Sunday, August 27, 2006

Pass GO and Collect $75

A TAX REFUND RECENTLY spurred me into getting my financial house into better order. With any luck, this $75 check that I received earlier this month will pay generous dividends decades down the road as a result.

Unlike my Federal tax refund, which was used to fuel a trip to Atlantic City, this one was considerably smaller, being a rebate for New Jersey renters as part of our property-tax-rebate program. Still, at first thought, I filed it under "found money," and after cashing the check, displayed the cash to my parents and crowed about pissing it away on something fun.

Yet I never actually executed that plan. Initially, it was because I could think of nothing immediately on which to blow it. Yes, I have an iTunes account and an Amazon wish list and an eBay login, all three heads of the modern Internet-spending Cerberus. And I do work within walking distance of innumerable used bookstores, caf├ęs, and knick-knack shops in Greenwich Village. I have a quirk of mind, however, that — after I have made a list of CDs, or books, or whatever, that I might want to buy — leads me to blank out on the items once at the destination store. If I don't actually commit the list to paper, I'll walk up and down the aisles entirely lost. Very frustrating, though perhaps a backhanded financial survival trait.

Instead, the $75 went into my emergency fund. On its origin: Back in the mid-Nineties, I tended to do my laundry at my parents' house rather than spend $5 a load in my apartment basement. I started setting aside $5 a week to represent the laundry moolah I wasn't spending. Also, in a (failed) effort to curb my videogame habits, I began dropping a quarter into a jar each time I started a new game, usually of Twisted Metal 2. Both stashes eventually totaled over $400, including around $170 in quarters. (Ever lift a Classico pasta-sauce jar full of quarters? Buy a truss first.)

I continued the laundry-cash tradition when I got my own apartment, but I also began a Friday ritual of throwing any extra money from my weekly allowance in as well. Basically, each week the larger of $5 or my allowance remainder had to go into that pot. If I ran through my allowance earlier than Friday evening, $10 went in; should I be foolish or pressed enough to return to the ATM a third time, $15; and so on. Taking a ten and a five out of the $60 that you need to last the week forces you to stop returning to the well so often, I can assure you. Soon, I started adding any sort of "found money": tax returns, appliance rebates, folding money from the coin-counting gadget at the bank, unused walking-around dough from vacations, even a couple of good blackjack scores. Two years later, in the wake of 9/11, I dubbed this now-substantial cache of cash my emergency fund, only to be tapped upon widespread failure of ATMs. (I assure you that this is as paranoid as I got after the attacks; none of the money went to a supply of plastic sheeting and duct tape.) Four years after that, I was able to use a big chunk of my emergency cash to fund fully my 2006 contribution to my Roth IRA. Automatic savings may be unconscious, but never are they mindless.

Now, when I have heard coworkers complain about never having enough money to fund a 401(k) or take part in the Section 125 health savings plan (or, more recently, the transit equivalent), I cite this as an example of how small amounts can make a big difference. I can understand how someone still paying for college or negotiating a mortgage would have debt reduction as their biggest priority, and it's smart to do so. (After watching a friend in college rack up four figures of credit card debt, I have since feared long-term debt like medieval townsfolk fleeing the return of the Black Death.) I can think of two coworkers, however, who definitely have leaks in their games, rivulets of money that could be diverted into a reservoir of effortless thrift. Even $10 a week into a mutual fund (to which my current employer does add a profit share), or to lend to Uncle Sam in order to pay uncovered medical expenses or a MetroCard, can reap big rewards.

In dropping this $75 into my emergency fund, I began to think seriously about the exact disposition of my retirement funds, and the market in general. I have no problems funding my 401(k) or my IRA (if I couldn't, no way would I be jetting out to Las Vegas at least once a year), but I am sure I could have the allocations more finely tuned for my needs. I therefore got some books out of the library, and reread one I've had for a couple of months, to address this. Also, I actually still have a fund open at my old employer, where a couple of the specific investment options were good performers. This will change. Sources inform me that the boss there is expanding the office. Nobody is suggesting he would fund this considerable expense with anyone's capital but his own. However, this is the sort of situation in which such shenanigans have been known to happen. Why even take the risk? So I have a phone call planned to the customer service of my current fund company to figure just what I need to do to move that money under my own more direct control. Then I need to sit down with the fat book of Morningstar ratings at the library (which I wish would open on summer weekends . . . another reason to hate this part of the year) and determine some better places to allocate this cash. Because when the time comes to retire, I suspect it will be all I receive.

I firmly believe that Social Security will fail my generation. I view the Trust Fund as something located between an IOU issued by a casual acquaintance and a Ponzi scheme. I do not trust the current gang of fuck-knuckles in Washington, nor any of their foreseeable successors, to exert the moral and political muscle to guarantee that the nation will return in full what it has taken from every paycheck I have received since high school — and without interest, might I add. Anything I spend at that time of my life will have to come either from my continued labors or what I can manage to conceal, via legal ERISA allowances, from Uncle Sam's withering reach.

So with any luck, and a little diligence in both my financial and writing lives, I hope to link to this post from 30 or more years in the future and tell you just how much that $75 rebate has grown into.

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