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Total Cost: $501 ($100 gift card for $500+ spending)
In addition to this, I made the purchase via MrRebates, which will give me 7% cash back. I will receive another 2% cashback from the priceline visa card I used to pay for the order. The total cashback is 9%. Except the moisturizer, these products will likely last me six months. The concealer, it is a 12-month supply!
Do you stock up on beauty products? What are your favorite items?
I never liked animal prints. I thought they looked old, tacky, busy and trying too hard. Last January, I went to Anne Fontaine, one of my favorite stores, to check out their winter sales. There was a dress in a silhouette I like. The discount was hard to resist(from about 400+ to 100+). The only downside is that it is in a kinda of animal printish pattern. I decided to give it a try.
Oh, my! How glad I did! It went home with me and I have been wearing it whenever possible. It can be paired with flats, boots, or pumps. I have worn it to work, to dinner dates, to shopping, to cocktail parties, or just to wander around. With its bold prints, I pretty much don’t need much accessories. A statement dress that received a lot of compliments! (The photo below does not do the justice. I am still a photographer in training. With my lack of basic photographing sense, I am counting on my husband to be the photographer-in-residence for this blog. This may take a while to happen as he currently is not very interested in reading this blog. Personal finance is not something that fancies him. Fashion puts him to sleep. Personal Finance + Fashion, the main themes of this blog, is like a maximum strength sleeping pill for him. :))
This dress is a revolutionary item in my wardrobe. From this dress onward, I started paying attention to animal prints. The result? Four items in animal prints in 2014.
Got an email from a friend. He wants to know whether he is saving enough for his retirement. I did a quick analysis for him and thought it might be worthwhile to share the analysis with interested readers who might be pondering about the same question.
Goal: withdraw $5000 monthly after retirement
Question: How much should I save each month to reach that goal?
Planned retirement age: 60
Annual Income: Take home pay is $84,000 after taxes, health insurance and 401(k) contributions
Roth and regular 401(k): $220K
Current contribution to 401(k): $17,500 with half to a Roth 401k and half to a regular 401k.
Savings: nothing material
Part 1: Analysis:
First, I will use his retirement needs to determine his saving goals. Then, I will reverse the direction and calculate how much he would have for retirement if he saves at various levels.
1. From retirement needs => saving needs
How much does he need to retire?
Years in retirement: 50 (retire at 60 and live till 110, better overestimate)
Return rate: 5% (lower than the normally assumed 7%, just want to be conservative)
Withdraw amount: $5000 monthly (this is probably way more than he actually needs based on his current monthly expenses. However, I understand the psychological benefits of overestimating this number).
How much he needs to retire: $1,100,000 (I did not include the social security pay in calculations).
How much should he save while working?
Current 401(k) Balance: $220,000
Years to retirement: 20 (240 months)
Annual return: 6% (assumed)
He needs to save about $900 per month ($10,800 per year) to reach his retirement goal of $1.1m.
How he is doing now: He is currently saving $17,500 a year, which would be about $1.35m when he retires at 60. So he is doing well if all of our assumptions are accurate.
However, life is full of uncertainties. The numbers above are very sensitive to assumptions.
Iteration 1: Change annual return to 4% a year for both retirement and saving periods.
How much he needs to retire: $1.3m
How much he need to save while working: $27,500 yearly or $2,292 monthly. (Not saving enough!)
Iteration 2: Retire at 50 instead of 60
How much he needs to retire: $1.15m
How much he needs to save while working: $55,000 yearly or $4,583 monthly. (Not saving enough!)
Iteration 3: Retire at 55 instead of 60
How much he needs to retire: $1.12m
How much he needs to save while working: $25500 yearly or $2,125 monthly. (Not saving enough!)
2. From savings => retirement fund
His current take home pay is $7000 per month.
