Boston Gal's Open Wallet

"What's the cash in your pocket that you need to check out of the rat race?" Mr. Thompson asks. "I decided I had to have two years' worth of (living) costs...in very liquid, easily accessible assets." He figured he had to cover a lot of transition costs. That included moving expenses, legacy costs (like the remainder of his lease in his old home), and enough money to support his expenses while he changed careers and ramped up his new business. Saving up to two years' worth of costs may sound daunting. But here's the good news: If you are making this kind of move, you are probably moving from a high-cost part of the country, like San Francisco or New York, to one of the cheaper ones. And your money will go a lot further there.

[...]

How far will your savings get you over the long term? Someone investing their savings conservatively should certainly be able to earn about 3% a year over inflation. If you want to withdraw $10,000 a year and make it last for, say, thirty years, you will probably need to have about $200,000, or twenty times as much, saved up now.

[...]

You might not want to go as far as Mr. Zelinski–"I don't own a cellphone, I drive a '95 Camry, and for two years I lived without a sofa," he says–but the principles he espouses aren't crazy. "You're financially independent if you have $15,000 coming in and $14,900 going out," he says.

How much do you need to be free? Maybe you should ask instead: How much do you really want to be free?

Labels: Frugal Females

She tried to find a full-time job without much luck, because the job market was saturated. Temporary freelance design work couldn't cover her bills.

So in January 2008, she filed for Chapter 7 bankruptcy, becoming one of nearly 1.1 million consumer filers that year.

[...]

"The bankruptcy filings are a warning about the risks now facing middle-class Americans," says Warren, chair of the Congressional Oversight Panel on the Troubled Asset Relief Program (TARP). No longer can they count on a college education, a good job and homeownership to protect them from financial collapse.

"It's horrifying for people who are not used to anything but an upward trajectory," says Bob Anderson, a bankruptcy lawyer in Wilmington, N.C. "They are used to calling the shots."

Schubert agrees.

"I'm a highly educated, middle-class woman," says Schubert, who is the single parent of a 2-year-old son, Lincoln. "Until now, I have never in my life been unemployed."

California moved today to crack down on the sale of energy-gobbling big-screen television sets that now account for about 10% of a typical household's monthly power bill.

After nearly two years of study, the California Energy Commission voted 5-0 to approve the nation's first efficiency regulations for TVs of up to 58 inches sold in the state.

The new standards for TVs, which take effect Jan. 1, 2011, are similar to those imposed on refrigerators, air conditioners and dozens of other household appliances since the 1970s.

[...]

"The average Californian should not see a cost premium," says the LCD TV Assn. "They will, however, benefit from dozens to hundreds of dollars in energy cost savings over their TV's lifetime, thus making the proposed standard extremely cost-effective."

Irvine-based Vizio Inc., a market leader, told the energy commission that it would have no problem complying with the new standards even before they officially take effect.

The commission estimates that switching to more efficient TVs would save an average of $30 per set per year and $8.1 billion in electricity bills statewide over the first decade.

Moving to more efficient televisions would eliminate the need to build at least one large, gas-fired electric power plant, the energy commission says. "Increased efficiency is the most cost-effective way of meeting our renewable energy goals," said commission Chairwoman Karen Douglas.

After Sheffield, she moved to Scotland and worked in a hostel. “I was finishing my writing — I was getting ready to submit my thesis. I saved up a bit of money. I thought, I’ll just move to London, because that’s where the jobs are, and I’ll see what happens. So I did. I submitted the thesis but I was still preparing for the viva — there was quite a lot of writing and studying still to do.

“I couldn’t find a professional job in my chosen field because I didn’t have my PhD yet. I didn’t have a lot of spare time on my hands because I was still making corrections and preparing for the viva; and I got through my savings a lot faster than I thought I would. The difference between living in the Highlands and living in London is massive. I hadn’t really thought that one through.

