Thursday, July 31, 2008

Return and round-up

Yes, yes, I'm back, and slowly getting back up to speed. It was a good vacation, but sometimes the stress of getting ready for vacation and the stress of coming back from vacation really cut into the net relaxation I get from taking a vacation...

Friday, July 25, 2008

Vacation days: do you use them or lose them?

I'm away on vacation this week, but here's a vacation-themed rerun from two summers ago:

How many vacation days do you get? And do you take all those you're entitled to? According to an article in today's RedEye (the Chicago Tribune "lite"), 574 million vacation days a year go unused in America.

We already get relatively little paid vacation to start with. According to the article, Americans average 14 vacation days a year-- and 25% of U.S. employees get no paid days off (of any kind, including sick days and holidays). Compare that to European countries, where employers are required by law to give 20 or 25 days of vacation. The U.S. is the only industrialized country without laws giving employees the right to paid vacation.

then, even though we have less vacation days to begin with, we still leave more days unused-- 4 a year, on average, compared to 1 or 2 in European countries. So we actually end up taking less than half the amount of vacation as our European counterparts.

The article includes a quote:

Culturally, it might be a matter of priorities: Europeans may prefer to be rewarded for their work with vacation, while Americans like having one of the highest per-capita incomes in the world and are willing to work longer to get paid more, Allegretto said.

That is, Europeans tend to choose time over money, while Americans pick money over time. If you take it a step further, Europeans prefer time, and Americans prefer "things" (yes, I know in some cases people are saving the money, so it's "security" or "time in the future" versus "time now"... but in a lot of cases, really, it's "things"). Obviously these sorts of choices fit into a much larger cultural context, both as far as the relative value of time versus money/"things" as well as how taking time off is viewed in the workplace.

The organization Take Back Your Time is making a valiant attempt to affect this greater cultural context as much as it can. They have a Take Back Your Time Day coming up on October 24th-- nine weeks before the end of the year, because Europeans work the equivalent of nine weeks (360 hours) less a year than Americans on average, between more paid time off and less overtime-- and I will surely write more about it as the time approaches. But I encourage you to check out the website in the meantime!

As for me, I never let a vacation day go to waste, but I also don't always pick time over money. This is a little complicated, but... I get 15 vacation days and 9 comp days (which function the same as vacation, really). I roll over the maximum of 10 days vacation every year (I used all 9 comp days my first year but none of my then-10 vacation days-- mostly because I wasn't eligible to during my first six months, which included the summer-- and have maintained those in reserve ever since), but I've used my full allotment of 10 vacation days in year two, and am on pace to use all 15 in year three. I'm also able to cash out up to 3 unused comp days at the end of each year, and I try to do so, but I also make sure to use at least 6 comp days so I don't leave anything on the table.

There are definitely times I'm tempted not to take vacation because there's too much to do. It's usually hectic and stressful catching up when I get back, and sometimes I feel bad about important work being delayed when I'm not there to do it. But taking time off makes me happy, whether it's for a long vacation, an extended weekend, or just a single day off when I really need it. I like spending time with people I care about, visiting interesting places and doing interesting things, and having time that's obligation-free. And I think in the long run it's good for my performance at work, too; when I've gone too long without a vacation, my focus and concentration wanders and my stress levels increase, and I'm just not at my best.

How much vacation time do you get? Do you use all of it? How do you feel about that?

Tuesday, July 22, 2008

Buying frugal souvenirs that multi-task

I'm away on vacation this week, but here's a vacation-themed rerun from last year!

I'm really happy with my souvenir-shopping on my recent vacation... because I didn't pick up a lot of "just because" souvenirs, but instead looked for things I already wanted or needed. This way I have items that will remind me of the wonderful time I had in Ireland, but instead of adding clutter to my home and straining my vacation budget, they fill needs that were already there.

For example, after moving from Chicago to Washington DC earlier this year, the decor in my apartment has remained rather sparse. One of the reasons I've held off on purchasing things is that I knew this vacation was coming up and I'd have the opportunity to look for art that would be especially special because of the associated memories.

Of course, for this to work well, you have to be patient and only buy things that are really right for you. Nina recently wrote about souvenirs that "don't translate" when you get home from vacation, and that's really true. So you have to be very honest with yourself about what will still seem like a good idea when you get back to everyday life. For me, this meant that I decided that if I couldn't find something that fit my criteria, I wouldn't buy any art at all. I didn't want to get something that reminded me of Ireland but after a few weeks or months ended up in the closet gathering dust! I just kept reminding myself about my plans to enlarge some of my nicest photographs from the trip to put on the walls, and made myself pass up a few items that temporarily tempted me but didn't hold up to scrutiny.

