steady she goes

When I first started reading about personal finance as a young pup (aka fresh out of college), one of the things that seemed to echo throughout was the importance of saving. Sure, investment gains are great, but a big key to growing wealth was to save.

Circumstances (low income, student loans, bad spending habits) prevented me from saving much in the first half of my post-college life, but since (ironically) I've moved back in with the parents, my net worth has skyrocketed. A lot of it has to do with gains in investments made possible with savings, but primarily, I attribute the rise to socking more money away.

So here's a quick update (from approx. the beginning of the year through June), again, because I'm in such a good mood due to the market.

• My net worth has risen about 87%.
• My brokerage account has jumped 131%, mostly due to my participation in my company's ESPP program.
• My 401(k) has gone up over 90%, thanks to my contributing 15% of my salary and my company's match.
• My Roth IRA went up 24% (it'd be almost 40% if you factor in July's goings-on).

Though the month is only halfway over, my net worth has already grown 8.6% since the end of June. Usually, the growth is due to savings but this month has been special. This month, the growth's been mainly due to Baidu.

Let's hope earnings are good come July 25. ;)

hsbc direct new money promotion - worthwhile?

I received an email from HSBC yesterday, promoting their new 6% APY for "new money." The gist of the deal is that through April 30, you'll get a 6% APY (vs. the regular 5.05%) for all new money deposited into your online savings account. The higher rate is nice, but is it really worth it in all situations?

A friend of mine just IM'ed me about the promotion, and thought he'd be able to get $300/month from the promotion if he: 1) sold off his stock holdings, valued at $20k, and 2) deposited that amount into HSBC. His rationale was based on text from HSBC's email saying that you'd receive $150 for every $10k deposited. The text was actually misleading (or my friend misinterpreted that text). Basically, for every $10k, HSBC would be giving you $50/month via the new rate.

[Here's my math: $10k x 0.06 (the APY) / 12 (number of months in a year)]

So the total gain from depositing $10k would be $150. In my friend's situation, the gain would be $300.

Is that worthwhile? I may be wrong, but I don't think it is. First, if the stocks he has right now are poised for growth (and they're technology stocks so I believe they are), then by selling, he'd be jumping off the proverbial bandwagon before the proverbial parade starts. Second, by selling his shares, he'd have to pay capital gains tax, which eats into his net gain.

Don't get me wrong -- getting 6% yield without any risk is a good thing. However, it depends on what the opportunity cost is. I personally think this is a great offer if you've got a ton of cash you can move into HSBC, from another vehicle that clearly won't get you the same kind of return (such as a money market account, checking account with a pitiful APY or you're doing an app-o-rama).

little things add up

Yesterday, a friend of mine showed me two pictures of furniture she was interested in buying. One was for an entire set of bedroom furniture -- bed, dressers and all those other things -- and another was just for a bed. The prices for the sets of furniture were (hypothetically) 1.5x and 1x. She was wondering which one to buy, and I told her to go for the entire set for 1.5x.

This actually kind of stemmed from my decision a little less than a year ago to buy a couch for my new apartment for $1,600. At that time, I thought having a big comfy couch would be critical to my happiness. After all, I love to watch TV and I love to sit on big comfy couches. However, as time passed, I realized I probably could've gotten the same utility (love those economic terms) from an IKEA couch at 1/5 the cost.

Wait, you may say. Didn't I tell my friend to go for the more expensive option? Yes, I did. =) My rationale was that she was going to need to buy all of those pieces of furniture anyway so in the end, the 1.5x cost would be less than the total cost of the bed at 1x plus all those other pieces at .

So what does this have to do with personal finance? Well, duh! The motivation for spending less overall is so that you have more money to sock away in your savings! That was the driver behind my thinking. =)

By the way, this blog will be quiet most likely the next couple of days as I'm traveling to Clearwater for a client visit. Looking forward to the warmer weather!