“I have a pathological aversion to being in debt. My mother’s family are Jewish; there’s this hoarding thing, saving, being prepared — if you’re in debt somebody could come and knock at your door and take it all away tomorrow. It got to the point where I didn’t have quite enough money for my rent. I asked my best friend if I could borrow some money and he posted me a cheque.

“I was looking at this cheque. It wasn’t even the total of my rent; it was a quarter of it or something, some stupidly low amount like £120. I thought, ‘But once I deposit this cheque, I’ll still need money for next month.’ And I couldn’t do it. I couldn’t borrow this money knowing that I couldn’t pay it back and that I’d need more pretty much straightaway. And that was when I started to think: what can I do that I can start doing straightaway, that doesn’t require a great deal of training or investment to get started, that’s cash in hand and that leaves me spare time to do my work in?”

I don’t know that prostitution would necessarily be one’s first choice, I say. Starbucks? Waitressing? Bar work? Bunking down on a friend’s floor? “Yeah, you could work behind a bar. But how many hours would you have to do just to pay your rent? I couldn’t even get an overdraft at that point, though of course once I started depositing so much cash they offered me a mortgage, about three months later! And I wasn’t prepared to borrow from friends or family. To be honest, the writing-up of a thesis takes up so much of your time and so much of your energy.”

So: hookerdom. “Yes. I didn’t object to the concept.”

Beyond income, one's vocation has much to do with accumulating wealth. Educators, engineers, business owners and retail store managers have a tendency to live below their means and to be quite efficient in transforming their income into wealth.

It is the home/neighborhood environment that most explains one's ability to accumulate wealth. It may be useful for people to understand that there are 1,138,070 millionaire households living in homes valued under $300,000. This is far more than the 403,211 who live in homes valued at $1 million or more.

[...]

The typical household should be able to put away 5 percent of their annual income while they are in their 30s, 10 percent when they are in their 40s, and 20 percent when they are in their 50s.

This is also related to satisfaction with life overall. There is a highly significant correlation between satisfaction in life and living in a home and neighborhood which are easily affordable.

What is a good rule if you are determined to become wealthy?

The market value of the home you purchase should be less than three times your household's total annual realized income. Also, if you are not yet wealthy, but want to be someday, never purchase a home that requires a mortgage that is more than twice your household's annual realized income.

Even though everyone at his Boston advertising agency knew layoffs were coming, Erik Proulx was still shocked when he lost his job as senior copywriter last October.

With no steady salary and lots of free time on his hands, the 30-something husband and father of two fired up his computer, created a website, and began blogging about his experiences. “I’ve heard so many people express some kind of despair after losing their jobs. I was one of them,” Mr. Proulx says. “It was important for me to discover in myself that this could be the best opportunity of my life – with the right attitude.”

Soon his website (www.pleasefeedtheanimals.com) was attracting hundreds of laid-off ad professionals who contributed their own experiences of creative projects they’d undertaken. Proulx was so intrigued by their stories that he ended up creating a 40-minute documentary about life on the other side of layoffs. In a strange twist of life imitating art imitating life, Proulx found fulfillment in unemployment by filming the stories of people who found fulfillment in unemployment.

“I’ve been exercising this belief that I have that when you do what you love, money just seems to fall in line,” Proulx says. “That’s fairly cliché, but it’s the truth.” In its final edits, the film – called “Lemonade” – has been sent to judges for the Sundance Film Festival.

“Lemonade” revolves around the lives of Proulx and 15 others who were laid off from the ad industry. Instead of focusing on how unemployment crimped their lives, the film looks at how their unexpected downtime allowed them to follow lifelong passions.

Labels: Smart Spending

Levit, of Paragon Financial Advisors in Newton, crunched the numbers, looking at Werlin’s expenses, the expected return on her investments, and the size of her Social Security payments once she reached full retirement age. The one thing she didn’t factor in was Werlin’s life expectancy. Rather than risk Werlin outliving her money, Levit said, “I just plan for you never to die.’’

