Exactly How to Open Up a Roth IRA in your Thirties (Or any time! It’s never too late…or too early!)

October 19, 2018 By laurasomewherelse in Money Tags: advice, dollars, Money, retire, Retirement, rich, roth, Roth IRA, Savings, target date account, target date funds, Technology, thirties, Thirty, thirtysomething, Vanguard 1 Comment

As long as you’re earning income, you can open up a Roth IRA. I’ve written a lot about why Roth IRA’s are amazing here and here and here and also here, but in a nutshell, they are magical investment vehicles that allow your earnings to grow tax free FOREVER.

So if you invest $100 in your Roth IRA and that $100 earns $15 interest this year, that $15 will NEVER be taxed. EVER. Even when you take it out of your Roth IRA after you retire (as long as that is after age 59 and a half), and spend it, no tax monster will come to get you.

So imagine that you invest $100,000 over the course of a couple of years and it earns $15,000 of interest in that same couple of years. That $15,000 will also never be taxed. EVER. Do you see how this can add up? In a standard IRA (not a Roth), you will be be taxed on ALL of your interest the second you remove any of it from your account. That’s a lot of tax.

So, if you haven’t opened up a Roth IRA yet, here’s exactly how to open one up at Vanguard RIGHT THIS VERY MOMENT. It should take you less than 20 minutes to do this, and if you get lost you can call Vanguard and they’ll walk you through it. They’re amazing on the phone! Vanguard is my favorite financial establishment for Roth IRAs, as they have the lowest fees (almost none), and fees can really add up over the years so it’s best to stop them in their tracks early. Vanguard has been great for me so far, and I think you’ll love them- they’re extremely helpful, with an easy to use website, low to no fee funds, and they have amazing customer service. So follow the steps below to open your account. (Disclaimer: I have not been sponsored by Vanguard, or by anyone, to write this. I just love Vanguard’s services!)

Also, you will need at least $1000 to open up a Roth IRA at Vanguard. You will need at least $3000 to open up the fund I’m about to recommend below, but if you have the $1000 ready, go ahead and open up a Roth IRAwith a Fund I’m going to mention, and you can always transfer to the one I recommend- that’s actually what I did originally when I first opened mine up. The trick is to simply GET STARTED NOW. Make sure you have at least the $1000 set aside in order to begin. Remember, with Roth IRAs, you can always remove this money whenever you like, without taxes or fees! Because Roths are special that way! So, although you should only remove money from your Roth in an extreme emergency, it’s nice to know that your contributions are 100% reversible! Okay, without further ado, here we go:

Step 1: Go to https://investor.vanguard.com/home/

Step 2: Click on “Investing” and then click “IRAs: Roth and Traditional.”

Vanguard Pre 1

Step 3: On the far right, click “Open your IRA today”

Vanguard pre 2

Step 4: Answer the question: “Are you registered on Vanguard.com with ‘no.’ (If you are already registered for another account on Vanguard, of course say ‘yes’ and follow those steps to create your Roth IRA.)

Vanguard pre 3

Step 5: Answer the question “Tell us about your new account” by clicking ‘Retirement.’

Vanguard Photo 1

Step 6: For the next two questions, select ‘Retirement’, and then ‘Roth IRA.’

Vanguard 2

Step 7: Fill in your basic information.

Vanguard 3

Step 8. From here, you will simply click continue and connect your bank account using your account and routing number, so that you can transfer money easily to your Roth IRA. What’s great about Roths is that any money you put in, you can take out without fees or taxes at any time. This is not the case for regular IRAs or 401ks. Any money you EARN (called interest) from your Roth, you cannot take out without fees until you are 59.5 years old.

Step 9: Once you’ve connected your bank account, continue on to e-sign and set up a username and password for the website.

Step 10: After the basic paperwork is completed, you get to select your funds – aka where you will invest your money. For beginners (or really, for anyone, this is my favorite fund and it’s what I still have) I recommend what’s called a Target Date Account. This is a nicely automated account where you won’t have to play around and rebalance much or at all over the years. The account rebalances itself for you. Basically, you choose how old you’d like to be when you retire and then think of what year it will be when you are that age. So if I want to retire at 65, and it’s 2018 now and I’m currently 34, it will be 31 years until I retire, in the year 2049. So I would choose Target Date Fund 2049.

If you don’t know exactly what age you’d like to retire, don’t let that deter you. I recommend setting your retirement age for 65, and then you can fiddle with things later. So what year will it be when you’re 65? Pick Target Date [That Year], and move on.

For a Target Date Fund, as I said above, you will need at least $3000 to open an account. If you have $1000 and want to get started, I recommend selecting a Vanguard Star Fund and then transferring everything to a Target Date Fund when you have the $3000 (this is actually what I did). There are many reasons why I like Target Date Funds better than the Star Fund, especially for people in their 30s or younger, but it’s a different topic, so I’ll explain it in another post.

Here’s info on Target Date Funds, from Vanguard itself: https://investor.vanguard.com/mutual-funds/target-retirement/#/

Here’s info on the Vanguard Star Fund: https://investor.vanguard.com/mutual-funds/profile/VGSTX

There you go! You did it! You’ve opened up a Roth IRA! If you have questions, feel free to contact us at omgim30@gmail.com, or call Vanguard themselves at 877-311-0016. They’re great to talk to and will help you set things up if you’re confused. Hope this helps!

