5 important HR things when you start your career

I am so happy and excited for my sister.  She's starting her first teaching job next Monday.  It's been a nervous summer beginning of school year.  Now, she's got a job and all the benefits to go with it.  She asked me to sit with her to go over hrr benefits(actually, I asked to sit with her first when I hear she got an offer). 

Here are a few HR things that I think are very important when you start your first job:

1. health insurance - this includes all the prescription drugs, vision, dental, and medical health insurance that are provided.  Get at least the basic ones.  It's a no brainer, I just had to explain the difference between HMO and POS  Al of that only cost her about $700 a year.
2. retirement plan - for this, she is offer 2 employer sponsered.  I asked her to put close to the max for each(15k each, max is 16.5k each).  I know she only makes a small amount right now($46k), but since she live at home and has no loans to pay off (good girl, sort of, because my 'rents paid for her school).  I also told her this is only for the first year, and she can change that any time she wants.  Also, I wanted her to not have too much money on hand all of a sudden so she'll learn to manage her money and think about what she wants to do with it. (I wish I had $30k to put away).
3. life insurance - she as a little confuse about life insurnace.  Since my parents had bought a policy for her, she wanted to know if she can still get one.  Even though, she doesn't have a lot of asset or debt to cover, the basic is soooooooo cheap, that I made her get it.  CHEAP meaning it is $0.02 per thousand of her income per paycheck and the paid out is 2x her income.
4. budgetting - so I went over with her how much money she can put away for retirement by looking at her spending:  I asked her what she spend her money on and so far it's only food and cell phone bill and she paid off her credit card bill every month which is around $250.  Let's double that which comes to $500 x12 months = $6k(this is mostly just spending money).  She wants to get new clothes for work, and she thinks it's $1000 (either that's some expensive stuff, or it's a lot of stuff, but ok whatevs).  Also, she wants to help my parents out by giving them $300 every month (good, since she lives with them).  So her expected expenses are $6k + $1k + $3.6k = $10300, plus the benefits she pays for $11000.  I said if she put $30k of her salary($46k) in the retirement accounts, she'll be paying taxes on $16k.  Her taxes will be $3110 (15% fed, $90 + 4.75% of anything over $3000).  So she'll have $12890 left, minus her expected expenses, she'll have $1890.  Which I suggested a Roth IRA, but we'll discuss that later.
5. spending tracking - I asked her to make a speardsheet on her spendings to see what she spend her money on.  I didn't ask her to do much of trimming or budgetting because she has an good idea what she want to buy.  However, I wanted her to see for herself of her spending is good or not.

Things we have not dicussed yet but will discuss in the future: emgerency fund(I know she should have one ASAP, but since she lives with my 'rents I can delay this a little tiny bit, plus I built in a padding into her spending money), Roth IRA, investments - both real estate and stocks, and the bank of little sister (just kdding), and large item money, i.e. vacations, computer, car.

alternative living - part 4

Previously I posted about retirement planning and lowering cost of living options.  Here is a further look into another one of the alternative living arrangements to lower the cost of living:  reverse mortgages.

Here are the pros and cons to reverse mortgages:
Pros:
-you can still live in the home that you have bought
-you still own the home
-you have a set amount of income every month in addition to your other retirement benefits
-you can mortgage part or all of the equity of your home
Cons:
- the bank owns a part of your home because they are paying you for it
- depending on what portion and how you mortgage, it may run out
- depending on your mortgage and home equity, you may not leave much or anything to your heirs
- you still have to pay property tax, and other home owners expenses
- there are quite a few restrictions on setting it up, like if you get one through HUD, you have to be 62 or older and not have defaulted on any loans
-your house has to be paid off or very low balance

The drawbacks of reverse mortgage are many.  For one, you may not have much to leave your heirs.  Since this is relatively new product that got a bad rep due to sleazy sales people taking advantage of the elderly, many people distrust reverse mortgages.  Rightly so, since there is little regulation of this.  Banks are also stopping the offer of these while home values are sliding lower still.

