After seven years, I'd saved $13,000 to go to Europe for six months. And though I was leaving my job as the development director at a small literary arts center, I offered to continue writing grants for them over the summer. This was a win for all involved; the new development person wouldn't have to worry initially about grant applications, and I'd have additional income. I also now had a husband, which hadn't been part of the original plan for the trip that I conceived when I was 22 and single, but he was a welcome addition to the passenger manifest, especially as he could work remotely (writing math curricula and test prep), lived extremely frugally, and had savings of his own. And while London had been my original goal, my very practical husband pointed out that, with the USD to GBP exchange rate at about $1 to £0.63 at the time, our savings could go further if we chose somewhere that was on the euro, which was clocking in at about $1 to €0.73. So with these slightly altered parameters, we were off to Ireland.
We spent our first three months in Dublin volunteering for the non-profit creative writing center Fighting Words. It was lots of fun and we met lots of lovely fellow volunteers; plus, as it's a sort-of sister organization to the 826 National chapters, including 826 Seattle--where we volunteer regularly--we felt right at home.
However, Dublin was more expensive than we'd predicted (though still cheaper than London!). It was hard to find a short-term apartment and when we did, it was pricier and crappier than we had hoped for. Groceries (especially produce and dairy) were cheaper than in Seattle, but everything else cost more. We burned through more than half of our budget in our first three months, and while that was stressful, it wasn't a full loss: in addition to learning the ins and outs of Dublin, we explored much of the rest of the country and some of Northern Ireland, as well.
Ireland's pricing made Berlin, where we spent our next two months, a pleasant surprise. It was huge, cheap, covered with great public transit, and a ton of fun. We found an apartment that, while spartan, was bigger and cleaner than our place in Dublin, and we split our time between exploring the city, making weekend trips, and working, my husband on his curricula and test prep and me on grant writing, my business, and the freelance writing and editing projects I was beginning to take on.
We dedicated our final month to straight-up travel, bouncing through Croatia, Italy, and Denmark on our way to Iceland, our final stop. It was a wonderful, exhausting whirlwind of stressful airport repackings to try to meet carry-on requirements, Airbnb apartments, and pocketfuls of incompatible currencies. We were very glad that we had established home bases in Dublin and Berlin, though; six months of vacation-style travel would not have been possible (or good for our marriage!).
In my next and final part of this series, I'll reflect on what it feels like to actually do something I spent nearly a decade planning for, and consider some of the good fortune that befell me and allowed me to take this trip.
Photo by Rebecca Brinson. All rights reserved by brassMAGAZINE.
As many do, I became enamored of travel when I studied abroad in college—for me, it was a month in Rome studying poetry. I knew I would want to return to Europe for an extended period of time. I had lived in the same city, Seattle, for most of my life. And I wanted to stay there; I loved it! But my time in Rome helped me realize how much, emotionally and intellectually, there is to gain from learning a new city from the ground up.
I graduated in 2005 and went into non-profit fundraising in early 2006, a field I thought could make use of my otherwise-questionable creative writing degree through grant writing and other communications. I worked in a theater's development department, and in addition to contributing to my retirement account, I set up an automatic savings plan in a high-yield online savings account vaguely labeled "Europe."
For the first couple years, I put in $100 a month. In daydreaming about this one-day journey, I settled on the idea of going to London. I had visited before and knew I loved it, plus, no there was language barrier. I didn't yet have a timeline, but that decision helped me realize that it would still be several years away until my funds were ready (London = not cheap). So as I moved up in the theater and my pay increased (by non-profit standards, anyway), I upped my contributions, eventually reaching $250 a month.
By 2009, I wanted to expand the small company I had recently co-founded, so I left the theater and took a part-time reception job at a non-profit literary arts organization; I spent the rest of my time on my business. Due to my reduced income, I stopped contributing to my savings and retirement accounts for about a year. But eventually, I was promoted to a full-time development position at the literary arts center and was able to resume saving. Again, as I got further promoted, I increased my contributions to $300 a month.