Luckily, I took my time and eventually came across a beautiful piece of pottery in a Dublin craft shop. It has a spiral motif, which I came to strongly associate with Ireland and my vacation due to the prehistoric art we saw, so that was a great and subtle connection. (If I'd gotten something covered in shamrocks and leprechauns I bet I'd have gotten tired of it pretty quickly!) It's my favorite color, blue, and goes well with a few pieces I already have. And even with the exchange rate, it was in my price range. In other words, it was something I would have realistically bought at home-- but I'm so happy to have bought it on vacation because it means a little more.

My next souvenir was smaller, but followed the same theme. We visited the Aran Islands off the west coast of Ireland. Now, the Aran Islands are famous for their sweaters, hand-knit by island women with each pattern having a meaning. However, the sweaters are rather pricey, and even more to the point, I don't need any new sweaters! What I did need, however, was an earwarmer/headband-- something I intended to buy all last winter every time my cold ears started to ache, and yet somehow never got around to. So I picked up a hand-knit Aran Island earwarmer instead of a sweater... same intricate pattern, same connection to the islands and their people, but more affordable and something I will actually use.

(I have to admit that my last souvenir was not nearly so useful, but it was sort of a last-minute airport "I-have-5-Euros-in-my-pocket-
to-use-up" kind of thing... and I am enjoying my tin whistle even if it's not practical in the least!)

How about you? Do you try to buy souvenirs that also fit other wants/needs? How do you approach souvenirs? I must say, on most smaller trips I stick to postcards and other cheap or free souvenirs, but this one was a special vacation for me and I am quite glad to have something nicer as a memento.

Tuesday, July 15, 2008

Weekly round-up: wanna be a guest poster? (Also: happiness vs money, and relationships w/food)

I'm away on vacation next week, and there's so much to do to get ready!  If anyone's interested in guest-posting here next week let me know...

Sunday, July 13, 2008

Pay commuting, medical, and/or dependent care costs pre-tax, and save money for both you and your employer!

Do you take public transit and/or pay for parking for your commute to work? Do you have expenses for child care or care of a dependent parent? Do you have out-of-pocket medical expenses? How does saving 25% or more on those costs sound, adding up to perhaps thousands of dollars a year? Well, if you can convince your employer to take the costs out of your paycheck pre-tax, then that's exactly what you'll get... and your employer will benefit too!

Under federal tax law (and mirrored by some state and local tax laws), employers can allow their employees to pay for commuting costs through pre-tax payroll deductions. The 2008 limits are $115 a month for public transit (including vanpools) and $220 a month for parking (either near work or at a location where you board public transit to work), but no higher than your actual costs.

So if you spend $100 a month to take public transit to work, and another $5o to park at the train or bus station, you could have $150 a month ($1800 a year) deducted from your paycheck. Over the course of a year, that'd save you $450 in federal income taxes (if you're in the 25% tax bracket), $137 in FICA taxes (7.65%, if you're below the $102,000 cap), and possibly an additional amount from state and local taxes (for example, in Massachusetts at the 5.3% state income tax rate you'd save another $95.) And if you spend more in a year, you could be looking at over $1000 in savings!

Sound good, but you're wondering how to broach the issue to your employer? Well, they benefit from the setup too. Since the amount is deducted from your taxable income, they don't have to pay their 7.65% share of your FICA taxes either (saving them $137 a year based on $1800 in expenses, or up to $300 if you use the maximum benefit.) They'll also save on federal unemployment tax, and they also may save on state unemployment and workers compensation payments, depending on state law. And if your coworkers take advantage of the option too, then your employer will benefit many times over. (There'll be some administrative costs to them to implement the program, but although I don't know the details of that sort of thing, I've seen it mentioned many times that the tax benefits usually outweigh the costs for the employer. And for-profit companies can deduct the administrative costs as a business expense.)

The same principle applies for other pre-tax benefits deducted from your paycheck-- like Flexible Savings Accounts for out-of-pocket medical/dental expenses or for dependent care (child care or elder care) expenses-- so if you have significant expenses in those categories and your employer doesn't offer pre-tax deductions, you may want to pitch that to them as well. (The limit for each is $5000 of eligible expenses a year.)

Do you have transportation, medical, and/or dependent care expenses deducted from your paycheck? Have you ever tried to convince an employer to start offering such benefits, and if so, how did it go?

Wednesday, July 09, 2008

Round-up: slurpees on 7/11; Alton Brown; and a little tomato!

I have a little green tomato! Okay, I should save the vegetable rambling for another post, but I'm very excited. (I haven't posted about my first-time container gardening adventures yet because I was afraid of total failure, but now I have a little green tomato!)


