Life in Balance: Amit Chaudhary's Blog
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As part of my money management goal in recent months, I heard (the audio version) of the book, All Your Worth recently and it was an eye opener.

The summary of the book, it asks the reader to keep things simple and divide all incoming money into three categories, the Expenses into Must Haves & Wants. The remaining is Savings.

Must Haves are those expenses, you would not stop even if you did not have a job for an year or two, like Basic food, House, Fuel, etc. Rest are all Wants such as TV, Restaurants, etc.
Over long periods, particularly years, keep the above in following percentages:

Must Haves 50%, Wants 30% & Savings 20%

Within a few days of this, we had tracked our expenses and broadly knew more about our expenditure then we ever did.

The book has suggestions on how to bring the Pie back in balance. Beyond that it covers many other areas such as house purchase, etc.

More information:

Two of the book’s chapter are available from the official All your worth website: The Truth about Money and Financial CPR

It’s All Your Money blog has a detailed review of the book: Balanced Money Formula. He has shared a spreadsheet in the review that allows tracking money and follows the balanced money formula from All your worth.
The Simple Dollar blog also has a detailed review of the book: Review: All Your Worth

For you:
Finally, this book might not be the right Personal Finance book for you, depending on your spending habits, earnings, age, savings, etc.

Simple Dollar blog has an article with some suggestions in This Is the Right Personal Finance Book for You!

In the last month or so, I put in some effort on money management.

As part of discovering a way to do expense management and budgeting, I tried multiple software and online web sites for US residents including Microsoft Money, Quicken Online, Yodlee moneycenter & mint.com. I did not try geezeo.com, wesabi.com or Quicken.

mint.com is shaping up to be quite feature complete website and it has the killer\distinguishing feature which makes expense tracking practical and possible. Automatic expense categorization.

Enter an account, say your credit card. It will download the data and categorize the expenses and give you a chart like below with the details.

In comparison, I had to manually categorize all the expenses in Microsoft Money and just gave up when I realized how much work that was. Yodlee moneycenter has the categorization features and other advanced ones such as investment, however mint.com is better designed, for example yodlee logs me out in 2-3 minutes and hence mint.com is more usable.

Features I found useful at mint.com

• Automatic expense categorization (Knows Safeway is groceries). One can override or fix expense categorization
• Custom categories under any parent, this very useful feature was added recently.
• Simple way of setting and tracking budgets
• Can download and work with all our accounts such as bank, credit card and credit union.
• Is secure and you can cancel it with a single button and everything detail stored is gone.
• Very nice pie chart for expenses within fixed periods
• Search functionality for transactions including search by category or vendor
• Can be useful within an hour or less.
• Investment support including tracking performance of each time or portfolio, compare against indices
• Net worth summary page

There are many more that might appeal to others.

Features missing at mint.com

• Expense chart needs work, the pie chart does not remember last search range and resets back to all months. Need more charts including showing increase in categories.
• Graphs for networth growth, this itself will get many of the financial bloggers such as www.1stmillionat33.com using mint.
• No retirement planning

If you live in the US, I would suggest trying it out, it is a major step in saving money.

Start by watching the Mint Demo. Then put a credit card and watch the trends for a week or four.

It was amusing, ironic and yet sad when I read in the Yahoo Personal Finance article: US economy fears mount as housing starts dive:

“If the heavily indebted US consumer suddenly decides to appreciably increase savings next year, a recession would be more likely than a soft landing,” Manufacturers Alliance chief economist Daniel Meckstroth said.

It comes on tail of Tim of Seattle Bubble taking about considering the complete price of a house instead of the monthly payments in The Monthly Payment Buyer

Coming from India, where one has to have to pay for all the price of their home (Think $600-$800k in the US tech areas like Bay Area and Redmond) when buying there house, it is still a changing mindset for me.

Now the question is when do I start saving for Rs. 3 Crore? (Indian Rupee) or skip the plan for the sake of USA.

From Free The Drones Personal Finance Blog:

• The Peacock, who splurges on expensive stuff to impress other people and keep up with the Jones.

• The Mattress Stuffer, who is terrified of the stock market and ends up with tiny retirement savings by sticking to the most conservative investments possible.

• The Foot Dragger, who puts off saving for retirement until it’s nearly impossible to do.

• The Emotional Spender who spends not because they need something, or even because they really want it, but because they have stress or problems in other areas of their lives.

So far, I have been at different times in the last 5 years, a Mattress Stuffer and a variation of Foot dragger, the kind which pushes investment in a sector\company though He\She knows it will do well. A suggestion for personality:

• The Ostrich who avoids all things financial, this includes reading, budgeting planning and investment. This is a more common version of the Foot Dragger.

Amit

A year back, we moved from Santa Clara, CA to Bellevue, WA in the US. A year is enough time to get some perspective on how the places compare and what makes one better than the other.

The notes and areas of interest are from a point of view of an Indian immigrant working in the IT (Software) industry and with a family.