I continued to live frugally, keeping my expenses between $10,000 and $13,000 below my annual gross salary. In addition to my full-time work, continuing efforts with my small business, and some private tutoring on the side, I also earned two nine-month certificates, one in web development and one in editing. However, while I loved parts of being a fundraising professional (like the writing), I knew by then I didn't want it to be my long-term career, and needed other skills. The "Europe" idea started to mean even more to me—in addition to introducing me to new cities, it could mark a time of professional transition. With my goals coming into focus, I further trimmed expenses (fewer drinks out, clothes shopping primarily at consignment shops, etc.) and upped my monthly contribution to $500.
Periodically, I would review and update how much money I thought I'd need by tracking my typical spending, scoping out local rental prices, and watching exchange rates. Beyond helping me plan, those bouts of research served to make the trip more concrete. Yes, it was a slow process, but I could see the progress I was making. Since I'd be making automatic transfers since I'd started working, I didn't miss the money—it had become second nature. And so, after seven years of saving, I had set aside $13,000, enough for a spare but not-deprived six-month trip.
Find out in my next post if that truly was enough, and how my time abroad helped me change career paths.
Photo by Rebecca Brinson. All rights reserved by brassMAGAZINE.
Fire up a quick Google search for “save $1,000,” and everyone from Dave Ramsey to wedding planning hubs and financial coaches has advice on how to hit the savings target, ranging from eating out less to selling your blood.
With that many savings solutions, perhaps the bigger question is what to do with that chunk of change once we’ve got it. People talk a lot about investing in themselves through a nice professional wardrobe, higher education, or fancy business cards. Ever thought of pursuing entrepreneurship as a way to invest your money?
Launching a business can be a lengthy undertaking with a lot of loopholes to jump through. As I learned while founding both for- and non-profit entities, the tab for legal requirements and filing fees can also add up. Tackling the process in stages and starting now can make a lot of sense.
Not sure how to put your $1,000 to its best startup use? Consider one of these, each of which will run you about a grand:
Protect that great idea. Rapper Ludacris Tell[s] it Like it is – “start up ya own company, trademark the name / That's gon' run ya bout a grand so start savin' ya change.” In the most general sense, a trademark is a brand name, and filing a federal claim to one protects your full and exclusive right to use it. How important a trademark is depends on your industry. Processing fees are a la carte, start at approximately $350, and, as Mr. Ludacris said, quickly add up to about $1000. Once granted, trademarks are good for life with proof of use within 5-6 years and proper renewal every 10 years, according to the U.S. Patent and Trademark Office, making a trademark a good way to invest in your entrepreneurial dream today. Patents, the way to protect designs or inventions, require a slightly different process but cost about the same.
Bring your business to life. While the exact process varies, the first thing an eager business owners must do is cut checks for:
- Officially forming your business and filing with your state. In Texas, where I launched my business, you could foot the bill for filing for formation of an LLC ($300), retail or “seller’s” permits, or an assumed name certificate ($25), but it's generally regarded as startup-friendly. Don’t forget occupational licenses, and postage, notary, or online filing fees to submit your documents. While costs vary, they can quickly total several hundred dollars.
- Opening bank accounts for your business. My bank, for instance, requires a $500 minimum sustained balance to avoid usage fees, which means it cost me $500 to open it.
- Launching an entry level marketing campaign. Print basics like business cards through sites like Vista Print or Zazzle to keep costs low. For websites, options such as a Wordpress-hosted site come in at approximately $150 for a custom domain; for several hundred more you can host through an external service or purchase your own building software, like Dreamweaver.
- Classes, online forums, books, and other resources to teach you how to become a business owner in your state. Libraries are great for general research, but you’re going to want copies you can mark up.
Pay up so you can help others. Filing for non-profit status in most states is cheap; in Texas, the cost is $25. The IRS is going to charge you about $850, however, for federal filing, in addition to the paper and ink required to print the 50-100 page application several times, and the expensive postage to mail it. While this process can be completed without a lawyer, it is much smoother with one, so you may want to keep saving until you can afford legal representation.
While $1,000 is only the beginning, the road to entrepreneurship starts with tangible investment in oneself, and that sum is more than enough to get started. What are you waiting for? Good luck, business builders!
Whether it's a $30,000 salary or $130,000, your first "real job" is probably the biggest income change you'll experience. Sure we'll get gradual raises here and there, and maybe even a major promotion or two, but going from an income of nothing to a full time salary is quite a jump.
As a result, managing your first few paychecks can be difficult. It's easy to overestimate disposable income and end up spending money on things you really can't afford. Rent, food, loan payments, and other necessities are obvious items to add to your budget, but there are other essential expenses you might not realize.