So I Paid Off My Student Loans- Part 1

September 7, 2018 By laurasomewherelse in Grab Bag, Money Tags: college, complete, Debt, drama major, graduation, life choices, loan, Money, nyu, Savings, school, Student loan, student loan debt, thirties, Thirty, university 1 Comment

If you’ve been following this blog for the past few years, you may know that I’ve been on a quest to pay off my student loans since… basically forever. Actually, for the first few years after I graduated, as my debt amount surged while interest piled up, I simply lived in hopeless despair. I wondered what magical miracle would occur that would enable me to pay off more than $100,000 (yes that 6th zero belongs) worth of debt – and for undergrad only! I’m not even a doctor or a lawyer or even a prosperous business person- I have a DRAMA degree, for god’s sake! And that $100,000 total is with ONE YEAR PAID OFF ALREADY by mom and grandma! So even with a whole year of school paid off, plus some financial aid, my loans were STILL that much!

And the loan kept growing, even after college ended, because in the first few years after graduation I’d decided that since my interest was high on the smaller of the two loans (one was for around $86,000 and the other was $14,000), I’d put the smaller loan on forbearance (effectively deferring it) and not pay it for awhile.

I know now that this is BACKWARDS thinking- it’s a really bad idea to put loans on forbearance unless you’re absolutely desperate and have no other choice. To be fair, most people put loans on forbearance because they have no other choice- I myself was the definition of desperate- so the warning is probably unnecessary. But forbearance is a horrible sneaky trap that only punishes your future self while your current self breathes a very temporary sigh of relief. I got the 14k loan down to 11k with a lot of blood sweat and tears, and then put that loan on forbearance for a year. When I started paying it again, after only one year of deferment, the loan had GONE BACK UP to 14K! As if I had never made a dent! The experience was both sickening and horrifying.

NYU is even more expensive now- disgustingly expensive. Somewhere around 70K a year expensive. It’s wayyyy overpriced, and pricing seems to only be only going up. The thing is, many colleges are following that same path of being completely out of line overpriced- the problem is not just NYU. To be fair, I really enjoyed my NYU program- I had private conservatory training in all aspects of acting, directing, and theater, and the 4 years were pretty amazing. It’s not a bad school. But the loans afterwards all but buried me- and I don’t recommend anyone ever taking on that kind of student loan debt. Ever. Even if you’re going to medical school or something that should fast track to a lucrative career, I’d still advise you to think your finances through very carefully.

In a blaze of glory I finally completed my last student loan payment this February, 2018. I still can’t believe it. I remember the day I hit ‘send’ on that last payment- I cried. My body shook in front of my computer and nothing made sense. The student debt that had hung over my head for so many years of my early adult life was finally gone. It felt like a miracle- but it wasn’t. It was the result of an incredible amount of work and very carefully calculated planning. Even making very little money per year, I finally did it. I did it.

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I did it! In the next post I’ll tell you how…

The Anti-Budget Budget In Your Thirties

July 23, 2016 By laurasomewherelse in Money Tags: Afford Anything, anti-budget, budget, budgeting, emergency fund, goodbudget, investments, Money, Paula Pant, Retirement, save first, Savings, thirties 1 Comment

Although Jane and I both very recently wrote articles about how we’ve been tracking every dollar we spend lately, (check out Jane’s Budgeting article Saving Money Like You’re In the Depression Era and my budgeting article How Tracking Money is Like Weighing Yourself), I want to write here about a way to possibly not track your money at all.

This is kind of the method I was unofficially using before I started tracking every dollar this past month using the Goodbudget app. The method involves taking a savings percentage off the top of your income before you spend any of your money on anything else. The word “savings” is general and can include any of the below:

–Contributions to an Emergency Fund

-Contributions to any savings account

-Contributions to a retirement account – such as a 401K, an IRA, or a Roth IRA.

-Paying down any debt- such as a student loan, a credit card, or accelerating your mortgage payments.

-Contributions to your child’s college fund- such as a 529 Plan.

So here’s how to live the anti-budget life:

The second you get paid, decide on a percentage of your income to contribute towards savings.

2. If you never save anything, you can start with as little as 1% to save. The way to figure this out is to simply knock 2 zeros off the amount. So if you get paid $2000 biweekly, contribute $20 every time you get paid. Make $1000 biweekly, contribute $10 every time you get paid.

3. If you’ve been saving already, for retirement, for a house, to pay down credit card debt, to have a good emergency fund- saving for anything really- then you can easily incorporate this tactic to make saving money even easier. Whenever you make any money, save a certain percentage towards any and all of your goals. I usually do it this way- the second I get paid, I put 10 percent towards my emergency fund, 10 percent towards retirement, and 10 percent towards throwing extra money at my student loans.

With this tactic, you can then try not budgeting the rest but instead spend it comfortably knowing that you’ve already saved what you needed to.

Of course, you’ll need to make sure your bills, like rent and utilities, are paid before you spend the rest freely, but you will still be able to spend without budgeting every dollar.

Check out another anti-budget budget article by the awesome finance blogger and podcaster Paula Pant of Afford Anything- she lives by this strategy and goes into immense detail about it in The Easiest Budget to Follow- Shockingly Simple.

Give this strategy a try, especially if you hate budgets, and let us know how it works for you! It’s nice and simple!