Current Non-discretionary Monthly Spending:
Apartment Management Fees: $600
Mortgage payment + Homeowner Insurance + Property Tax: $2200
Church Contribution: $400
Subway to work: $70
Grocery and other misc. items: $800
Total fixed monthly expenses: $4,180
Travel: $5,000 per year
Clothing + Gifts: $4,840 per year
(Note: This is why I said earlier that he probably overestimated his post-retirement monthly expenses. Without mortgage, his spending is only $1,870 a month without discretionary spending and $2,690 with discretionary spending.)
Total Savings: ($7,000-$4,180)x12 – $9,840=$24,000 per year.
After including the $17,500 contribution to 401(k):
Years to $1m: 10-11 years
Years to $1.5m: 15 years
Years to $2m: 18-19 years
Iteration 1: Cut his spending for discretionary items to $5,000
Total Savings: ($7,000-$4,180)x12 – $5000=$28,840.
After including the $17,500 contribution to 401(k):
Years to $1m: 9-10 years
Years to $1.5m: 14 years
Years to $2m: 17-18 years
Iteration 2: Increase his spending for discretionary items to $15,000
Total Savings: ($7,000-$4,180)x12 – $15000=$18,840.
After including the $17,500 contribution to 401(k):
Years to $1m: 11-12 years
Years to $1.5m: 16 years
Years to $2m: 19-20 years
Iteration 3: Spend everything he takes home.
Total savings: 0.
After including the $17,500 contribution to 401(k):
Years to $1m: 15-16 years
Years to $1.5m: 21-22 years
Years to $2m: 25-26 years
The numbers tell a clear story: Saving buys him time. The more he saves, the quicker he reaches financial independence.
Part 2: Recommended Actions
(1). Put all 401(k) contributions into a traditional 401(k). By doing this, he can save more taxes because contributions to the traditional 401(k) is tax deductible. With a marginal tax rate of 33%, we are talking about saving more than $2800 in tax every year, which means additional $2800 to his savings account. What happens if tax rate increases in the future? It is highly likely. However, there will be ways that will allow him to take his money out of traditional 401(k) without paying too much tax, definitely not in his current tax bracket of 33%. Check this post by gocurrycrakcer for why he may never need to pay taxes again after he retires.
(2). Open a Roth IRA account and max it out every year. Capital growth in a Roth IRA is tax free and if needed, his contributions (not the growth part) can be withdrawn without penalty. For these reasons, Roth IRA strictly dominates a taxable investment account. So I would not put money in a taxable account before I max out the Roth IRA.
(3). Open a taxable investment account to host his savings.
I would keep just about three-six months expense in my bank account as emergency fund and park the rest of my money in index funds in an investment account.
(4). Track expenses and stick to budgets.
Based on the numbers he gave me, he should have had some savings by now. The fact he has no savings made me suspect he is overspending without realizing it. So I suggest that he starts logging all his expenses and sticks to the budget for discretionary items.
Overall, I think he is doing a reasonable job in his retirement savings. If plan well, invest wisely and save a bit more, he will be financially independent in about 12 years (assuming he really needs $5000 per month after retirement).
Do you like this kind of post? Please let me know your thoughts below or contact me here.
First of all, I don’t get any commission from this post. All the recommendations are the items I have personally bought and loved.
Nordstrom.com is where I shopped most last year with 12 orders placed.
There is no Nordstrom at where we live, but there was one at where we used to live. I went to the store a couple of times and was not too attached to it. I am not a department store person. The amount of selections and choices overwhelm me. I just want to get out when I see mountains of clothing. So I always preferred the smaller mall shops or boutique stores. After I realized the difference in cashbacks between shopping online and in store, I start to shop online for most of my clothing items. Living in a shopping desert also expedited the online shopping process.
I started to notice Nordstrom when several of my favorite fashion bloggers strongly recommended items from there. At the beginning, I was skeptical and thought they get paid to recommend those items. Then a few items really caught my attention, so I decided to pull the trigger. If the items turn out to be disastrous, I can just return them given Nordi’s free shipping and returns policy. I was pleasantly surprised by the quality of the items and kept everything in my first purchase from Nordstrom.com (Dated July 3, 2012). From then on, I am totally hooked and Nordstrom has become my go to place to shop for myself and for friends and family. Without keep rambling about my shopping experience, which could go on for ever, I want to recommend a few items that I have bought again and again, and will continue buying again and again.
