My wife and I married at 22, about three months out of college. A lease started on our new apartment in Philadelphia literally three days after our wedding, so we had a brief honeymoon in Rockport, Massachusetts (just a thirty minute drive north from our wedding!). For the next two and a half years I was in graduate school, paying for it from my day job to avoid a loan, and at the same time starting to pay my undergraduate loan. So vacation wasn’t exactly an option, though we did manage to get to a few family get-togethers.

So now we’re about 26 years old, and with discussions of starting our own family taking place, we decided that it was really about time we take a vacation together - before it’s too late!

About a month ago, I started looking at vacations in the Caribbean. We had never been anywhere tropical, so we figured it’d be a great place to go. Aruba sounded like a perfect destination, until I made the discovery that fares from Boston rarely got below $400 per person. Next I see that hotels average around $300 a night, and that most people spend over $100 for dinner! Adding all this up, along with the miscellaneous fees and spending money for excursions, and we were looking at well over $2500.

I scoured the deal sites that everyone recommended to me, but either they were too strict in their dates, or the “deal” evaporated when you read the fine print (or reviews for the resort).

I had nearly given up hope when last week, I was browsing through Farecast when I saw a small inconspicuous link which said “Deals from Boston”, and below that “SFO for $220.” SFO? As in, San Francisco? As in, a coast-to-coast flight for about $200? Say it ain’t so!

In a frenzy of instant messages my wife and I tried to decide whether to jump on this or not. Of course, while we were doing this, the flight doubled in price back to the standard fare, and I felt crushed. I swore if I ever saw an opportunity like this again, I would just jump on it.

So when the same fare reappeared three days later, I did. I sent a message to my wife - “We’re going to San Francisco in 7 days” - and bought the tickets. Yes, this flight was indeed for the next weekend, or six days from today. I am rarely this impulsive, but after a month of frustratingly searching for the perfect vacation, I wasn’t going to miss my chance.

Next I started looking for hotels. They were quite expensive, with even one or two star hotels averaging over $200. I looked at places outside of the city, but San Francisco is very friendly to walkers, and I didn’t necessarily want to have to drive into the city every day.

So I couldn’t believe it when I saw the Omni Hotel (a four star luxury hotel rated the #3 luxury hotel in the U.S. by TripAdvisor) had a deal for $185 per night through Expedia - about one quarter of their normal nightly rate! I have no clue what caused this deal, but I thought the opportunity to stay in a luxury hotel for less than $200 per night (compared to their standard rate of $699 per night) was too good to pass up.

We’re both very excited about this vacation, but I have to admit that it took a lot of effort for us to spend money on it. See, when it comes to quality, long lasting purchases (like the couches we bought recently, or a new computer), I am able to justify these purchases to myself. Sure, leather couches may cost $2000, but they will last at least five years, and are something we use every single day. In the end, we’re spending about one dollar per day for those.

Compare that to a vacation which might cost $2000 for four days, and we’re instead spending $500 per day, or 500 times the amount of those couches! Of course, sitting at home watching a movie on those couches will not be nearly as thrilling as walking through Muir Woods or taking a cable car to Chinatown. But at least from a financial standpoint, it’s very hard to weigh those two things against each other.

Still, I don’t regret it. We have been married three and a half years, and deserve a vacation together, and I think that we aren’t being nearly as extravagant as we could be with it.

Today I made a transfer of $263 from my checking account to our emergency savings account, “officially” topping it out. We have saved four months worth of living expenses into that account. We decided on four months due to the fact that we are both working, and I feel strongly about my job security.

It took just over one year to accomplish this, starting with savings of just about one month. And for half of the past year my wife was not working (and not spending a dime either), so all in all I am very pleased at our accomplishment. This goal also comes a month after the expenses of moving (paying movers, paying double rent) as well as buying new leather couches (yes, you can spend and save at the same time!).

So … now what? It is a great feeling, to know that I can start saving for all of our other goals, but also a challenging one in that now I have to think of the best way to split money we put towards savings. Before, it was any money left over from our expenditures that got dumped into the emergency savings.

The biggest challenge, as always, is the fact that about twenty percent of my salary comes in the form of quarterly bonuses. So while I can still take a certain amount of money each month and set it aside for savings, that amount pales in comparison to what I can save each quarter from bonuses.

Currently, we have three main savings goals:

• A House:

We would like to be ready to purchase a house as soon as possible. Considering the fact that the median house price north of Boston is $450,000, this will be a few years. We do have a generous gift of part of a down payment from my wife’s parents, but will still need to save a large amount of money ourselves.

• A Baby:

At some point in the next couple years, we would like to have a baby. From what I could find, a baby costs about $10,000 in the first year. We would like to save at least several thousand dollars towards this to help lessen the strain on our monthly expenses.