Bad things happen to good people. That's just the way life goes, so you need to prepare for the worst. Layoffs, car accidents, unexpected illnesses; whatever the case, you should have between 3-6 months of living expenses saved to prepare for life's unexpected expenses. It may seem unattainable at first, but saving a little bit at a time will help you reach it. And, once you have 3-6 months of your living expenses safely stored in your savings account, you'll sleep a little better at night.
401K / Retirement
When you're twenty three years old it's hard to grasp the concept of retirement. Why should you save for forty years from now if you're already struggling with money today? Shouldn't you get out of debt first, and then start to save?
Although that might make sense to you, it's not making cents for you. Your early 20s are a crucial component to your retirement saving. Saving even a little now can make a big difference later. If you start saving $1,500 a year at 24 in an IRA, you'll have around $340,000 at 65. However, if you wait until you're 34 to start; you'll have about $164,000--less than half the money.
Christmas / Vacation Club Account Savings
The holiday season falls at the same time every year, yet somehow people still seem to find themselves drowning in debt by the New Year. Instead of waiting until the last minute and swiping your credit card to cover holiday costs, set aside a few dollars every payday.
$20 a month adds up to $240 by the holidays (saving for 12 months starting in January), which can make a huge difference. Some credit unions even offer a designated Christmas Club Account that earns interest. The same concept goes for a vacation, wedding, or any major purchase in your future. If you know it's coming, start saving now.
It takes a few months, at least, into your first job to get a true grasp of your budget. Patience is key. Don't over estimate your disposable income off the bat and start making impulsive purchases--they might come back to haunt you. Just because your checking account balance is starting to grow, it doesn't mean you need to spend it.
On the flip side, don't limit yourself entirely either. It's human nature to seek enjoyment, so you should reward yourself from time to time. Just make sure you're rewarding yourself with money you don't need elsewhere.
Making smart financial decisions in your 20s will set precedent for your future. Having patience and understanding long term goals are two skills you need to work toward, and the earlier you learn, the stronger your financial future will be.
When I finally got to the point where I could start saving some money, I had visions of a steady flow of income from interest payments. So I started shopping for the best rates -- boy, was I given a rude awakening. Savings accounts paying 0.5% interest ; money markets at 0.9%; and CDs not too much better at 1.1% and maybe as high as 3% if I agree to lock up my money for FIVE YEARS. I was looking down the barrel of turning that $1,000 into $1,005 through a savings account after a year -- and that was before any fees. So I started looking for something better.
I found some research suggesting over 60% of the total return in the stock market over the past 20 years has come in the form of dividends, not just the stock price going up. I had to get on this train. How did I find some good ones?
The dividend yield is dividend per share paid divided by the current share price. So, if a company pays $1.00 per share dividend per year and is worth $20, the yield would be 5%. That is TEN TIMES more than a savings account can offer -- worth the risk if you ask me.
Historical Dividend Payments
I leaned towards companies that had lengthy histories -- decades -- of paying dividends to shareholders. I even came across Dividend Aristocrats -- major companies that have increased their dividend for 25 or more consecutive years. Nice!
Low Payout Ratio
This is the dividend per share divided by the company's earnings per share. If a company earned $2 per share and had a $1 per share dividend, that is a 0.5 or 50% payout ratio -- this suggested that there was still room for the dividend to grow and had some margin for error if they had a bad year.
Heeded Too Good To Be True
A search for stocks with the highest dividends brings you some very interesting results -- companies with 10% and higher dividend yields. These can be good investments but can also be very speculative investments. I stayed away from these.
A big pharmaceutical manufacturer caught my eye. The stock was around $25 and paid $1.28 per share of dividends -- a whopping 5.1% yield. I was feeling good. But then, they cut the dividend in half and the stock price fell as low as $15 - ouch. I nearly panicked but remembered my strategy -- I wanted that safe, dividend income. So, what did I do at $15? I bought more. A 64 cent per year dividend at $15 stock was a 4.3% yield -- not bad. A few years later, the stock has doubled in price from those lows and the dividend is now $0.96 per year -- and some analysts think another dividend raise is in the works. The shares I bought at $15? Well, I am earning a 6.4% return on those shares I bought at those levels. Sure, the stock goes up and down each day, but each quarter, the checks keep rolling in. Sure beats a savings account.