1. Tissue Weight Wool & Cashmere Wrap (in a variety of colors).
The left is the old version and the right is the new version. Both of them are available on Nordstrom.com and the old version is on sale at 20% off. I bought both versions in the colors shown here. The left one was the Christmas gift to my brother’s fiancee and the right one is the Christmas gift for my best friend. Both gift receivers love the gift and started wearing them a lot (based on their social media pictures). They both told me the wrap is of great quality and can be worn in so many ways for various occasions. I would have totally bought one for myself if I am not waiting for a Hermes cashmere wrap. This would be my go to gift for my girlfriends.
Both are good quality, available in a variety of classic colors and are 100% cotton. I bought both tees in the style and color shown above. I have been wearing them nonstop since I got them in November. They pretty much go with anything, like wraps, scarfs, jackets, vests, and coats. I prefer the left one slightly more than the right one because of the lower neckline. The lower neckline makes it more wearable as a top alone and highlights my neck bones better.
I machine wash and dry them. They hold up shape nicely and have not showed any pills yet. I will be restocking them for next winter during the semi-annual sales. However, I would not mind paying the full price ($25) if they are not included for semi-annual sales.
3. Lush maxi dresses
These maxi dresses are of great value (I define value as a good price-to-quality ratio). Full price is $50 and you can often get them on sale for around $30 or even lower. They come in solid colors and prints. I bought one in royal blue (a great color!) and one in floral print. I could not find mine online now, but they will likely be restocking them soon for summer shopping. Don’t drop them because of the “Juniors” description in the title. They are of good length (the hem touches and slightly covers my instep and I am about 5″6-5″7), very forgiving around the shoulders and waist area. They are also not very low cut in the front. They are very soft and comfortable. I worn them to a beach vacation. I even wore the blue one to work with a short-sleeved black shrug on top of it. Received many compliments.
I machine wash them, but hang them to dry. I accidentally machine dried the print one and it shrank quite a bit and the color faded. So, do not machine dry them. But they can be safely machine washed without losing the shape or color. My blue one is still in great shape and will likely last me through this year. I will be restocking them next year.
I love Nordstrom’s Free Shipping and Free Returns policy. I bought a jacket last September and was not sure about it. Then I forgot about it until it was like two months later. By that time, I cannot find the return labels anymore. I thought it is too late to return. Another month passed, when I was doing Christmas cleaning, I found the shipping labels and then I just sent it back with the labels. Within two weeks, I am credited with the full amount without a question asked. How can I not be hooked by this fantastic customer service!
What’s even better? As I show in this post, you can easily get more than 10% cashback if you stack cashback portals with gift cards bought by the Chase Ink Plus card. To be able to act on deals, I always have one $200 Nordi gift card in my purse.
For our kids, their education is the only thing we save for. I am a strong believer in “Give a man a fish, and you feed him for a day; show him how to catch fish, and you feed him for a lifetime“. We don’t plan to give our kids money, but we do hope to be able to support their education to the highest level they want to pursue. The best gift my parents gave me is allowing me to start my grown-up life and career debt-free. We hope to do the same for our kids.
We started saving for our son five years ago when he was 2.5 years old and started saving for our four-year old daughter since she was born.
Our savings for our kids’ education primarily take three forms, though there is a backup fourth form:
a. in a state 529 plan
A 529 plan is a tax-advantaged savings plan designed to help parents saving for their kids’ future college costs. Contributions to 529 plans grow tax-free and are distributed tax-free for qualified education costs. The wiki at Bogleheads does a good job explaining 529 plans.
These savings plans are often state-sponsored investment accounts. Not limited to where you live, you can choose 529 plans offered by any of the 50 states and the district of Columbia. We chose to go for the plan in our resident state for three reasons: 1) the state provides good matches to residents’ contributions; 2) it offers Vanguard’s mutual funds as investment choices; 3) it allows state tax deductions for contributions.
