methodically, and through great sacrifice and dedication.

I started this blog because I knew I could count on no one but myself to solve my problems. I wanted to put it all in writing and hold myself accountable. Laying out the financial picture for no one but me to read was designed to encourage me, provoke me, and, in the case of progress, elate me.

And now, suddenly, someone else has solved a huge portion of my financial difficulties in one fell swoop. I will have to elaborate on how this affects my fiscal worldview in another post; I can't quite wrap my mind around it at this moment. But for the time being, I will lay out how I have used my miraculous bonus to tackle my debt.

$1,139.56 to end my AMEX debt
$1,547.00 to fulfill my Smarty Pig LASIK savings goal
$1,525 to start a Vanguard Roth IRA Smarty Pig savings goal
$300 to start a registration/insurance Smarty Pig savings goal
$100 to start a Christmas shopping Smarty Pig savings goal

Total spent: $4,611.56
Leftover: $388.44

Thus, my credit card debt is *essentially* erased. As previously mentioned, my LASIK costs incur 0% APR on my BoA credit card until June 8, 2011. Thus, I have saved enough to pay off the debt once my 0% APR runs out, excepting my $19.00 a month in minimum payments. Rather than pay off the debt right now, I am letting the $1,748.00 earn 8.5 cents a day in interest in my Smarty Pig savings account. It's free money, why pass it up?

The $300 Smarty Pig account is actually designed to cover an onslaught of May 2011 expenses: car registration, AAA membership renewal, and renter's insurance. Last year these totaled $375. Thus, I plan to save at least that much before all these costs come due again in May.

The $100 Christmas account will earn a bit of interest until December (less than a penny a day, at this time) until I load it onto an Amazon e-gift card, which at Smarty Pig comes with a 3% cash boost, meaning if I load $100, I actually get a gift card with $103 on it. Again, free money. And because I don't get to fly home for Christmas until Christmas Eve, I usually do most of my shopping on Amazon and have it shipped to my parent's house, where it waits for me to arrive. Super convenient.

Smarty Pig rules. I cannot recommend it enough. (I am not compensated in any way for saying this.)

I will do a net worth update next post. But for now, know that the bonus has been put to good use. And I did allow myself  a few indulgences: drinks out with friends twice this month, buying lunch for a colleague, new curtains for the living room, and a charitable contribution. I am a very lucky girl.

Odds and ends

SmartyPig lowered their rate, from 2.15% to 1.75%. This is still above and beyond what anyone else is offering, but I am disappointed nonetheless.

I am currently negotiating my rent. My lease is up next month and I am trying to get my monthly expenses lowered. I haven't yet discussed my rent on this blog (I will), but it is appallingly expensive to live alone in Los Angeles, so I can use all the help I can get. Send good thoughts and well wishes my way, universe.

I have already come up against a few unexpected expenses this month; a wedding present, and a Labor Day cookout where I was asked to contribute a 12-pack of beer. All told, almost $40 of atypical expenses. I am also in need of a haircut, which isn't normally part of my monthly budget. In LA, a woman's haircut runs around $50-$100. Ridiculous. So I go to SuperCuts, where I pay $21 plus tip. (Once a year I go to a good stylist to give me excellent layers for my SuperCuts stylist to copy at each trim.) I won't be winning any modeling competitions soon, but frugality has its costs.

Happy weekend!! Fall is coming to LA, and it makes me positively giddy!

Checking account cushion?

How much of a cushion do you keep in your checking account?  This is something I struggle with, as my conservative side definitely acknowledges the safety and security that comes from having money instantly available. (And a checking account is instant enough for me; I don't really buy into the idea that I should have a couple hundred dollar bills stashed in a coffee can.)

However, I also prefer to have my money working for me, in the form of gathering interest in my savings account or reducing interest charges on my credit card. Return for the money is rather important to me, given that I have so little discretionary income with which to bring my net worth out of the red.

To this end, I have only about $150 cushioning my checking account. And honestly, I only keep it this high because my $118 car insurance automatically debits from my checking account on the 16th each month and I don't want to risk my mid-month paycheck not being there to cover it.

So, am I insane, walking a tightrope without a net?

End of the month

My budget and I are close. Really, really close. We know each other intimately. Yet at the end of each month, I pull away. I dread visiting my Excel spreadsheet and let receipts pile up in my wallet. Sometimes I won't open the document for days on end.

This only happens in the last few days of each month. The rest of the time, opening my budget document is one of the first things I do after dinner. I use the spreadsheet to record literally every dime that comes in and goes out. I add up my savings contributions, my credit card payments, my grocery costs, and the money I spend on social activities (last month I ate out once and went out for cocktails once; more on my lameness in another post).

I relish the freshness of a blank slate at the start of each month. I input my regular expenses in advance and then play with my discretionary income. What if I put this much toward AMEX? How about I throw this amount into my emergency fund and then this little bit into my LASIK repayment account? 

Even if I haven't spent any money that day, I will almost always open my Excel spreadsheet at night. Sometimes I'll play with the figures, and other times I'll simply look at the data. Yes, I may be obsessed, but that's why I have this blog: my personal finance outlet.

But at the end of the month, I dread seeing a negative number. For instance, during the month of August, I decided to lower the cushion in my checking account and move an extra $80 into the emergency fund (my checking account cushion torment is another post entirely). However, I tracked this in my monthly budget, meaning even if I only spent exactly what I made, I would come out $80 short. So when I found myself in the hole $15 I shut down. The $50 of expenses I accumulated in the final week of August were evidenced on receipts that I kept in my wallet but refused to enter into my spreadsheet.

Irrational and silly, yes. But dangerous as well. I had a vague grasp of the implications of my spending on my budget, but I didn't have the accountability that my daily data entry normally afforded me. I thought I knew where I stood, but I didn't have a concrete understanding of my finances. 

What strikes me as especially funny about this is that the end-of-the-month distance I had from my financial picture was exactly the relationship I'd always had with my money. I knew it came in, I knew it went out, and I knew that I never overdrew my account or bounced a check. But beyond that, I was pretty clueless. And I certainly wasn't worrying about only paying minimums on my credit cards. Ah, to go back in time and slap myself....

So, according to my August budget, I spent more than I made. The negative number in my "leftover" column taunts me. Every month I dream of finding a positive digit in that column, after I've already made one extra credit card payment or sent another $50 into my Ireland savings account.

Sadly, this rarely happens. Because while I believe in "paying myself first" in the form of doling out my credit card payments and savings deposits at the start of each month, I also cannot completely predict my life. If I want to try a great new recipe and need some fresh veggies or chicken to do it, I will probably go to the grocery store. If an old friend comes into town and wants to meet for brunch (like the other day) I won't turn her down.

Apparently, I'm not perfect or infallible, as much as I may claim otherwise.