However, for those who Social Security, an other retirement funds are not enough to live on, and they cannot live with the alternative means that i have mention in my previous posts, reverse mortgage could be a great way to supplement retirement income.  The catch is to be diligent in reading all contracts and understanding the fees and loan structure before signing anything. 

alternative living - part 3

Previously I posted about retirement planning and lowering cost of living options.  Here is a further look into another one of the alternative living arrangements to lower the cost of living:  long term travel - living in hostels
Here are the pros and cons to living in hostels:
Pros:
-no owning anything, unless you want to own a car
-there is no property tax because you don't own land.
-you can live where ever you want
-you can travel as much or little as you want
-utilities are included in the fee
-keeps you from owning too much junk
-no yard work
-some places even come with breakfast
-most places come with free wifi, a shared kitchen, and some even free computer to use.
-you get to meet a lot of people from all over the place

Cons:
-these isn't a lot of space
-to get cheaper price per night,  most places have a dorm styled shared bathroom.  Rooms with private in-room bathrooms cost more
- depending on the places you live your stay could add up to the price of rent, but it's still cheaper than most rental apartments
-you may have to do some work for the cheaper fees, like man the desk a few hours a day

Traveling long term and living in hostels are a great way to see the world.  In fact, there are a lot of hostels in Europe than US, but hostels are becoming more popular.  For single people, the dorm style rooms can be as cheap as $10 a night, and private rooms are $25 per person.  The down side is, you don't have a lot creature comfort things with you unless you have a car, but parking can get expensive if you are in a city.  If you are traveling by bus or rail, you really can't pack too many things.

I have stayed at hostels during vacation trips.  They are usually located near all the places I want to be without paying the high hotel prices.  I have had really good experience with them and would recommend them to any budget travelers.

alternative living - part 2

Previously I posted about retirement planning and lowering cost of living options.  Here is a further look into another one of the alternative living arrangements to lower the cost of living:  living aboard - on a boat

Here are the pros and cons to living aboard:
Pros:
- boats are a cheaper than homes for the most part.  We are not talking about getting million dollar yachts.
-There is no property tax because you don't own land.
-you can live where ever you want, as long as it's on water
-you can travel as much or little as you want
-there are ways to provide for your utility needs without being on the grid
-keeps you from owning too much junk
-no yard work
-you can go fishing for you food, but you have to like fish and know how to clean it

Cons:
-these isn't a lot of space
-you have to know a little about maintaining the boat
-you have know how to swim and sail
-you have to have you sea legs
-water usage has to be monitored well
-if you stay at a place that you can hook up to the utilities there, you still have to pay for slip fee
-you have to rent a car if you want to travel on land, or if you have room, have a motor cycle on board.

The cost of living aboard can be a lot lower than in a house.  The down side is the you have to live kind simple. With the Internet and cellphone coverage getting better, communications isn't a problem.  Same with TV and other entertainment formats.  TV and electronics are getting smaller and more energy efficient, that having them around doesn't take up a lot of space.  Though you may not fit a 50" TV in you boat and you could if you really wanted to), you wouldn't need it.  With the prevalence of solar panels, and other solar base ideas, your utilities will also be lighter even if you are docked at a slip.  For those who are extreme minimal in owing things, space isn't an issue. 

This would be a great way to traveling the world.

There are a couple of site that will detail cost, how and why of living aboard:
/http://cheaprvliving.com/Boat_Living.html
http://www.frugal-retirement-living.com/living-aboard-a-sailboat.html

Of course,  in the meantime, we can still take a page from the aboard life style book on lowering the cost of living.  Habits like not owning a lot of stuff and monitoring your energy are good ideas anyway.

alternative living - part 1

Previously I posted about retirement planning and lowering cost of living options.  Here is a further look into one of the alternative living arrangements to lower the cost of living:  RV or mobile homes.