Saving Money By Living Like You’re in the Depression Era

July 6, 2016 By janersays in Money Tags: Savings, thirties Leave a comment

Growing up, my parents were pretty amazing at saving money. Just to name a few of things they did to save money, they brown-bagged their lunch to work, compared grocery store circulars from several markets before purchasing anything, organized food plans for the week depending on what was on sale, and joined our buildings’ co-op board so that they could be watchdogs on how the building was spending money, which would ultimately affect their maintenance costs and property values.

They instilled a lot of wisdom in me, but more than anything, the idea that has stayed with me the most is: it’s not how much money you make, it’s how much money you save.

The thirties are a time for building your nest egg, creating a solid financial foundation for yourself and potentially your family. And since I don’t make a lot of money (right now…), I take this adage to heart.

Lately, I’ve been really contemplating every single purchase I make. I try to be mindful about each dollar leaving my wallet. From the smallest items (gum, a bottle of diet coke, etc.) to larger purchases like clothing or new shoes.

This reminds me of a quote my parents used to repeat to me whenever I wanted to buy something new (well, not always, but often enough that I remember it.)

They would say,

“Use it up, wear it out, make it do, or do without.”

Until today, I didn’t realize this was a common household aphorism during the Great Depression. But it works and always. Especially in light of the whole Marie Kondo organizing movement of keeping only items that “spark joy” and also of a surge of people adopting a more minimalist lifestyle. Check out this woman’s blog, Make It Do. She decided to not buy anything for a full year except what she used up or wore out.

For me, I’m not going to be as extreme, but I do want to be mindful about every dollar I spend, in much the same way that I try to be mindful about everything I eat.

Would you adopt a spending diet? What’s your relationship to money?

Should I Play the Lottery In My Thirties?

January 25, 2016 By laurasomewherelse in Friendships, Money Tags: dream, finance, gambling, investment, lottery, lotto, Money, powerball, Ramit Sethi, Savings, thirties, thrity, tools Leave a comment

Last week the Powerball jackpot was 1.5 billion dollars. A bunch of my friends bought tickets and a few of them even won…four whole dollars.

When one of my friends first told me he went and bought a bunch of tickets, I’ll be honest, I was little upset with the idea. He asked me if I was going to buy any myself, and I replied with a haughty, ‘no, I think I’m going to invest my money and save it, thank you very much.’

I kinda felt amazingly proud of myself- the lottery (and gambling in general) are things that I can easily control my response to and I value that about myself. I have insane self-control when it comes to spending money on things that I consider wasteful. I don’t know if I’ve ever purchased a lottery ticket- maybe I bought some for an ex many years ago.

However, something about my own response bugged me- was it really so bad to buy lotto tickets? That same week, I received an email newsletter from a writer I love, Ramit Sethi. He was talking about how silly it is to discourage people from buying lotto tickets, because, in a way, you’re discouraging them from dreaming. Ironically, he was actually writing in response to bloggers who scoffed at people who bought lotto tickets. He said:

Their articles [finance bloggers] reflect a total lack of understanding about WHY people buy lottery tickets. Hint: People who buy lottery tickets don’t really expect to win. People know the odds are astronomically, cosmically against them. So why would they do it?

The answer: They’re buying permission to dream about winning it.

If you think about it, $2 for a dream is well worth it. If you live a life where you’re counting pennies, isn’t it worth paying $2 for the dream of becoming fabulously wealthy — even if just for an hour? Hell, if you live a humdrum life of $60,000/year with 2% annual raises and one 2-day vacation a year, you can see why people would crave an escape.

By the way, there are a LOT of other ways we pay for an escape: Movies, fancy clothes, and so many more things. Isn’t it funny how lottery tickets cost less, but incur more wrath from judgmental people? It’s fun. It makes you feel good, and that’s a great reason to spend $2. OF COURSE lottery tickets are mathematically stupid. So is going to a bar to meet someone…but we do it anyway.

I never really thought about lotto tickets that way, but they’re a tiny price to pay to dream about something way bigger and more exciting in your life. Sure, we can all visualize and meditate and dream for free, but any tool that helps you feel happier and more passionate about life, is harmless, and only costs a couple of dollars, is absolutely, totally worth it. Use the tools that you discover- little indulgences here and there can help you feel better and dream exponentially bigger. Make the ‘silly’ choice sometimes.

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Have You Been Taking Advantage of Compound Interest in Your Thirties?

December 30, 2015 By laurasomewherelse in Money Tags: compound interest, compounding, Credit card debt, dollars, eighth wonder of the world, einstein, finance, IRA, Roth IRA, Savings, snopes.com, wonder of the world 2 Comments

compound-interest

“Compound interest is the eighth wonder of the world”

“The greatest invention of mankind is compound interest.”

Albert Einstein is attributed to have said some version of all of these quotes. Whether he did or did not actually say this remains to be determined, but the truth is that compound interest really is a force to be reckoned with.

Compound interest can cause your retirement fund to grow way more than what you could’ve contributed yourself, and you can end up living on what you never could have saved up in your wildest dreams. $5000 invested at the age of 18 in a Roth IRA and left alone can turn into half a million dollars by the age of 72 with an average 9% interest rate.

$5,000 + compound interest magic + time= $500,000 for you

Compound interest can also get you in tons of credit card debt- the kind of debt that you couldn’t imagine wracking up in your wildest dreams. $5000 of credit card debt at a 22% interest rate would become $44,235 in 10 years.

