Frankly I think they should have called it the “Enema Bill” because out our… well, wallets with this bill. Here’s a short video (1:36) that you should watch. If you can’t see the video, click here.
Envelopes a possible cure for financial amnesia.
San Jose Mercury News (San Jose, CA) February 17, 2004 Byline: Caille Millner When it comes to his checkbook, Rashmi Modi suffers from serious memory lapses. site electrical engineer salary
“I just don’t pay attention,” said the 27-year-old engineer. “The money’s there, and then it’s gone.” It’s not as if he doesn’t make enough of it. Modi, who lives in Richmond, Calif., earns about $80,000 a year. He has no debt, but over the past three years he’s managed to put only about $6,000 in a savings account.
Considering his salary, Modi’s fixed expenses are moderate. He pays $850 a month in rent, and he’s planning to drive his 4-year-old Toyota 4Runner until it wears out. But he’d like to buy a house in the next couple of years, and he knows that his saving pattern isn’t going to cut it.
“I just feel like I’m not getting ahead,” Modi said.
So the San Jose Mercury News sent him to Libby Milhalka, founder of Altamont Capital Management in Livermore, Calif. Milhalka describes Modi’s situation as”common _ a lot of people don’t know where their money is going.” To combat amnesia, Milhalka recommends that Modi leave his ATM card at home and stick to an envelope system.
“He should create an envelope for each expense category, like lunches, groceries, and gasoline,” Milhalka said. At the beginning of each week, he should put a set amount of money into each envelope _ say, $30 a week for groceries _ and only use as much as is in the envelope. site electrical engineer salary
An envelope system will also help Modi cut down on impulse spending. He currently spends around $110 a week on books, movies and CDs. That’s almost $6,000 a year, or 9 percent of his salary.
“If he wants a house, he needs to reconsider whether he should be spending this much on discretionary items,” Milhalka said.
Noting that Modi is often late paying bills and therefore gets hit with fees, Milhalka also suggests that he schedule a weekly date for his finances.
“He should use that time to make a budget, pay bills, and review his investments,” she said.
Modi hasn’t been saving in his 401(k), either, which Milhalka says is a mistake.
“He should be using his 401(k) to save for a house,” she said.
Contributions are tax-free, and the tax code allows first-time homebuyers to borrow up to $10,000 without penalty. While raiding a 401(k) isn’t a good idea for everyone, she says, “For Rashmi it may be a good idea because if he buys a house soon, he won’t have a mortgage when he retires.” Modi was surprised at how much he would be able to do with his salary if he makes a game plan.
“I need to save more, and make sure it’s allocated properly,” he said.
___ GOAL: BUY A HOUSE Name: Rashmi Modi Age: 27 Occupation: Engineer Salary: $80,000 What he learned: Organize his finances, keep track of spending and start saving in his 401(k).
___ Distributed by Knight Ridder/Tribune Information Services.
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