• Retirement:

I am 25, and I know I could wait another five years before saving for retirement and still come out ok, but I also know that starting at least some type of savings now would help immensely.

At the end of the month, I will be opening another savings account at HSBC. This will be a long-term savings account, at this point focused towards our down payment, that we will never, ever touch. For baby savings, I figure we can add to the emergency savings account (which I should probably rename), and just make sure when we withdraw for baby expenditures to never go below our emergency amount. For the IRA, I will save $2,500 in my checking account. Once I reach that point I will open a Roth IRA at Zecco (I can buy and sell stocks, funds, etc at that point for free, minus a fee of $30/year).

All in all, it’s exciting, if not somewhat overwhelming. We were to want to save 10% for the downpayment of a house over the next two years, we would have to save nearly $2000 a month for that alone!

Sometimes, you just have to shake your head at how unbelievably kind fate can be.

At the beginning of this week, my business line received a call from, of all places, Fuddruckers. You know those glass bowls you drop business cards into for a free lunch? Well, for the first time in our life my wife and I dropped a card in. This was a call letting us know we had won a lunch for not two, but fifteen people. It was a very nice surprise to start the week with.

I should be honest here and, at the risk of insulting any Boston readers, mentioned I was still recovering from the Cleveland Indian’s loss to the Red Sox in the ALCS. Yes, I live in Boston. But it’s hard to steal a team’s affection away from a Cleveland hometown boy.

So the call from Fuddruckers helped brighten my mood a bit. Then, on Wednesday night I checked my email right before going to bed. I saw an email with the title “You won!”, and almost threw it into my spam box before noticing it was from Flexo over at Consumerism Commentary, one of the personal finance blogs I read every day. To be honest, at first I couldn’t figure out what this might be referring to. I opened the email to find out I had won the contest he had posted last week for a free Sumo Lounge “Omni” chair – basically, a luxury, incredibly comfortable, massive bean bag chair.

What a surprise this was! The last contest I won, in all seriousness, was when I was eight years old, opened a pack of Bubble Yum gum, and won a shower radio. Not only was I excited about winning, but I also really wanted the prize! From some reviews I’ve read, it’s a great thing to lounge on when playing video games. Even better, my wife is a huge fan of lying on the floor when reading, so at least now she can be more comfortable doing it. Thanks Flexo!

Then yesterday came the biggest news of all. A few days ago, I posted about living on a salary where a bonus accounts for a large portion of your yearly pay. Well this week was our fiscal end of the year bonus. My boss had mentioned several times that this was going to be a nice bonus, thanks due to a new, expensive publication we started and then sold out of a week later.

I can’t really say the amount of the bonus, as I don’t like revealing too many exact figures about my financial life, but I can say this: It was the largest check I have received in my life, and was more than three times the amount I had expected. When I received the check, my hands started shaking and I was having trouble getting oxygen. Funny how the body responds like that, even to good news!

This check hammered home one of the things I love about the company I work for: They appreciate and reward hard work. This past month, I have stayed late a large amount of days, and worked over two weekends, all in preparation for launching our new website. I think they noticed that, and besides simply telling me their appreciation, also expressed it in this bonus.

Now here comes the challenge: Budgeting this very large sum when I had only planned for receiving one-third of it. I threw around some numbers last night and came up with this plan:

• 30% to my dad, for my college loan. This will put me within two years of paying off the remainder of my loan.
• 20% to reach my goal for my emergency savings!
• 20% towards a down payment for the used car I plan on purchasing in December (don’t worry – I have been planning on getting a new car for several months now. It wasn’t the bonus that made me decide to do this).
• 20% to pay off the remaining eight months on my current car’s loan.
• 10% to test my self control.

As for that last 10% … I am honestly not sure what to do with it. I know that it is really only fair for me to spend some of that on something I would really enjoy, either a nice night out with my wife or a new gadget from Best Buy. The problem is, I have been near-salivating over an Apple Powerbook for the past half year. I have decided to get rid of all my current computer equipment and replace it with a single laptop. The thing is, I don’t need a new computer right now. So it’s going to be a very difficult decision to make regarding how much to spend of that remaining 10%, and what to spend it on.

Oh, and one more thing. Last night I got to go see one of my favorite groups, Mates of State, play at the Museum of Fine Arts in Boston. It was a great way to cap off a fantastic week.

Emergency Fund: First, I have decided to change the amount of money saved in my emergency fund. While I was originally aiming for $10,000, I now feel as though $8000 is a reasonable enough amount on which my wife and I could live for at least several months should both of us be out of work. However, I feel very secure in my job, and when my wife starts working again it seems fairly unlikely we would both be out of work at once. Also, if worse comes to worse we have two wonderfully supportive families who could help out, though I doubt it would come to that.

