"It's the Most Wonderful Time of the Year!"

No, its not Christmas in June, but almost - yesterday I got my annual merit pay increase! Woohoo! Not that I didn't know it was coming - I have been looking forward to it for awhile, but didn't know how much it was going to be - I predicted a 3.25% and it came in just a tad higher at 3.52%. Not bad. All other parts of my compensation stayed the same.

Actually, this time of year makes it a great time to go through your W-4's and make sure you're having the right amount deducted. In fact, this is what I did last year (not only because of the pay raise, but also because of getting married) and I will do it again this year. This year I will have to increase the amount that is withheld from my paycheck. Since the first part of last year I was single, the amount that was withheld was quite a lot higher than it needed to be, so I changed the allowances in my W-4 so that I underpaid on the last half of the year. All told, by adjusting the withholding, I netted a measly $200 refund from the government (which made me ecstatic - no free loans to the government)! This year though, it meant that the first half of the year I have been slightly underpaying my predicted taxes - so that's where at least a portion of my raise is going to be siphoned off to.

Here's my process: First, I use MSN's tax estimator. This is pretty easy since I have quite predictable income and for the most part expenses. Then I take the difference between what I've already paid (should be on your pay stub) and what the estimator says I will owe, and divide that by the number of pay periods left in the year. This is what I fill out in the "Additional Withholding" when I submit my W-4. Just as a note, you are allowed to change the W-4 as often as you need to in order to have the right amount taken out of your paycheck. This system ensures that I don't pay Uncle Sam any more than I have to interest free.

Some people are so bold as to claim enough withholding allowances to not have to have income taxes witheld for 10 months out of the year, and then have the full amount withheld from the last two months. This would effectively allow them to bank the amount normally withheld for several months gaining interest. For example, if a person had an estimated tax bill of $4800, and instead of having $400 witheld from his paycheck every month, deposited it in an account bearing 5.00% APY for 10 months, and then had $2400 taken out of his paycheck the last two months, he would net about $103 from interest. This is an intruiging idea, but seems a little too close for comfort for just $100 or so (depending on your actual tax bill).

The Carnivals Are Up!

Just wanted to be sure and let everyone know where some of the carnivals are this week. This was my first time of being involved in a carnival, and I was fortunate enough to get selected in two of them:

RetireYoungandWealthy is hosting the 15th Carnival of Money Stories with a great variety of posts on all aspects of personal finance. You can find the article submitted by your's truly here.

TheDigeratiLife put together the Carnival of Personal Finance: Epic Journey Edition with a nod to Homer's Odyssey. With 91 different articles, it may take as long as Ulysses' journey to read them all, but its a great collection of topics. Great job! My article was a brief one on Obopay.

Well that's all on the carnivals. Hopefully I'll be able to submit more in the future - maybe I'll even host one!

Lesson 8: Spending More to Buy Nicer Things

Being married means that I spend more on nicer things than I would have otherwise. Case in point: The two pictures show the relative differene in my perception of a "dream house" at this point in our lives. The first one is offered for a grand total of $7000, the second, for something like 2.1 mil. While I somewhat jest at the extent of our differences (who wouldn't want house #2?), the fact of the matter remains that as a single individual, I would probably have no problem living in a $7000 hovel. (In some ways, the contrarian glamor of it is rather appealing). Nevertheless, I wouldn't ever want my wife to have to live in a roach infested shack. (See Lesson 9: Living a happier, healthier life). Before I got married, I slept on a $50 futon, which was great for me, but I deemed unacceptable for married folk. We went out and got curtains and rods for the windows (which were perfectly fine bare).

But the real difference is the attitude of buying - not for an immediate need - but for something that is going to last. As opposed to buying furniture made of particle board that will disintigrate at the first sign of moisture, I've bought furniture that hopefully will last for years. Instead of buying tools for a project based on "what's the least expensive", I've bought tools that will last a lifetime (or at least have a guarantee for that long).

Many people buy for "now". They want the DVD/VCR combo, so they buy the Cheap-mart version for $50, as opposed to spending $90 for a version that will last more than twice as long (prices quoted are fictitious with no knowledge of actual prices). Such tradeoffs on price and quality are often difficult to quantify, but can be key to saving big bucks in the future. The way I was raised, if something is worth getting, its worth spending the extra time and asking the extra questions to make sure you're getting the best value. This really is the key, whether you are buying an air mattress, or a house. Having the right information allows you to make a good decision on the tradeoffs between price and quality - sometimes there isn't any difference, sometimes 5-10 dollars can make a big deal. So sure, I do spend more on things now that I'm married. But I'm confident that the extra money I spend has bought me quality, functionality, and value that more than makes up for the dollars of extra price.

The Economics of a High School Student

It's that time of year for high school students to finish up and start having summer fun. Even better, some students are out (or are "encouraged" by their parents) there looking for a summer job. The benefits seem good - even though it doesn't pay much, it still gives you some extra spending money, or even save a little for college. In addition, it may instill some responsibility - getting to work on time, dealing with customers, and employers, your first brush with W-4's etc.