$5000 + compound interest + time (not much) = $44,235 owed to your bank.

Now that you’re in your thirties, make sure you’re aware of this miraculous compounding power. You can make compound interest work for you, or you can let it wreak havoc on your financial life, but either way, you have to start now because compound interest compounds fast, and waits for no one.

If you learn one financial lesson in your thirties, let it be this one- use compound interest wisely and start now.

Here’s a chart of $5000 invested in an IRA at age 18, untouched until age 72, at various interest rates. If somehow you averaged a 13% interest rate, that $5000, without ever adding another penny, would become over 3.5 million dollars when you retire. Now that’s some powerful magic.

rothchart

What Are My Retirement Account Options If I’m Self-Employed in My Thirties

December 3, 2015 By laurasomewherelse in Money Tags: 401(k), contribution, Debt, individual 401k, Interest, IRA, Job, Money, Retirement, Roth IRA, roth solo 401k, Savings, Savings Account, self-employed, sep ira, simple ira, solo 401k, Student loan, thirties, Thirty 2 Comments

So hopefully by now you’ve opened up your Roth Ira or Traditional IRA. Even if you’re not self-employed and have a 401k plan at work, it’s still a great idea to open up a Roth, and it’s never too late. Here’s how to open a Roth IRA right now.

If you already have a Roth IRA and/or a traditional IRA, you probably know that the maximum contribution you can make to both (total) per year, as of 2015, is $5,500. Then you have to wait till next year to contribute another $5,500. If you’re 50 or older (and if you are, you’re awesome and I appreciate that you’re still reading our blog about the 30s), you can contribute an additional $1000, totaling up to $6,500.

Because I’m still paying off my ridiculous NYU student loan, $5,500 a year is about the most I can contribute to my Roth IRA anyway right now. But that won’t be always be the case. So what happens when I want to contribute more than the $5,500 a year Roth IRA cap, but I’m self employed so I can’t open up a 401k at my workplace?

There’s a solution. There are actually multiple solutions.

A self-employed writer friend of mine recently told me that she’d hit the limit for the year on her Roth IRA and was currently holding on to extra money in her bank account while making less than 1% interest (most bank accounts and savings accounts are 1% interest or less). “Roth IRA’s have such a low cap,” she said to me, “$5,500 compared to $18,000 in a workplace 401K. Are we completely at a disadvantage since we’re self-employed? What should I do?”

Holding onto your extra retirement money in your savings account is not a good solution, because your money won’t earn enough interest for retirement. You should, of course, have an emergency savings account, but that account is different from your retirement fund. So without further ado, here are some great choices for retirement accounts if you’re self employed. And these are IN ADDITION to your Roth IRA (which I hope you’ve opened!)

My favorite option: The Roth Solo 401K (also called the Roth Individual 401k)

Why it’s great: You can contribute up to $18,000 in 2015! That’s fantastic, and is the same contribution limit as the one on a 401k you’d get working at a “real job”.. (most day jobs). Also, there are Solo 401Ks and Roth Solo 401ks, but I love the Roth, because all the money compounds and gathers interest in your account for years and years, and when you receive it after retirement, EVERY PENNY will be tax free. AMAZING!

Drawbacks: If you have employees, you can’t open one of these. Only you and your spouse can participate. Also, if you’re self-employed AND working a day job, you’ll be able to contribute only $18,000 to your workplace 401k and your Solo 401k TOTAL (so probably not the best option for day-jobbers with workplace 401ks).

How to open a SOLO 401k: You have until December 31st. Try opening one at Vanguard, which is my favorite place to open Roth IRAs because of the low to no fees involved.

Another Good Self-Employed Reirement Fund Option: The SEP IRA (Simplified Employee Pension Individual Retirement Account)

Why it’s good: You can contribute as much as 25 percent of your earnings to this IRA, up to $53,000 for 2015. That’s a lot of money! Also, this IRA is very simple to set up. You can probably set one up online in 15 minutes or so.

Drawbacks: You’re not able to make the SEP IRA into a Roth SEP IRA. This is a major drawback, as you’re able to take tax deductions now (every dollar you contribute to your SEP IRA you can write off your taxes now, which is nice), but when you withdraw money in retirement, every penny will be taxed, including all your investment earnings. This is helpful right now for a tax write-off, but not good in your retirement years. Also, this plan may be costly if you have employees, as you’ll have to contribute for them as well.

How to open a SEP IRA: Again, I usually recommend Vanguard, but do your research. T Rowe Price and Fidelity also looked like good options.

Great Option if you have employees: SIMPLE IRA (Savings Incentive Match Plan For Employees)

Why it’s great if you have employees: The SIMPLE IRA was basically designed for self employed business owners with employees. If you have a few employees, maybe 3-10, and they make more than $5000 a year, but way less than 100K, this is a good one for you. It’s also easy to set up and should take you 15 or so minutes online.

Drawbacks: If you have more than 100 employees, the SIMPLE IRA might not be the right plan for you- this was designed for smaller businesses. Also, if you have a day job with a 401k, you’ll be able to contribute only $18,000 to your workplace 401k and your SIMPLE IRA TOTAL (so probably not the best option for day-jobbers with workplace 401ks). The deadline was October 1 to open one for 2015, but you can still open one for 2016.

