New Job Turbulance

Sorry I didn't get anything posted this morning. My new job started today and I wasn't able to get to all the IRA research I wanted to. I did get open a Roth IRA at Fidelity, and I'll post about why I chose them soon.

The New Job

I started my new job today. The company is small, about 8 people. The salary is a step up from what I was making ($59,000/year vs. $52,500) and the work seems enjoyable.

Taking this job made sense for us. It seemed like a career step forward.

Stuff I Wish I'd Known

So, it turns out that a) my friend who I though was going to be my boss is actually training me to be his replacement and b) The company is being sold and I will be one of the assets being transfered to the new company.

It would have been nice to be able to factor those things into the equation when deciding if I should take the job.

Naive Optimism

Despite a sentiment of gee-you-should-have-told-me, I still feel good about deciding to take the job. We prayed about if it was the right thing to do, and we felt that it was. I put my trust in God that He knew these details and that taking this job remains the right thing to have done. It may be the case that I was supposed to take the job, but wouldn't have if I had known all the facts beforehand.

Here are the reasons I'm still naively optimistic :

• If me and my friend get everything fixed up by August 1st for the sale, both he and I will get $5000 bonuses when the sale completes (Mid to the end of September)


• With the type of product the company has, I have a few guesses on who it might be being sold to, and I wouldn't mind working for any of them. They're places I wouldn't have thought that I could get into very easily.


• I'll be having more of an architect position than I thought I would.


• As we were programming together today I was able to help spot several errors and make several important optimizations. I thought that I would be pretty rusty in the language we are using, but it looks like things will be just fine.


• This looks like fun project to be involved with. It combines several areas which I have been interested at a hobby level, which I don't have professional experience in.


• The new company my current boss is starting sounds pretty neat too, and if things don't work out at the company that is buying the current company I think I'd be able to get a job with him at the new place.

Expect Less Posts For The Next Couple Of Weeks

As I said, if we can get a specified set of features working completely by August 1, I'll get a $5000 bonus...so I probably won't be blogging as much till that's done. I'll try to post two or three times this week and next.

What Does a Pay Stub Look Like?

How Much Do You Really Get From Your Paycheck?

What does a real world pay stub look like? When I finally started getting real paychecks, I was initially let down. I had very naively divided my salary by 24 pay periods and imagined all the cool stuff I was going to buy.

Reality is a bit of a letdown sometimes. I actually only end up with a little over half of my salary coming to me.

So, without further ado, here's my current pay stub (with certain data blanked out!)


Green is income, red is expenses.

At the top left, Salary is the amount I supposedly get each pay period (every two weeks). It works out to be about $50,000 per year.

At the bottom left is the amount that gets deposited into my bank account every two weeks.

43% of my salary doesn't end up in my pocket!

It would be difficult to argue with the taxes portion of the paycheck, but let's take a closer look at the section titled "Deductions From Gross" and "Non-taxable Company Items".

Deductions from Gross

Deductions from Gross are voluntary amounts I choose to have taken out of my paycheck. As much as it stinks to get that much less cash, there are good reasons to get those amounts removed.

Less Taxes:
These deductions are taken out before taxes are calculated. It appears that the taxes are about 15% of the taxable amount. If this is correct, then I pay about $100 less in taxes each pay period by deducting these amounts from my gross paycheck.

What are these accounts though?

Health Insurance - Employee:
This is a medical 'flex spend' or 'cafeteria plan' expense. We estimated how much we were going to spend on medical costs this year, and are having that amount removed from my pay over the course of the year. This account can be used for dental work, eye doctor visits and glasses, birth and related expenses etc. Since we knew we'd be having a c-section baby this year, we knew at least how much we'd be spending.

FSA:
This Flex Spend Account is for child care. Since I'm at work and my wife is at school, we needed someone to watch our kids for part of the day most days of the week. With this account we can pay for child care from our pre-tax money.

401(k):
We are currently putting in 15% of my gross salary into our 401(k). We'd like to retire well, so we've got to make sacrifices now.

Even though these deductions don't come home with me, two of the three are or will be used by me during this year.

Non-taxable Company Items

This is the section which shows non-salary benefits that the company is providing. It appears that they company is paying $306.07 per pay period for insurance for my family.

They match 100% of my 401(k) contributions, up to 3% of my salary. It's true then that I am not being matched completely with my 401(k) donations, but at least it's something.

Take Home Per Year

In all my excited imagining about how to spend my money, it turns out that I should have been thinking about taking home just less than $30,000 per year instead of the $50,000 gross salary figure.

So, if you just barely landed that dream job with the huge salary, don't make too many plans till you carefully review what you're actually bringing home each month.

What am I worth?

The Value of a Soul...(or at least a warm body)

I am currently making $50,000/year. I applied for a new job today and will eventually have to tell them how much I'd like (assuming I get the position). What do I say? I am satisfied with my current salary. 50k is nothing to sneeze at, and with some basic money management skills we should do quite nicely as a family of four on this income.

On the other hand, what if I ask for 60k and get it? I don't want to come across as pretentious, cocky or greedy, but I would like to make as much as I can. An extra $10,000 a year would help nicely with our house buying goal.

Dispair..ity

Today after I had prepped my resume, I asked my colleague on the inside of this company if he would be able to give me a salary range I could expect. Through our conversation I discovered that he is making substantially less than I am currently -- probably in the $40,000 range. His skills are nearly as good as mine in some areas and better in others, and he's probably a harder worker.