How much do we contribute to our kids’ 529 accounts?
Our state allows tax deductible contribution for up to $4,800 per beneficiary per year by a married couple filling jointly. For each kid, we contribute exactly $4,800 per year, $9,600 in total. To fund the plan, we set up two monthly $400 automatic bank deposits to each of the two accounts of our kids. In part c, I explain why we don’t go above $4,800 per child.
b. in a Coverdell Education Savings Account (ESA)
A Coverdell ESA account is a tax-deferred account designed to help saving for education expenses. Contributions to Coverdell ESAs grow tax free until distributed. If the distributions are less than the beneficiary’s qualified education expenses, the beneficiary does not pay tax on the distributions. Again, the Bogleheads’ wiki provides good basics for Coverdell ESAs.
Compared to 529 plans, Coverdell ESAs have a few distinct features/limitations:
First, it can be used for both qualified higher education expenses as well as qualified elementary and secondary education expenses.
Second, the ESA funds must be distributed to the beneficiary by age 30.
Third, the total contribution a beneficiary can receive is limited to $2,000 per year.
Fourth, after turning 18, the beneficiary takes the control of the funds and cannot receive any more Coverdell ESA contributions.
Fifth, there are income limits applying to contributors of a Coverdell ESA.
We use TD Ameritrade for our kids’ Coverdell ESAs. Vanguard used to offer Coverdell ESAs, but they no longer accept new accounts. Our experience with TD Ameritrade has been good. They offer a variety of funds, including Vanguard’s low-cost funds and many no-fee ETFs. They also do not charge maintenance fees for Coverdell ESAs. I do wish their cost per trade is cheaper for stocks ($9.99 is not competitive when Scottrade is offering $7 per trade). This complaint, however, does not affect our decision to use TDAmeritrade to manage our kids’ Coverdell ESAs as I don’t plan to use funds in these accounts to trade stocks.
What if parents are over the income limit?
Our income exceeds the income limit and we cannot make contributions to Coverdell ESAs. However, the good news is that our kids can make contributions to their Coverdell ESA accounts and of course, they are qualified to make the full $2000 contribution. Below is a step-by-step guide for how we set up and contribute to our kids’ Coverdell ESAs:
Step 1: Set up a bank account for each kid. We have our main saving and checking accounts with Chase. So we just set up two baby savings accounts (for minors) that are linked to our main accounts. We deposit the monetary gifts our kids receive into their individual accounts. They are blessed with grandparents who like to give them monetary gifts. An added bonus for this is that my son learnt about saving at a very early age.
Step 2:Open a Coverdell ESA account for each kid. To open a new account at TD Ameritrade, follow this link. You will need to fill some paper documents and mail them back to TDA meritrade. Make sure to set kids as the account owners if parents are over the income limit. Parents would be the account custodian and have the rights to manage the accounts.
Step 3: Use money in kids’ savings accounts to make the $2,000 contribution to their respective Coverdell ESA accounts. The kids should be the contributors if parents are over the income limit. Since the kids are minors, we cannot order checks for their accounts. Instead, I go to a Chase branch and ask for two cashier’s checks of $2,000 each from our kids’ savings accounts. I then mail these cashier checks with the TDAmeritrade deposit slip to fund their Coverdell ESA accounts. I could also do a wire transfer, but Chase charges $25 per wire ($50 total). $25 on $2000 is like a 1.25% expense ratio, which is ridiculously high. So I rather get cashier’s checks than do wire transfers. It usually takes about a week for the money to show up in our kids’ Coverdell ESAs from the day we mailed the checks.
Step 4: After the money becomes available in the Coverdell ESAs, you can invest the money and enjoy tax-free growth!
If parents are not over the income limit, the steps are greatly simplified. You don’t need step 1. In Step 3, you just need to write a check from your savings account and mail it with the deposit slip to TD Ameritrade.