How to open a SIMPLE IRA: Here’s Vanguard again, and you can also try Scottrade, Fidelity, and T Rowe Price.

Hope this was helpful! Enjoy your awesome self-employed life while you build just as big a nest egg as your friends with day jobs!

The glamorous world of working from home a lot when you’re self-employed (hint: not so glamorous).

Budgeting in Your 30’s When You Hate Budgeting

October 27, 2015 By laurasomewherelse in Money Tags: 401(k), 80/20 budget, budget, growth, investment, IRA, Money, paycheck, Retirement, Roth IRA, Savings, spending, Student loan, thirties, Thirty, wants and needs 3 Comments

For all the writing I do about finance and money goals, I really hate to budget. I just can’t stand it.

Perhaps this is because I’m already a big saver, so when I want something, I usually REALLY want it, and not much is going to stand in my way. I hate not listening to my own written budget, but I wouldn’t listen if I really wanted something badly, so I feel like I’d probably go over budget lot of the time, and then I’d kick myself. Ok, so this is actually a self-control issue.

I walked around forever with budget hatred burning a hole in the pit of my stomach until recently, when I read an article and realized I’d been kind of following an unofficial budget strategy all along. I googled the info in that article and came upon even more articles that outlined alternative budgeting strategies. Turns out, I naturally follow a common budget strategy called the 80/20 budget, though my version is actually a 70/30 budget.

The 80/20 budget is basically the simplest and least detailed way to budget ever. And I love it, because the details of budgeting make me nuts. Here’s how it works: when you get a paycheck, 20 percent goes to savings. The rest is fair game to divide between needs and wants. That’s it.

This is kind of amazing if you’re never sure how much you’re going to spend in any given month- no matter what, you’ll still be saving. I do a 70/30 budget, or actually a 70/10/10/10 budget, which is only slightly different than the 80/20. The way it works is:

I get a paycheck
I put 10 percent in my retirement account immediately
I put 10 percent in my savings account immediately
I put 10 percent towards my student loan immediately (this is always in addition to the minimum monthly fee I pay)
Then the other 70 percent is divided as best I can among EVERYTHING else without making a budget.
Within the 70 percent, my NEEDS include: Rent, utilities, and student loan minimums (definite needs), as well as food, metrocards (transit), laundry money, and toiletries.
Also within the 70 percent are WANTS including: eating out and or/drinking with friends, food and coffee and green juice splurges, new shoes or clothes, tickets to theater, subscriptions to Spotify and Hulu.

Don’t get me wrong- it’s probably best to actually budget everything out little by little with a food budget, a clothing budget, and an eating out with friends budget. But I’ve never done this, and I don’t know if I’d stick to it if I did. So I think it’s better to at least have SOME sort of budget! And with the 80/20 (or 70/30, or even 60/40) budget, you’re at least still saving. If you don’t have students loans, I’d recommend putting at least 10-15 percent of your paycheck immediately into your retirement account, and then 10-15 percent immediately into a savings account.

What’s funny about taking a certain percentage out of your paycheck right away and paying down a debt and/or putting it into savings is how little you notice that the money is gone. It’s a strange phenomenon! Try it if you don’t believe me. Take 10 percent out of your paycheck immediately each month and put it into savings…you probably won’t even miss it! And if you do, you can always take it back. I wouldn’t recommend it…but the whole point is that your savings account belongs to you! 🙂

Is a 0% Interest Credit Card Just a Blatant Lie In a Pretty Package?

September 1, 2015 By laurasomewherelse in Money Tags: 0% interest, balance tranfer, credit cards, deffered interest, dollars, fees, finance, Money, podcast, Savings, Suze Orman, thirties, waived interest, zero percent interest 1 Comment

Oh my god!! A zero percent interest credit card?? Does that mean I will have unlimited money and can buy whatever I want forever in my thirties? And then I can simply pay money back super slowly until I die…. interest free?

Short answer: no.

Long answer: no.

I mean, come on.

I was listening to reruns of The Suze Orman show podcast the other day (it has sadly gone off the podcast air this summer) and a few people mentioned using a zero interest credit card and asked Suze for her advice.

I remember the first time I heard about zero interest credit cards. I thought to myself “what the heck is a zero interest credit card? Why would card issuers would give someone money interest free? In what way would credit card companies benefit from this?”

Here’s a simple answer: zero interest offers always expire. And card issuers almost always benefit.

Here’s another simple answer: zero interest credit cards are usually a bad idea for the consumer. And then card issuers benefit.

Here’s why:

Let’s start with the way zero interest credit cards work:

There are two different kinds of zero interest credit cards: deferred interest and waived interest.
For both types of 0% interest cards, the 0% interest rate only occurs for a certain period of time (say, 6 months) and then expires.
For both deferred and waived interest cards, after the 0% interest rate expires, the new interest rate is EXORBITANT- more than almost any other type of credit card. It could be as high as 26%, which is basically highway robbery.
A deferred interest card is VERY bad, and a waived interest card is not much better. Here are the differences between the two:

a) For a DEFERRED INTEREST 0% interest card, interest is actually accruing during the special 0% promotion period (that certain amount of time I mentioned above when the card is still zero percent), but it’s being deferred. So if you buy something on a 0% credit card that’s 0% for 12 months, interest occurs during those 12 months. but you won’t have to pay it until month 13. If you pay off your original purchase by month 12, you never have to pay that interest. But if you haven’t fully paid off your purchase by month 12, you get hit with THE FULL YEAR OF INTEREST CHARGES!!!