Sunday, July 06, 2008

Retirement Savings 101: Should I use a 401(k) or an IRA? Roth or traditional?

Last week I wrote about some of the basics of the different kinds of retirement accounts-- so if you need some information about how retirement accounts work, and what the difference is between an IRA and a 401(k) and what the heck "Roth" means, go read it.

However, understanding retirement accounts is only step one. Now you've got to decide which account(s) to use. Here are some things to keep in mind:

IRAs vs work-based accounts (401(k)/403(b)/Thrift Savings Plan)

  • Look for the employer match. It's pretty obvious, but if you're getting a match from your employer, it's almost certainly your smartest bet to take advantage of that first.
  • Convenience. 401(k) deductions come right out of your paycheck, which means they'll happen regularly and you'll never touch the money and risk spending it. (Most IRAs will let you set up automatic deductions from your bank account, which can help replicate most of this.) On the other hand, if you leave your employer and you have less than $5000 in your 401(k), you may have to deal with rolling over the money to a different plan, which isn't that hard to manage but is a hassle nonetheless.
  • Freedom to choose investments. Your 401(k)/403(b)/Thrift Savings Plan will have a limited number of investment options that you can choose between, and there are a variety of reasons why you might not be happy with them. (We'll talk more next time about how to evaluate your investment possibilities.) With IRAs, you can search far and wide for exactly the investment choice(s) you want and then open an account somewhere that offers it.
  • Minimum balance. Most IRAs/Roth IRAs have minimum amounts you need to invest in order to open an account, like $1000 or $2000. (Sometimes they'll lower that minimum if you sign up for automatic monthly contributions from your bank account.) If you just can't spare enough to invest a lump sum like that right now, then you'll want to go with your 401(k) instead.
  • Last day you can contribute. Your 401(k) deductions reduce your taxable income the year they're deducted; however, you can make "prior year" contributions to IRAs up through April 15 (ie, you can make your 2008 contributions anytime between January 1, 2008 and April 15, 2009.) This is especially relevant if it's springtime and you're looking for ways to reduce your prior-year taxable income-- you just can't do that with a 401(k).

Roth vs Traditional

  • The long-term strategy. Whether it's wiser to put your money in a Roth account or a traditional account essentially depends on whether you think your tax rate will be higher or lower in retirement than it is today (since Roth accounts use after-tax money today that's tax-free in retirement, while traditional accounts use pre-tax money today that's taxed in retirement.) Predicting the tax rates of the future is obviously a difficult and uncertain endeavor. (Although if you are in a low tax bracket now but are aiming to be pretty well-off in retirement, that's a sign to strongly consider focusing on Roth accounts.) One good way to deal with the uncertainty is to do a little of both-- have some money in Roth accounts that will be tax-free at retirement, and some that are traditional and taxable at retirement.
  • Effects on your taxable income today. Traditional accounts will lower your taxable income; this may help bring you below the income cutoff that allows you to qualify for various tax benefits. (One nice tax credit is the Savers Tax Credit where if you save for retirement you can get a credit of up to $1000 if your income is under $26,000 single/$52,000 married filing jointly; you qualify for the credit if you save in either a Roth or traditional retirement account, but if you're a little above the income cutoff, it's probably smart to use a Traditional account to lower your income in order to qualify. But this principle applies for other tax credits too.)
  • Maxing out your accounts. If you are planning to invest the maximum allowed into your retirement account(s), investing the $5000 max in a Roth IRA and keeping all the proceeds will mean you almost certainly end up with more at retirement than if you invest the $5000 max in a Traditional IRA but then have to pay taxes on the proceeds at the end. The same applies with the maximum of $15,500 in a Roth 401(k) vs $15,500 in a traditional 401(k).
  • Early withdrawals. Roth IRAs (but not Roth 401(k)s) allow penalty-free withdrawals of your money for any purpose, whereas traditional IRAs have a 10% penalty (except for a couple exceptions like medical costs, first-home expenses, and higher ed costs.) Obviously it's better to leave your retirement money in the account and let it grow, but if your worries about emergencies make you hesitate to save as much for retirement, knowing you can access the money in your Roth IRA can give you more peace of mind.

Got all that? Well, hang in for next time, when we'll talk about investments to go in these accounts (including but not limited to Socially Responsible Investment/SRI options.) And ways to think about how much you should be saving for retirement!

As always-- any questions? Anything to add? Chime in in the comments...

Wednesday, July 02, 2008

Round-up: free ice cream in DC, CFL recycling, and Fight Club

Man, my start-of-the-week round-up is slipping back from Monday to Tuesday to Wednesday... I suppose it's not really the start of the week anymore, huh? Anyway, the links are still as good any time of week!