He isn't, however, as assertive as I am. I'm not pushy or anything, but I know what I can do and I know what I want. If this company won't give it to me, I am blessed to be in the position that I can walk away from it. I'm not sure that my colleague could pull off the same thing.

If we were sharing salary info, he would know that he is being under paid, and could ask for a raise. On the other hand, if his request for a raise were turned down, and I were hired on at my current salary or higher, there might be a bit of animosity or bitterness between the two of us.

A Tradition of Secrecy

My dad has never told any of us what he makes each year. The closest I came to finding out was when I took the ACT test in high school. It asks for your parent's salary info during the registration, and when my dad said $100k+ I was amazed. To this day I have no idea how much more than that he makes. I expect I'll only find out when I have to handle the will.

I think that his attitude is typical and professional. I'm not completely convinced however that it's the best for everyone involved.

In Praise of Openness

In an open market place I would know what others are making, and I would be able to ask for a salary that isn't too far off the mark from what my peers are making. If I wanted more money than they are making, I would have to argue why I am a better value to the company than the other workers.

On the up side for me, I wouldn't know if I was getting what I am worth.

As an up side for the company, they could offer lower salaries, but then offer more performance bonuses.

In Praise of Closedness

Secretive salaries have many benefits for companies. For one thing, it is harder for competitors to poach employees. The competitor would have to offer enough extra money to be sure to pass the employee's current salary.

Another reason is that some workers aren't going to request enough money for their pay, and the company will get a good deal since the employee doesn't know that they are being undervalued.

Employees not knowing each other's salary provides less opportunities for disgruntlement between them.

Lastly, as a potentially valuable employee I know that I can request a larger salary because I know that they are saving money by not paying my colleague as much as he's worth. (Of course, I'll never know if I'm also getting low balled, just not as badly as him!)

Conclusion?

I'm still undecided about if I would rather have everyone's salaries out in the open.
Perhaps the best solution would be to publicize anonymous statistics so that the data is available, but that individuals won't know who to be bitter with.

Our financial strategy

Goals
Before figuring out a financial strategy, we had to figure out our goals. Our goals are:

1. Live within our means
2. Pay off debts before they cost us interest
3. Save for a house, and for emergencies

Summary
Here's a high level summary of our specific strategy, based on those goals:

1. Pay off debts first
2. Keep money where it will earn as much interest as possible while remaining as accessible as needed
3. Use a budget to maximize the amount of money we can save

Implementation
And here is our specific implementation, as of May 15, 2008:

When we get a paycheck:

1. Put tithing and offerings (10% of paycheck + offerings) into checking (we pay with a check)
   
2. Pay off the balance on the credit card (also use funds from the Money Market account, if needed)
3. If it is the start of the month, put $600 for rent into the checking account
4. If there are any other bills, pay those
5. Put $100 "we don't accept credit cards" money into checking account
6. Put remaining money into the Money Market Account

Spending:

1. Pay with the credit card when possible
2. Remember that there is only $100 spendable in the checking account
3. For non-standard expenses (medical, tuition, etc.) which can't be paid with credit card, transfer needed funds from Money Market to checking.

Money Market Surplus:
When more than $500 accumulates in the Money Market account after paying all expenses, transfer that money to a higher yielding (but harder to access) account. We are currently putting our money into CDs, but we have been looking at high yield online accounts, such as ING's.


Results

1. We earn 1% back on Credit Card purchases
2. We earn 1.144% on the money sitting in our money market account
1. 1 & 2 together effectively create a 0% loan from the credit card which is paid off each pay period (bi-monthly).
3. We keep enough money liquid to pay expenses for each two week period. This reproduces the paycheck-to-paycheck feeling we've lived with for so long
4. Money we don't need immediately goes to higher earning accounts while being protected from our merciless spending

We have been operating with this strategy for the past two months (April, May) and have found it fairly efficient so far. We know how much we have to spend because we can compare our credit card balance to the amount in our money market account.

We will likely modify some of the details going forward, for example we are looking at options to maximize our 'extra' money. CDs aren't giving a very great interest rate right now. We will also consider getting a credit card with better rewards once we determine which one will be the best for us.

Background: An overview of our current accounts

We have several accounts which we use to our benefit. Our main bank is the local credit union. Their service is excellent, and their rates are good. The real benefit for us though is the one-stop web page where we can manage (almost) all our accounts at once.

Our accounts at the credit union, their balances [amount] and the interest they earn (interest%,APY%):

1. Savings Account [$0], (0.797%, 0.80%)
2. Money Market Account [$2,308.40], (1.144%/1.15%)
3. Checking Account [$765.02], (0%,0%)
4. CD [$6,051.83], (3.057 %3.10 %)
5. Credit Card [$1,671.80], (11%?)
   

We also have an account at Wells Fargo. We keep it open only because the credit card there has been open for about three years longer than our other credit card, and we don't want to jeopardize our credit score till we've secured our house loan. Our accounts at Wells Fargo:

1. Checking Account [$100.08], (0%,0%)
2. Credit Card [$0],(21%?)
   

Other money we have includes about $150 in super emergency cash tucked away at home, a couple of savings bonds in our children's names and a plastic pig full of change.

You may have noticed that in the previous post I said we don't carry a balance on our credit card, yet there are over $1500 of charges on it at the moment.

On Tuesday I'll go over our current financial strategy and show you why.