So lets say you bought a $1000 bed on a 0% interest credit card that is deferred for 12 months. Let’s say that card has a deferred 23% interest rate. This means that about $20 in interest is adding up on your card every month. You won’t have to pay any of that interest for those first 12 months, but the card company has a record of it. If you pay off that bed within 12 months, you’ll never have to pay the interest. But if you just pay the minimum every month, the SECOND those 12 months are up you’ll be hit with a $240 deferred interest bill PLUS interest will continue accruing on anything you didn’t already pay off!! At a whopping 22% a month interest rate! This is terrible.

b) For a WAIVED 0% interest rate, lets say you bought that same $1000 bed on a 0% interest credit card that is waived for 12 months. Let’s say that card also has a waived 23% interest rate. This means that for 12 months no interest is accruing on your card. If you pay off that bed within 12 months, you’ll never have to pay any interest. But if you don’t finish paying the bed off, the SECOND those 12 months are up you’ll be hit with a 22% a month interest rate! This is pretty bad, though not as bad as the deferred card.

Credit card issuers count on you being dazzled by the zero percent interest rate and simply impulse grabbing one of their credit cards to make a big purchase. Don’t fall for it!! You’ll likely end up paying way more in the long run!

And if this hasn’t yet convinced you not to get a zero percent interest card, here are two more evil tricks 0% interest card issuers may be playing on you:

For some 0% interest cards, if you’re late to pay or miss even one payment, the 0% interest offer is negated, and you’ll end up having to pay interest right away- before the 0% promotional period is even up! And it’ll be higher than other credit cards!
Also, on some 0% interest credit cards, the 0% offer is only good for the first major purchase, and not the purchases thereafter. So if you continue using that 0% card, it won’t be zero interest anymore for anything other than your first purchase!

Read the fine print on 0% cards. And of course, if you can, avoid purchasing things that you couldn’t afford without a credit card anyway. A lot of times when it comes to interest rates, credit card companies are selling you very blatant lies wrapped in very pretty packages.

How to Save Stupid Crazy Money on Travel in Your Thirties..or.. Oh the Places You’ll Go..While Barely Traveling!

July 12, 2015 By laurasomewherelse in Friendships, Money Tags: cheap, city, fire island, free, governors island, highline, hometown, Money, Savings, spa, staycation, thirties, thisborderlessworld, toronto, travel, vacation, whitney 6 Comments

I love travel, but I love New York more. If I had to pick whether to travel and never return to New York, or whether to stay in New York and never travel again…I must admit, I’ve just stumped myself with that one…

Anyway…I’m lucky and grateful that I never have to decide between those two options. And I’m also lucky that I get to travel all the time for work, but during the summer, the work travel slows almost to nothing. And it’s during this time that I travel the most of all! But I don’t have to go anywhere! And I don’t have to spend any money.

I will explain.

I used to have a travel blog where I’d talk about traveling all the time. Ironically, I didn’t actually ever travel for pleasure during this time – only for work- because pleasure trips cost too much money for me. Since I’m still paying off my student loan– which I’m gonna kill dammit…soon..I save a lot of money by not taking vacations.But I found a kind of travel that costs me almost no money, is just as pleasurable as pleasure trips, and never takes up a lot of time. I go on staycations! I travel completely within New York, and see lots of exciting places..even ones I’ve somehow managed to miss during my 30 years living here!

My friend Amy does this best. She’s an expert staycationer who both staycations and travels the globe. No matter whether she’s exploring Greenpoint, Brooklyn, or wandering around Tokyo, she always goes alone. It’s pretty amazing and inspiring. She always finds great places to see and new experiences to have.

Amy recently walked the the George Washington Bridge and the Brooklyn Bridge in one day!

So here’s how to save stupid crazy money on travel in your thirties and go on summer staycations instead:

1. Look for free or cheap summer things to do in your hometown

I happened upon yoga in Bryant Park one day..I’d forgotten that it was a summer thing in New York. Pretty neat.

2. Find somewhere you’ve never gone in your city or hometown and go there.

My friend Zach and I recently went to Governor’s Island- a little island off the coast of Manhattan- home to a bunch of museums, and gorgeous views and great picnicking areas. It cost me a grand total of $2.00 for the ferry.

3. Go to an area in your hometown/city you’ve been to but find a street or ave you’ve never seen before.

Saw fireworks on the boardwalks of Long Island City, Queens. Somehow I’d never been there before.

4. Go somewhere you’ve already been, but never appreciated as a vacation spot..and call it your vacation day!

I love Fire Island beaches- and with 32 miles of beaches, there’s always more to explore.

5. Go somewhere in your hometown/city that just opened!

I went to the new Whitney museum off the Highline recently ..it’s brand new!

6. Go to a place you’ve been to before but pretend you’re in Europe. Or Canada. Or America if you live in Europe or Canada. You know what I mean.

Ferry off the coast of downtown Toronto

Ferry off the coast of downtown Manhattan.

7. Go nowhere, stay at home, and say you’re on vacation. Turn off your phone. Disconnect wifi. Call it ‘mental spa week.’

Ahhh, I’m starting to feel better already just thinking about mental spa week.

Doesn’t a summer staycation sound good? Give it a try! It’ll seem even better after you take a look at your bank account and still have all of your hard earned money left 😉

Are You At Your Income Happiness Cap?