1. Housing. Advantage: Seattle

The Housing situation is slightly better in Seattle when compares to the bay area and the Seattle market is traiing the bay area market by a year or so, that meant 15% price increases in the last year while a almost flat market in the bay area. If considering single family house. one can buy a decent livable house in Greater Seattle area for U$500k (A new one in Snoqualmie or a older one needing renovation in some Bellevue zips: 98008)

Our preferred criteria is to avoid too much commute (<= 20 minutes each way) from current and future work (Bellevue, Redmond, Seattle, Kirkland) and good feature set in the house.

Seattle market: Areas worth considering to stay: Bellevue, parts of Redmond (much lesser commute). Areas within 30 minutes commute any time of the day are Snoqualmie, Kirkland, Woodinville and Redmond Ridge. The lowest house prices are around 500k (30+ year old small (1500 sq ft.) 3BR, 2BA rambler in good living places, average school district in Bellevue or a new larger house (2500 sq ft.) with good features(hardwood floor, island, etc) in Snoqualmie. Next level of houses are in the U$ 700k-850k range, these are newer (<10 years), good school district (Eastgate, etc), basically these are snoqualmie or better houses with lesser distance from work, shops, etc. Rents in Eastside for Houses is typically from 1400 to 1800, 1600 to 2000
Bay area market: Areas worth considering to stay and affordable: Santa Clara, Sunnyvale and parts of Mountain View. Areas within 30 minutes commute are San Jose (Evergreen, etc) and Fremont. The lowest house prices are around 800k (30+ year old (2000 sq ft.) 3BR, 2BA house in Evergreen.) Typically prices are U$ 900k-$1 million in and around Sunnyvale and highend comparable houses are in the US$ 1.3-1.5 million range (v/s 800k.) Rents for Houses is from 1800 to 2200, 2000 to 2400
Summary: Even with a house market slowdown, bay area requires both couples working and a singular focus on making more money. In the Greater Seattle area, buying one of the good houses creates the same requirement and the 30% or so lower salaries partially offset the 40% or so less higher end house prices. The key difference in Seattle: Lower cost homes are available(yes, 500k is lower these days) if you want take lower quality or larger commute and dream houses which would be US$2-3 million in Saratoga are available for US$1 million in Woodinville.

2. Tech Job openings and salaries. Advantage: Bay area

In Seattle, the total number of tech job openings are much less than bay area, I would expect them to be 1/3 or 1/4 of bay area.

Bay area has job openings for much wider area of expertise. Another key point, if you (as I have) worked in non-Microsoft technologies, these jobs are very few in the Seattle area. When I was looking last year, there were maybe 6 companies that were looking for Software developers for Unix\Linux\Kernel skillset. Skillsets Seattle are Windows (C#, dot-net), gaming and internet.
In Seattle, the typical software engineer salaries for mid level experience C++ engineer are in the 75-100k range. In Bay area, the typical software engineer salaries for mid level experience C++ engineer are in the 90-130k range. This is a large advantage even after the CA state income tax of around 9%.
Disclaimer: In both places, if you stay in one company for > 5 years and perform well, you can and will get into higher range and develop depth in the company\group’s area of expertise.

The other article in this series:

• Comparing living in Seattle (Eastside) or Silicon Valley (SF Bay Area): Part 2 (Weather)
• Comparing living in Seattle (Eastside) or Silicon Valley (SF Bay Area): Part 3 (Traffic and Miscellaneous)

Articles by others:

• Andrew Chen writes on the Entrepreneur culture in Silicon Valley as compared to Seattle: Meeting people in Silicon Valley
• Dustin on Rain City Guide: 10 Things You Should Know Before Moving to Seattle

Last Updated: Feb 15 2007

I read the post on Paul’s Tips: How to work out if you’re better off renting or buying a place to live and found a problem with this quick back on the envelope calculations.

What the cost of renting a house is compared to buying it

House number one
Price: $1,000,000
Rent: $31,285 per annum ($600 per week)
Current interest rate: 7%
Interest on $1,000,000 loan for one year: $70,000

In this example, buying the house costs over double what renting it does for a single year. A lot of factors would have to change before buying could be considered more financially attractive.

This is incorrect as the comparison should be to the real impact of interest, which is total minus income tax deduction+property tax. My modified version would be:

If rent >= 60% of interest or 55% of total payment+1% of payment, it is better to buy on a pure cost basis as interest is tax deductible(25-33% off) if you do not hit the AMT limit.
For a 500K house, it has to be >= 2025 per month
For a 600K house, it has to be >= 2375 per month
For a 700K house, it has to be >= 2900 per month
For a 900K house, it has to be >= 3750 per month
For a 1.15M house, it has to be >= 5000 per month

The market should not be about to fall though and this does not cover property taxes, closing costs, insurance (House as well as Mortgage).
Now back to my usual topics.

Update: The deduction of interest rate from your federal income tax is a US law.