There may be more opportunity with dividends than with straight interest bearing accounts, but obviously there's also more risk as well. This isn't the smart move for everyone, but it's an option that's sometimes overlooked for growing your money.
I remember in college hearing friends say, "I can go out tonight; my student loan refund just came through." At the time, I thought nothing of it-- I even had a boyfriend wait for his student loan money to come through to take me out on a date. To us, a $5,000 loan payment hitting your bank account was just that: $5,000. Who cares what you spend it on? Nice restaurants, new clothes- a big TV; it doesn't matter.
Except that it does. Because student debt carries substantial principal and interest payments, it should only be used for its intended purposes--books, school supplies, groceries, rent, utilities, to name a few. It isn't money that should be spent on frivolous expenses, or unrelated activities. Instead, "fun" money needs to come from a job.
For one, if students aren't careful they can wind up unable to afford an actual educational expense because they wasted their student loans on unrelated activities. Also, that new television or weekly restaurant outing with friends may seem like an easy purchase at the time, but it's going to cost you a lot more over time. Why? Interest.
Think about it like this: Let's say you use funds from your student loans to go out to eat throughout your four years of college. On average you spend $40 a month, so around $500 a year and $2,000 for your college career. Look at the difference $2,000 more can make on your monthly payment and total interest paid:
Loan Balance: $20,000
Interest Rate: 6.8%
Loan Term: 10 years
Monthly Payment: $230.16
Total Interest Paid: $7,619.31
Loan Balance: $22,000
Interest Rate: 6.8%
Loan Term: 10 years
Monthly Payment: $253.18
Total Interest: $8,381.04
In a sense, those nights out to eat with friends cost over $750 in interest. That's a lot of money, and for students spending more than $40 a month, it only gets bigger. Or, let's say you're only able to afford a monthly payment of $200. It will take you an additional 2 plus years to pay off the $22,000 than it will to pay back a $20,000 loan.
Students are notorious for taking out more loans than they truly need, and they end up paying for it-- quite literally. You should only use your student loans to fund what you need for your education; everything else should be paid for by money you make from a part time job, etc. No one is there to monitor how you spend this money, except you. So save yourself from the unnecessary debt so many college grads have to deal with, and make smart decisions with your loans.
Finding the right job is an art and it takes you to know yourself and what you like and what you want. Often people search for jobs in their field without paying mind whether the job will fit their needs or lifestyle. Few people have the luxury to turn down a job opportunity, especially how the economy has been. But during a job search it’s important to search for employment in companies that you will be comfortable in. After college graduation, I searched and applied for jobs at every company that had an opening and ended up with jobs that I liked and didn’t like. However, I learned a lot about the atmospheres within different sized companies and all of them have perks and downsides depending on what kind of job that can get close to fitting your lifestyle.
Working from Home
If you are a freelancer or contractor or own your own business, working from home can be a wonderful opportunity or it can be someone’s downfall. A couple of years ago, I worked as a freelance publicist to a small, one-person company. It wasn’t until I started working for her that I realized I didn’t enjoy working from home, sitting at my computer, and sending promotional emails all day. I was happiest interacting with coworkers and customers face-to-face. Also, if you want any kind of success working from home, you have to have excellent time management skills and the keen ability to keep from procrastinating. However, for people who have young children or who just enjoy freedom, working from home can be a viable option.
The Big Corporation (5000 or more employees)
People who prefer to work nine to five, want their weekends off, and like a set structure will enjoy working at a larger company. When working for a company with a lot of employees you end up being exposed to many different points of view and meeting a variety of people. A higher salary, better benefits, and a retirement plan can be a perk as well. However, when I worked for a large corporation, I felt insignificant among so many people, and I had fewer opportunities to stand out and have my work recognized.
The Small Startups (5-9 employees)
Every job has its boring spells and startups are no exception, but often there is more variety and there is a certain level of exhilaration when a small group of people work toward a common goal of creating a successful company. Startups are fast-paced and they require flexibility and adaptability; you are always on your toes and must be ready to find a solution to any setback. I’ve learned more working for a startup than I ever did in any of my other jobs. I may not get paid as well as I did when I worked for a larger company, but I make a large contribution to the success of the company with my diligence and skills.