July 3, 2015 By laurasomewherelse in Money Tags: future, Happiness, Income, joy, maslow, needs, provide, pyramid, Savings, security, thirties 5 Comments

I’ve known for awhile that there’ve been scientific studies showing that your income correlates with your level of happiness only up to a certain amount and then caps off. This is an interesting tidbit to remember in your thirties, as your income possibly grows more than it has when you were younger.

A study in 2010 found the income level happiness cap to be $75,000. So according to this research, you’d get progressively happier up to $75,000 in income and then your happiness level would remain consistent. Let’s adjust this for 2015 inflation and then adjust it once again for a major city like New York, San Francisco, or LA, plus let’s be generous, so we’ll make the number $120,000.

Now, $120,000 a year is a good chunk of money for someone in their thirties, and nothing to scoff about even in New York, especially for one person and not a household. If you made $120,000, do you think you’d be significantly happier making $140,000?

I guess it depends on who you are, and how well you know yourself. I believe happiness definitely caps at a certain income level… that level might just be different for different people, but it’ll still work the same way.

I believe there’s a Maslow’s pyramid of needs associated with income. If you don’t know about this pyramid, click the link above…Maslow’s pyramid is a very clear way to view how our goals are naturally set up in life.

Ok, here’s a stab what I think the income pyramid of needs is:

1. Providing basic security items such as paying rent and buying food.

This is the basic bottom level of what money needs to provide- food and shelter.

2. Adding personal touches to our basic needs

At this level, you don’t only eat and pay rent, you can also buy a specific soap you like for your home, and buy a nicer can of beans than Goya.

3. Some disposable income

Once you get to this level, you can move beyond simple food and shelter and possibly go see a movie, or have dinner with friends

4. A good amount of disposable income

Here’s where you can purchase bigger items such as higher education, a vehicle, and a big screen tv. Of course, this is where a lot of people get into trouble and get stuck. Debt occurs the most at this level.

4. Money for the future and savings

This is a major jump that some people never get to. At this level, you’re mostly out of debt or on a good payment plan, and are setting aside money in a savings account and a retirement fund.

5. Money to give away

At this level, you have all the money you need, and your future accounts are funded. Now you can really help others. This is a nice, happy level to be at.

Beyond the last level, I guess you can give even MORE to others, or sock even more money away or buy a ranch and a bunch of ponies or something, but it’s all extra from there.

So maybe it’s actually not a yearly income thing- maybe people simply need to make enough money to climb to the top of the pyramid, and then more money doesn’t really bring more joy.

What do you think?

How Much Should I Be Contributing to My Retirement Account in My Thirties?

May 6, 2015 By laurasomewherelse in Money Tags: 401(k), 401k match, finance, IRA, Retirement, Roth IRA, Savings, Suze Orman, suze orman show, thirties, Thirty 4 Comments

The Suze Orman Show recently went off the air and I’ve been heartbroken ever since.

I never watched Suze on tv, but I listened to her show religiously, podcast-style. After all, Suze’s money commentary was addictive, and she dispensed the good advice to give up cable, which I haven’t had in years to begin with.

There are so many points Suze repeated over and over that made simple what used to feel so complicated in the world of money. She kind of changed my life. In tribute to her, my next few money posts will be as short and simple as possible- her best ideas were short and powerful and repeated time and time again.

So here’s how much you should be contributing to your retirement account(s) in your thirties:

1. First, if you are an employee (and not an independent contractor) make sure you are actually signed up to contribute to your work 401k. Are you SURE? I have so many friends who thought they were signed up for years but actually weren’t. So they contributed ZERO…by accident. Double check.

2. Second, if your workplace offers a 401k match, contribute money into your 401k up to the match. Then stop and contribute to your IRA or Roth IRA.

3. If your workplace doesn’t offer a 401k match, or you’re self-employed, start out by contributing the maximum to your IRA or Roth IRA. Don’t know how to open an IRA? Read about simple ways to do so here.

4. You can contribute up to $5,500 a year to your Roth IRA OR your IRA. Total. Try to hit that mark. If not, do what you can.

5. Contribute what you can to that IRA or Roth IRA. This is your main retirement vehicle. I try to contribute 10% of my income to my Roth IRA. Many financial advisors recommend 15%…I’m not ready for that yet, but once I finish paying off my student loan I will be.

6. If you max out both your 401k MATCH and ALSO your Roth IRA or IRA, then go back to your 401k and contribute as much as you can. You can contribute up to $18,000 in 2015.

7. If you don’t have a 401k because you’re self-employed like me, and you’ve maxed out your Roth IRA or IRA (good for you!), then you can start contributing to special retirement accounts for the self-employed. Learn about those here.

Hope this helps you learn how to save for retirement! Please ask any questions you have- I’m happy to answer or find you answers! 🙂

The Most Common Tax Questions in Your Thirties- Part 1

February 17, 2015 By laurasomewherelse in Money Tags: 1099, accountant, deductions, Interest, loan, Money, Savings, tax, taxes, thirties, Thirty, w2 2 Comments

Oh man, it’s getting to be tax time soon. Has anyone already filed their taxes? If so, good for you! Kudos!