A friend said that he would not go through the trouble for just $2,000 a year. What is the trouble? For every year, it only takes one trip to the bank (if you are not over the income limit, you only need to make one trip to the bank in the first year and no need to go in subsequent years), and then at most 30 minutes to fill the deposit slip and mail it with a check. What are the benefits?Assuming a 7% return, $2,000 today will grow to be $5,518.06 in 15 years. Having the money in a Coverdell ESA saves $1055.4 in taxes for a family with a marginal tax rate of 30%. With $2,000 each year for 15 years in a Coverdell ESA, the account’s future value would be $50,258.04 and saves the family $14,477.41 in taxes. With two kids, the saving in taxes doubles. Why not just put the money in a 529 plan and save the trouble?I like that we can use the funds in a Coverdell ESA to pay for elementary and secondary education expenses. By the time our kids are in middle or high school, we will have a better idea about how much money we may need for their college. If we are saving more than enough, we can use the funds in Coverdell ESAs for their middle or high school expenses. In addition, Coverdell ESAs are not state -sponsored programs and normally offer better investment options than 529 plans.
c. in our savings accounts
The total amount we explicitly save for each kid’s education is $6,800 per year ($4,800 in a 529 plan and $2,000 in a Coverdell ESA), which would be $189,638.76 in 16 years when our son goes to college and $231,193.42 in 18 years when our daughter goes to college. These values are based on an assumed annual return of 7%. Will the money be enough? Depends. We would rather under-fund than over-fund these education savings accounts for several reasons:
First,the funds can only be used for qualified education expenses. In a couple of years, we plan to move to a state with excellent public universities , we may end up not using much of these funds if our kids attend in-state universities. It is not fun if we have to pay penalties to move the money out of these accounts.
Second, the funds in these accounts are kids’ assets. Especially for Coverdell ESAs, kids have control over these accounts after they turn 18. While we will try our best to raise good kids, an 18 year old is not mature enough to manage money efficiently, period. The CEO of our brain does not finish development until around age 25. Not convinced? See a brain development map below:
To minimize the impact of the 18-year old rule of the Coverdell ESAs, when we use the funds to pay for kids’ college, we will use the funds in Coverdell ESAs first and may transfer them to a 529 plan if needed.
Third, we will likely be still working when they go to college. We are aiming for being financially independent by 2022, but I do not plan to retire early as I do love some parts of my job. Financial independence would allow me to say no to the things I don’t like and focus on the parts that I love. I am blessed to be in a profession that pays well. Hubby’s goal is to build some “money printing machines” in addition to our financial independence stack. Without any mortgage or debt to pay, we should be in a position to support the education deficit if needed.
Fourth, if we decide to retire early after reaching FI, we may not need these ESA accounts to help saving taxes as we will not be paying much taxes anyway. See Jeremy’s comment below and he has a very nice post discussing tax paying after early retirement.
d. in a rental property
This may sound like an unusual way to save for kids’ education. I have a love for land. When I read Gone with the wind, I felt for Scarlet’s love for land. ““It will come to you, this love of the land. There’s no gettin’ away from it if you’re Irish.” I am not Irish, but that does not stop me from forming a love for land.
The first big purchase I made after I started working was buying with mortgage a house with a large yard. This was when I was driving a very old Toyota Tercel (the model discontinued many years ago) that could not make right turns easily. Yes, you heard it right, when I need to switch to the right lane, I usually need to start the turning effort 100 feet before the switching. When I need to make a right turn, I need to start making an effort at least 300 feet before the turn. Even with a car like this, I still preferred buying a house before changing the car.
As my brain grows more blue (see the brain development map above), I became more rational about houses. Now I try to view real estate investments as a part of our investment portfolio and have bitterly experienced and realized the downsides of owning houses. If we move again, we will likely not buy a house, at least not for a long while. We have decided to keep a rental property (one of our former houses) to balance our overall portfolio, especially for kids’ education, in case there is severe inflation or big house price rebound. Keeping the property also helps comforting my love for land, but this reason is secondary, at least when I am pretending to be rational.