Everyone is different when it comes to job preference and when looking for a job it’s best to ask yourself what job will fit your lifestyle the best. Do you want a higher salary or are you willing to sacrifice a higher salary for better experience and skill building? Are you willing to work on the weekends or do you want a job with set hours so you can have time for other things? Do you like the idea of a small company or a large company? Are work relationships a necessity for you? Do you prefer working alone at home or at an office in a team? No job can fit all of your needs, but the size of a company can play a large part in helping you find the right job for your lifestyle.
Imagine having a job where you are in complete control. You set your own hours, make as much money as you want and get to do what you love! This might sound too good to be true, but it is possible to take charge of your life when you start a business, whether it is a consulting firm, landscaping service or restaurant. No matter what your age or bank account, the sky’s the limit, and starting your own business is easier than you think. Maybe that’s why there are nearly 28 million small businesses in the United States. Yours could be next – start with these three steps:
1. Identify your dream job or business.
The best advice I’ve ever gotten is “do what you know,” so think about the things you know better than anyone else. What strengths, skills or talents do you have? What interests you (e.g., animals, technology, numbers, food, shopping, entertainment, etc.)? Do you like working with people or do you prefer to work solo? Do you like making things or would you rather serve others in some way? If you could start any business, what would it be?
Do some brainstorming with friends and family or visit your local community college to do a skills assessment to get ideas. At this stage, don’t limit yourself by potential obstacles like time commitments or funding. Consider every possibility, and envision yourself being successful. Which business idea stands above all the others?
If you need some motivation or want someone to help you along the way, there are lots of free resources available. Contact your local SCORE chapter, the small business development center in your community or the Small Business Administration (SBA) for articles on everything from deciding if starting a business is right for you to how to choose the appropriate legal structure.
2. Create a workable plan to make your dream a reality.
It's time to transform your idea into a viable business. The steps you need to take will depend on what type of business you start. For example, opening a coffee shop will have different steps than starting a consulting business. For professional advice, you can turn to SCORE, the SBDC or SBA. For real, front-line experience though, talk to anyone you know who owns a business – maybe your parents, an entrepreneurial friend who started a business in college, or your next door neighbor who started a side business when he retired.
The SBA lists 10 steps to starting a business including writing business and marketing plans, choosing a location (unless it is a home-based business), getting appropriate licenses and permits, etc. In addition, think about the timing of your business. If you already have a full-time job, you might not be able to start your business right away. The income from your current job, however, can provide you with some financial stability while you work out the details of your plan. For example, you could start your business on the side, working evenings and weekends, to work through the obstacles. Think low risk.
3. Fund and launch the dream.
Now that you’ve figured out what type of business you want to begin and have created a plan for starting it, it is time to jump in and make it happen! Depending on the business, this might involve securing funding from outside sources. If you are offering a service such as bookkeeping, landscaping or dog walking, overhead will probably be minimal, so you may not need outside financing. For larger businesses like a retail store or a restaurant, you may want to explore loans, grants and other funding sources. The SBA offers a lot of great resources to help you explore different funding options.
Once you’ve secured funding and have executed your step-by-step business plan, you are ready to open for business. Shout your news from the rooftops. With your marketing plan in place, tell everyone you know about your new business – ask friends and family to support your new venture, share the news on social media, advertise and host an open house to celebrate!
Sounds pretty good, huh? Are you ready to start your own business? In an entrepreneurial economy with countless resources, you are only limited by your drive and your imagination. Go for it!
My 11 year old earned about $200 of dividends last year. She got there by her loving dad investing a few dollars every month into stocks via Direct Stock Purchase Programs (DSPPs). I have been using them for years to build an investment portfolio for myself and my girls. Despite not being a financial professional (ahem, disclaimer), it is where I tell nearly everyone to start if they are looking to get into investing.
What are they?
The name pretty much gives it away. Rather than buying shares in the open market via a stock broker, you buy shares of stock directly from the company.
Why do I like them?
- Many recognizable names offer DSPPs.
For starters, you will feel more comfortable plunking your cash into a company you see every day driving down the street versus one that you have never heard of.
- Low fees and commissions, if any.
DSPPs often have very low fees or are sometimes even free to participate in and to buy shares. This means that more of your cash goes towards buying actual shares versus paying big commissions.