But my family was a little different. I didn't ever have a "real" summer job. Neither did my brothers. Nor did they really want me to get a summer job - even if I had one, I probably would have worked at my dad's business as an electric motor repairman - I'm sure I'll talk more about that in the future.

Why wouldn't my frugal, money-saving parents not encourage their high school students to get jobs? The reason is that we were involved in projects and competitions and community service through church and school that they felt were better uses for our time. In their view, school, and the extra-curricular activities along with it, were my "job". For example, in the summer of my junior year, I worked on a Science fair project that I spent over 200 hrs on. A couple of summers I helped out with my church's VBS camp with over 300 little kids. During the school year, I was involved in competitions from Social Studies fairs to Bible quizzing. Other than the benefits personally, when it came time to apply for colleges and scholarships, I had a resume full of academic and community activities - and folks like to give scholarships to students with full resumes.

So as opposed to a couple of summer jobs that I might have made 3000 or 4000 dollars each, I got scholarships worth $40,000, and $70,000 in addition to a number of other smaller scholarships. It's hard to beat "making" that kind of money for a high school student.

LazymanandMoney had a post with 15 things he would tell himself when he was back in high school. You should check it out!

Obopay: The new way to send money

Here's an interesting new way to send money - it's called Obopay and its supposed to be the easy way to send money - through your cell phone. Currently, the main option for sending money to other parts of the US and the world is through traditional money transfer services such as Western Union and Moneygram. While pretty widespread, these services have a drawback in the fact that you have to physically go to a brick-and-mortar agent location in order to send and receive the money. Enter Obopay. Started in only 2005, Obopay would allow you to send and receive money without having to go to an agent location. On Wednesday, Obopay signed a deal with Verizon, and apparantly can be used on any network in the US. By downloading the software onto your phone and putting in your pin, you are supposed to be able to receive and send money to anyone that has a cell phone. How that works for someone that doesn't have the Obopay service, I'm not exactly sure. But it is an intruiging new twist in the realm of money transfers and finance. Also, I'm not exactly sure how it would work in countries where people often don't have credit cards - Western Union's bread and butter. So it may be awhile before Obopay fully catches on, but it certainly seems like something worth watching. When I find out more information I'll be sure to keep you updated.

Lesson 9: A Healthier, Happier Lifestyle

Ahh..... the days of warmed up hot dogs, and ramen noodles! Ok, really, I don't really miss them very much. Lets face it, as a married person, its a lot more worth it for me to take care of myself, if only because I have someone else around that I want to take care of. I eat better, I sleep more, I would say I probably have less stress, and being married gives me a reason to go out and do more things.

Its proven: Married people live longer! Numerous studies have shown that there are a lot of benefits to one's overall well being and quality of life. While there may not be a direct quantifiable financial benefit, there are definitely improvements to everyone's productivity when they are happier and healthier. Overall, there is probably a slight (at least initial) cost to healthier living - more on this tomorrow. But the improvement in well-being is something that money can't buy, nor something that should have a price associated with it. Maybe in a strict dollars and cents calculations you'd come out a little ahead, maybe a little behind - in the end, who cares?

I've seen a number of posts elsewhere where people question whether financially it makes sense to get married. I would say that the question really misses the point of marriage in the first place. Saving, discussing and planning should be part of the marriage, but shouldn't be the reason for it. I'm thankful that in getting married, I have a life partner that I can share the rest of my life with. That is worth more to me than all the money in the world.

Lesson 10: Travel Costs are Less

This lesson is a pretty obvious one, since my wife and I now live only from one side of the bed to the other (most nights anyway....), as opposed to almost six hours driving. Trying to see her once a month was certainly no picnic on the car miles, gas bill and number of hours taken out of a weekend (but of course it was worth it, honey!).


However, what I want to talk about is making the decision to fly rather than drive. AAA has a calculator that shows the fuel cost for a given trip, but it's pretty simplistic in my opinion. Although the decision can be boiled down to just the cost of gas vs the cost of a ticket, there really is a lot more to try to model into the equation -some of which is difficult to quantify.

For instance, trying to go from Indiana to West Virginia was close to 6 hours of driving. A direct flight could have been only an hour and a half or less, but there aren't any direct flights, and there aren't really any major airports within an hour of either end of the destination. Adding up the total time would have been just about 5-6 hours - not significantly different than the driving time.

There are other costs to flying too - do you have to get a rental car once you are there? Are you carrying more than one passenger? But the decision isn't all weighted in favor of driving - there is additional wear and tear on the vehicle, (arguably) more stress, and the consideration of emissions (if that's your thing).


For major venues that are more than 5 hours away, are only one traveller, and don't need a rental car, flying often is the cheapest way to go. Over Christmas, I was able to get my wife a ticket for back home 10hrs away by car for just under $100. For other situations, especially when there is more than one person travelling, taking the car is usually the cheapest method.

I was highly disappointed that I wasn't able to find a halfway decent comparison calculator that would be able to show the driving time + cost as well as a flying time + cost based on starting/ending points, whether you needed a rental, and number of travellers. I guess I'll have to leave it up to someone else to develop it!