Here are the pros and cons to living in an RV:
Pros:
- RVs are a lot cheaper than homes for the most part.  We are not talking about getting million dollar RVs.
-There is no property tax because you don't own land.
-you can live where ever you want
-you can travel as much or little as you want
-there are ways to provide for your utility needs without being on the grid
-keeps you from owning too much junk
-no yard work

Cons:
-these isn't a lot of space
-you can't always park it where you want
-you have to know a little about maintaining the vehicle
-your guests any really stay over
-water usage has to be monitored well
-if you stay at a place that you can hook up to the utilities there, you still have to pay rent for the site, but it costs a lot less than a house rental
- you might develop a reputation as "the man that lives in a van down by the river"

The cost of living in a RV is a lot lower than in a house.  The down side is the you have to live kind simple. With the Internet and cellphone coverage being so great and getting better, communications isn't a problem.  Same with TV and other entertainment formats.  TV and electronics are getting smaller and more energy efficient, that having them around doesn't take up a lot of space.  Though you may not fit a 50" TV in your RV(and you could if you really wanted to), you wouldn't need it.  With the prevalence of solar panels, and other solar base ideas, your utilities will also be lighter.  For those who are extreme minimal in owing things, space isn't an issue. 

This would be a great way to travel both North and South Americas.  Depending on the cost of shipping and conversion, not a bad way to travel Europe and Asia as well.

There are a couple of site that will detail cost, how and why of living in a RV:
http://cheaprvliving.com/
http://www.your-rv-lifestyle.com/

Of course,  in the meantime, we can still take a page from the RV life style book on lowering the cost of living.  Habits like not owning a lot of stuff and monitoring your energy are good ideas anyway.  For me personally, I would love to install solar panels on my house.

planning for retirement - part 2

Last post I concluded that if I had $1million in the bank, then I could retire if I live in a very cheap area.  Now, what if I don't have that in the bank?  I think there are a few alternative ways of living that would be affordable on low/restricted income.

1) living aboard - the cost of owning a boat and living on a boat seems to be less than owning a house, plus mobility
2) living in a RV/mobile home - not like trailer parks of yore.  Some mobile homes are really nice, especially if you don't own a house, you can put that money into the mobile home
3) long term travel - you can travel extensively and live in other countries for much less than in the States, rent out the house we own to generate income.
4) reverse mortgages

Of course, some of these require that I am in good health or some of these will have set date of stop, like the reverse mortgage.  I'll look into the pros and cons of each in my future posts.

planning for retirement - part 1

I was reading RB40's post about $1million not being enough for retirement.  I got to thinking, what if that was enough?  Where and how would I live if that was what I had?  Maybe I sure plan for that.  Let's take a look at what retirement would be like in about 25 yrs:

1) kids would be out of the house - I really hope so!!!
2) house would be paid off and downsized
3) investment/rentals would be paid off or sold - hopefully paid off so it just generates some income
4) cars - will probably only need 1 and would be paid off
5) smaller house = smaller utility expenses
6) health and other insurance will rise
7) food cost will be the same per person, but only 2 people in the household.
8) more money spent on hobbies
9 taxes will still be about the same

Over all, the expense is dramatically lower in 25 years than now.  So if I am in the habit of living frugally will $1 million be enough? If I get 1% interest like the current saving rate, that's $10k /yr, and $600 after tax.  My rentals/investments will have to generate additional 2-3x that for me to live where I am living currently, which is a pretty expensive area.  However, if I am living in a lower cost of living area, my rentals will only have generate another $600 net for me to live well.  So the aim should probably to pay off all debt first, which include mortgages of personal use and investment.  Then comes savings.  And I should choose a lifestyle that will fit my then earnings, and not my earns to chase after a life style.  But isn't that what we started with anyways with frugal living?

P.S. I am also not counting Social Security because 1) I don't know if I will get to see it 2) if I do, it would just be travel money.