The bad news, Levit said, was that her portfolio - built from savings and an inheritance from her father - just wasn’t big enough for her to retire now. If she started taking money out of the portfolio today and wanted it to last, she could take only $34,000 a year, adjusted for inflation - not enough to support a lifestyle that currently costs $41,000. To comfortably make ends meet, however, the former tech-support staffer only had to earn between $7,000 and $12,000 a year for the next 16 years. After that, Social Security would kick in, providing Werlin with the extra funds needed.

“That’s lower than I thought,’’ said a pleased Werlin, noting that Levit’s numbers give her real flexibility in making her next professional move. “Can I find a job that pays $12,000 a year? Yeah, I think I can.’’

Levit’s projections, of course, were based on assumptions, including an inflation-adjusted 6 percent rate of return on Werlin’s portfolio, 3 percent inflation, Social Security payments of at least $12,000 a year, and a continuation of Werlin’s frugal lifestyle. Just how risky were those assumptions?

Labels: Money Stories

As part of the experiment, which was also undertaken by former England rugby star Kyran Bracken and broadcast journalist Rosie Millard, the volunteers had to agree not to work for the week while they lived on the basic pension and to keep a diary of their progress.

Deductions were made from their £95.25 weekly income to take into account the cost of gas and electricity, insurance, mobile phones and cable TV and car usage. Costs were averaged over the year to give a weekly sum.

This left Carly with £58.34 to live on while fellow volunteer Will Rimmer, 26, had £65.06.

Participants had to disregard any food and toiletries in the house or petrol in the car and start from scratch.

Anything they did during the week had to be paid for out of their pension income and could not be supplemented by their savings or salaries. Neither Carly nor Will has started long-term savings plans, so would the experiment shock them into taking action?

After working for more than a decade in New York ad shops, Chuck Hipsher moved to Detroit in 2005. He took a position at the Campbell-Ewald agency, where he helped launch the Chevrolet Silverado campaign. Raised riding in the back of his grandfather's Chevy pickup in Iowa, Mr. Hipsher, 50, says he was "elated" at the opportunity.

He met his wife at the ad agency, and the two had a $40,000 wedding. Kelly Hipsher, 32, was laid off in October 2007 and found out she was pregnant in February 2008. A week later, Mr. Hipsher's pink slip followed. Two months after that, the out-of-work couple moved to Greenville, S.C., to be closer to family and get a fresh start. Together, they had received about $60,000 in severance. "Now we have $600 to our name," says Mr. Hipsher.

Although their rent was cheaper, Mr. Hipsher says the family continued to spend like before. They moved with three cars -- two BMWs and a Chevy Silverado. They continued to buy cases of $36-a-bottle wine. They spent $250 a month on a cleaning lady, and Mr. Hipsher dropped $50 a week on flowers for his wife. The couple still dined out regularly.

"We were stupid," he says. "You become accustomed to a certain lifestyle. When your world changes and things dictate that you change, you're pretty stubborn to give things up."

He sold the BMWs and voluntarily turned in his beloved Silverado to avoid the repo man. "It was heartbreaking," he says. He replaced the fancy wheels with a Chrysler minivan.

Before the layoffs, the Hipshers had no debt. Today, they owe about $70,000 -- including money borrowed from family members and $31,000 in credit-card debt. To hold off the collection companies that call daily, Mr. Hipsher says he is doing his best but is also considering filing for personal bankruptcy.

After a stint selling new and used BMWs on a lot in Greenville, Mr. Hipsher recently began consulting for free for a small marketing firm, "to stay busy."

In September, a Web solutions company hired him as a marketing director. Between salary and commission, he thought he could match half his old income. But so far, he says he's only received about $1,220. Tight for cash recently, he pawned his wife's $12,000 wedding ring for a $2,000 loan. He has until Dec. 28 to pay back the principal, plus $500 in interest -- or else he forfeits the ring.

Looking back, he kicks himself for failing to enforce financial discipline right after losing his job in Detroit. "That precious nest egg is gone," he says.