I’m still working in Chicago right now and won’t be able to get all my 1099s together and ready for filing until I get back to New York. I have things moderately organized, and I even have an accountant, but my tax preparation still requires quite a bit of effort- especially since I sometimes end up with over a dozen 1099s per year (!)

In honor of the advent of tax season, and taxes starting to be on the forefront of everyone’s mind, I’ve compiled a list of common tax questions that are relevant to those of us in our thirties. The first few are pretty basic ones which you may have already figured out, and then they get slightly more detailed. Of course, tax answers are rarely simple, so you should make sure to triple check everything for your own personal situation. And I’m splitting this into sections, so you’ll get more tax question and tip articles as April 15th approaches.

1. Should I use tax software this year? Which program?

I used to use H&R Block’s tax software, which I think is pretty good. It’s about $20 for a basic program, and $65 for self-employed software.Turbotax is also quite popular- and it’s base cost is free. Once my self-employment taxes started to get really complex, I hired an accountant.

2. Should I get an accountant?

Only you know whether you need an accountant based on your personal situation. However, I think you can almost definitely make do with simple tax software if you are an employee with only one job and all you need to file is your w2. If you have side income from anything (rental income, side jobs, etc), you may want to consider an accountant- however, I think you still may be able to use tax software successfully. If you’re self-employed, I recommend considering an accountant, if only to protect yourself from accidental audit triggers. You can even find accountants on Yelp now. My goodness, I love Yelp.

3. How much do accountants cost?

CPA’s (Certified Public Accounts) charge anywhere from $150-$400 or more. But you can definitely get a great accountant for less than $400…read those Yelp reviews. A funny bonus of having an accountant is that your tax prep fee is actually tax deductible!

4. Does last year’s tax refund count as income this year?

The answer to this is almost always no if you took the standard deduction. If you itemized your deductions, it may count as income- look into it.

5. What documents do I need to do my taxes?

You need all your w2s (if you work only one job, you’ll have only one w2).

You’ll need all your 1099s if you’re self-employed or have side income.

Also, it’s important to have documentation of any interest you made on any of your savings or investments (you get taxed on this).

Additionally, you’ll need documentation of any interest you paid so you can deduct that from your taxable income (the interest paid on student loans, etc, is tax deductible). Also, if you’re itemizing deductions, you’ll need your receipts, or a spreadsheet of your receipts if you made one. (You won’t actually need to show anyone the actual receipts (except your accountant) unless you’re audited.)

6. If I made very little money this year, do I still have to file taxes?

Officially, for 2014, if you’re under 65 and filing as single and independent, you don’t actually have to file your taxes if you made under $10,500. If you’re married and filing jointly and under 65, the number is $20,300. Here’s a chart with more details. However, you may still want to file taxes for several reasons- one of which is that if you had taxes withheld, you can’t get your tax refund without filing. Here are a few other reasons.

7. What are some deductions I can take to help reduce what I’m paying on my taxes?

Have you deducted the interest you’re paying on your mortgage or student loan debt? Have you deducted your health care costs? Did you spend lots money to move for your job? There are some great deductions you may not be using to your advantage. Mashable goes into fantastic detail on this here.

Hope this has helped you with some of your questions- feel free to comment below with additional ones- I’d love to hear from you! Look out for more tax info here soon, and good luck filing!

Best Savings Accounts as of February 2015

February 11, 2015 By laurasomewherelse in Grab Bag Tags: account, Interest, investment, Money, Savings, Suze Orman, thirties, Thirty 4 Comments

Are you in your thirties and still keeping all of your savings in an account that offers a .03% or less interest rate? Or worse yet, do you not have a savings account at all?

If you’re still keeping your spare change under your mattress, it’s time to open up an account for your savings! And if you already have a savings account, are you getting enough of a return from it? Even if you barely have any extra money sitting around, you can still have some of your money making you money with a better interest rate. You can open a savings account at all the places I’m going to list below with no minimum deposit required. So even if you only have $5 to save for a rainy day, you can still open up a savings account.

Sometimes people ask me: “Shouldn’t I be investing my extra money?” You can do that, but you need to have a savings account first. A major reason to put extra money away in a savings account and not simply invest it all is that you need to have liquid money at your disposal in case of emergencies.

For example, the other day a seltzer water exploded on my computer and killed my keyboard. A bunch of very important keys (spacebar, delete, tab, etc) on my laptop just stopped working, and I ended up having to go to the Apple store and pay 70 dollars for a remote bluetooth keyboard. If the seltzer had gotten to my circuit board and my laptop wouldn’t turn on at all, I might have had to buy a whole new laptop for $1000- $1300!

You never know when emergencies will come up. Sudden layoffs, surprise medical bills, new laptops, parking tickets, surprise taxes and the like all happen, so it’s very important to be financially prepared. Suze Orman recommends having an up to 8 months in an emergency fund. Many other financial advisors recommend even more!

So while you’re saving, get your money to make you more money! This is done by putting your money in a savings account with the best APY, or Annual Percentage Yield (interest rate).

Here’s a list of the best interest bearing, no minimum savings accounts as of February 11 2015. These are all accounts I’ve researched and they have very good reviews. I personally use Synchrony (I started my account when it was called GE Capital) and it’s been great. Again, none of these are sponsored… Haha, I wish :p

Synchony Savings Account (formerly GE Capital) – Current Interest: 1.00% (I know that sounds low, but it’s actually amazing right now. Many banks are at .03% at most.)- Click to start an account for free here!