- Invest automatically every month.
You have heard it before – you have to keep saving. Most DSPPs feature the option to deduct funds from your bank every month and automatically buy shares. Some even offer small discounts off the stock’s regular selling price when you do automatic investments.
- Full investment of your cash & dividends.
Good news, there are low initial purchase requirements – sometimes as low as $25. And every dollar you invest goes towards shares. If a stock is at $30 and you invest $50, you’ll have 1.67 shares. Those little fractional shares can add up quite nicely over time.
- Easy access to your funds, but not TOO easy.
In a DSPP, when you need your funds, it may take a few business days to actually get the cash into your hands. That small obstacle to make a withdrawal from your DSPP may be the deterrent you need to keep your funds invested versus blowing it all on hats on a whim.
- Information comes the good old-fashioned way – snail mail.
Read – read – read. If you don’t learn about the business you are investing in by reading their reports, press releases and filings, you’re going to have a bad time (as a certain South Park ski instructor would say). The colorful annual reports you get in the mail will be harder to ignore and easier to pick up instead of an email that gets lost in your inbox.
How do I get started?
Think about a big name or business – maybe your favorite fast food joint or department store. Maybe you have some warm, fuzzy feelings about your cell phone provider? Most offer DSPPs. You can usually find details in the investor relations portion of their web site. Spend some time reviewing any minimums, fees and most importantly, the merits of the investment you are about to make – and if the investment is right for you, you’re on your way to having your first investment portfolio.
According to USA Today, our generation carries an average individual debt of $45,000. With that in mind, the widening pay gap between Boomers/Gen X and Millennials is grounds for considerable worry. Our 100-percent debt-to-income ratio (given an average starting salary of $45,000 out of college) is unhealthy, and our wages seem stagnant. Perhaps we really are the “Stuck Generation,” as Forbes alleges. If that’s the case, then tell me again—why do we keep hearing that we need to save for retirement?
Sure, IRAs, 401Ks, and other acronyms might sound nice—maybe even luxurious—but if we’re not financially solvent, retirement investing becomes just another burden. Our overarching financial goal should be freedom, not oppression.
The longer we wait to pay off our debt (like when we’re dumping money into a retirement account that won’t pay out for another four decades—or so), the longer we’ll have to wait to truly become free. In retirement, we’ll end up spending a good portion of our meticulously accumulated savings to pay for the mistakes of our youth. Let’s be smart.
Being money smart requires the skill of prioritization: rank-ordering our steps to both short- and long-run freedom. Here are four steps to both avoid losing money and gain ever-increasing financial freedom:
- Start an emergency fund. The word “emergency” implies a lot of things, one of the biggest being its inability to be predicted. Rather than let yourself get into even more debt when your car suddenly comes to a halt in a busy intersection, start saving. Sacrifice nice-to-haves for the most critical expenses.
- Pay off bad debt. Back in 2008 I explained the difference between good debt (student loans) and bad, revolving debt (credit cards). Apply this balancing act to your repayment strategies: pay off revolving debt first, starting with the highest interest-earning amounts (interest-earning is a bad word in this context).
- Live the modified 50/30/20 rule. Though challenging, living this rule will help you more clearly separate wants from needs—and get rid of unnecessary burdens. At the very most, 50 percent of your after-tax income should be consumed by necessities (food, housing, transportation); 30 percent, by paying off debt; and 20 percent, by lifestyle choices (we call these nice-to-haves).
- Invest. Notice that this is the last step. After you’ve planned for disasters, escaped the shackles of credit card debt, and changed your spending habits, you’re finally in a position to plan for long-run freedom. Restructure the 50/30/20 rule: keep 50 percent for necessities, move 30 percent to lifestyle choices, and throw 20 percent into investing. Oh, and stay out of unnecessary debt.
Yes, ignoring the high-return reputation of IRAs may be difficult (e.g., if you start saving $100 a month on a 6-percent yielding account at 20 years old, you’ll have over $250,000 by the time you’re 65—over a 500-percent return), but if we don’t stabilize our financial foundation, any riches we build for the future may just go towards another unpaid, maxed-out credit card bill.
Investing early pays off, but only if you’re working with a sound foundation. Escape the oppression of revolving debt, then start planning for a rich retirement.