For these reasons, I rather keep the money in my accounts than run the risk of over-funding kids’ accounts. If the funds in our kids’ ESAs are not enough, we would not hesitate pulling money out of our accounts to support them.
In addition to the methods I mentioned here, there are a few other ways to fund kids’ education. This link offers a nice comparison chart.
How do you save for your kids’ education? Would love to hear your preferred method of saving.
I must have got the new blogger syndrome. I woke up at 5:30am this morning thinking about what blog post I should write today.
With a very demanding full-time job, two small kids, and a busy husband, I have no idea why I put other responsibilities/routines on my plate. I just know I feel happy when I am done with a post. I feel excited when I see a comment. I smirk in work meetings when I see the site traffic increases. Rationality never takes priority when we are talking about feelings.
For 2014, I budgeted $9000 for clothing items and we end up spending $8946.98. The chart below shows a distribution of the spending: Dear husband’s spending is probably underestimated, as he often buys his own clothing and occasionally uses a different credit card that I don’t really manage. Still, I shamelessly spent significantly more on myself. Well, I guess this is one of the perks for the budgeting person of the house.
I will focus on my purchases below:
Chanel Timeless Kisslock Clutch: $1,900
Mulberry Crossbody Lily Bag: $804
A Diamond/White Gold Ring Band: $510.45
An Hermes Scarf: $399
Stuart Weitzman Chicboot: $312.75
Other clothing and shoes: $3,319.03
This chart shows all the stores I spent more than $200 at. Stores in the Other category include: Theory.com; TJmaxx; Marshalls; Intermix; H&M; Bloomingdale’s; Target; etc. This grouping of stores helps me to more efficiently maximize cash back from the purchases.
Mostly used: The Diamond/White Gold Ring Band ($510.45), wearing it every day
2nd place: Stuart Weitzman Chicboot (black suede) ($312.75), wearing it whenever possible, at least 40 times already this year.
3rd place: Alexander mcqueen scarf ($170), wearing it whenever possible, at least 30 times already; A pair of Tory Burch flat in black ($180), at least 30 times already
Never worn: A lace dress from anthropologie ($45); a short-sleeve white cardigan from Ann Taylor ($25); A patterned shift dress from Neiman Marcus last call ($120); A pair of leggings from Boston Roper ($20)
Worn only once: A maxi dress from Nordstrom ($40); a patterned top from Neiman Marcus last call ($60); A pair of pants from Boston Roper ($40); A floral patterned shirt from Ann Tayler ($30)
Worn only twice: Lost count, mostly items from $20 to $50 dollars.
Many items that I barely used are impulse purchases. They lured me into buying either because there were huge discounts, like the Anthropologie dress (discounted from $228 to $45) or because I wanted to take on riskier patterns and colors, like the dress and top from Neiman Marcus last call and the maxi from Nordstrom. Though these least used items may appear inexpensive, their costs per wear are much higher than those of the more expensive items that are used much more frequently.
(well, maybe I should say, learned again and again):
Do not buy because there is a sale. Do not buy because you suddenly feel like you want to try new things. Do not buy from stores you are not familiar with (e.g., Boston Proper. Their products are of good quality, but they are targeting an older age group. Their pants/leggings felt a bit strange on me).
So here comes my wardrobe resolution for 2015:
1. Minimize impulse buys and totally eliminate the never wore category from 2015’s summary;
2. 25 items for 2015. I am copying feather factor on this one.
3. Plan ahead and stick to the wishlist.
4. No bag purchase: I already have a perfect bag for work, a perfect bag for travel, a perfect bag for running errands, and a perfect bag for formal and evening events. I don’t see any reason/motivation to buy another bag.
5. a $7000 pie. Almost certainly, I will again take the largest chuck of clothing spending in 2015. However, I will improve by shrinking the pie to $7000 instead of $9000. That is another $2000 to our savings account. By maximizing my cash back from the purchases, I can add another $500-$700 to savings.
Well, it would definitely be better for our savings account if I make a $2000 pie. But I am not ready for that, at least not now.