Unfortunately, the actual amount in my emergency fund has not changed for the past few months. First, we had to pay $270 to fill 1/3rd of our oil tank. No, this should normally not be considered an emergency. However, our finances are still relatively tight with my wife not working, and I had forgotten to budget this expense in. The second reason is because of what I just mentioned: Without a second salary, we can only save money when I get my bonus checks. However, I will be getting a bonus in a week and a half, so I hope to see that green bar on the right get even closer to reaching its goal.

Student Loan: I am happy with the progress I am making on this. First, even though as I mentioned finances have been somewhat tight, I decided to increase my standard monthly payments to my dad from $300 to $400. Second, I feel confident in my ability to send at least another $1000 each bonus, which means my average monthly payment is about $730.

Lastly, I am interviewing next week for a part time job, the proceeds of which will go mostly towards this loan. That, on top of the fact that when my wife starts working again I will be able to increase the loan by yet another few hundred, means I can be looking at paying the rest of this $30,000 debt off in less than two years!

Car: With only eight payments left, I am close to finishing paying for my car, which I originally financed back in 2003. It’s tempting to pay it all off now, but considering I pay a paltry 1.9% interest rate I don’t see any reason to hurry it up.

Alas, it seems as though I won’t be finished with car payments completely. My wife and I have faced the harsh reality of living outside a city and trying to share one car. Unfortunately, unless her job schedule matches magically with mine, it’s nearly impossible. We are therefore looking at buying another car late this year. I’ll have more details on this soon, but we may be able to purchase my parent’s leased three year old, 17000 mile Honda Accord for an incredibly reasonable $15,000.

House and Retirement Savings: Alas, I am still a ways off from being able to contribute anything meaningful to either of these goals, so I have decided to remove them for the time being.

Ever since a few months ago when my interest in personal finance was piqued, I have been looking for ways to add a second income to my income stream. I work a steady 8-5 job, so my options are somewhat limited, but there is still a lot out there. I’ve been reading books like Rich Dad, Poor Dad (good inspiration with mediocre advice) and The 4-Hour Work Week (mediocre advice from an abrasive questionable author) for ideas, and have been brainstorming on my own. Here’s what I have thought of (and, in some cases, dismissed) so far:

• Real Estate: I think that real estate is a solid idea for a second income stream. At the moment, I am mostly considering buying a multi-unit house which I would live in and rent out the other units. It seems as though this might serve as a nice step in-between renting and owning my own house. Of course it has downsides, mostly in terms of dealing with tenants. For now though, any action I would take with real estate is in the future: I simply don’t have the capital right now to invest in anything.
• Consulting: I really like the concept of consulting. For me, that would be with computer science as I have a decade of experience and a few degrees in it. I have enjoyed my experiences with it in the past, the startup costs are close to nothing, and I could charge a very nice hourly fee for any work I do. The first step, however, is the one that requires the most effort: Marketing. I know from the past that while a lot of people need this service, it’s not always easy to reach them. I got a book from the library called Guerilla Marketing that may help give me some cheap ideas for spreading the word, if I decide to pursue this.
• Investing: So far, this is going great. I am having a blast researching and monitoring the six stocks I own (Apple, BE Aerospace, Crocs, Gamestop, Jones Soda, and Loopnet). Unfortunately, as with real estate, I am limited by my capital. Right now I am trying to prioritize my emergency savings, and I know that it would be more responsible to save at least 60% of this money in a low-risk account (like an online bank) since I plan to use it within five years. I also decided not to make use of Prosper.com.
• Online Poker: I know, I know. Gambling? However, I made a nice chunk of change a year ago by combining poker bonuses at various online casinos (free $200 for playing, say, ten hours of poker) with winning at the actual game, which was fairly easy to do when playing against most online players. However, I soon found out that due to recent federal regulations it’s nearly impossible to deposit money into most online casinos. Scratch that.
• Credit Card Arbitrage: I just posted my thoughts on this at Advanced Personal Finance: “I have to agree. That interest would be nice, but it just seems like a lot of work and a lot of risk, albeit for a decent return. Really my main concern is with the FICO score. Those calculations are so mysterious that it seems impossible to accurately quantify how much a $50,000 outstanding bonus affects your score. Also, I’m just too worried I would do that and then have something come up (like a new car) where I needed a good score. In the end I might just pay that interest I gained back by having a higher interest rate on a loan.”
• eBay: I am going to make a more detailed post on my experiences with this either today or tomorrow, but I am not sure if I have the knack to find profitable items to sell online. I even tried signing up for Salehoo, which links buyers with wholesalers, but have yet to find anything which would make me a profit. I have sold about $100 of old video games so far though, which is at least a start.
• Super Secret Business Idea: I had an epiphany in the shower this weekend on a business idea, based on some products my wife and I sold about a year ago. I thought of a possible way to mass market these products, and it’s really quite exciting. However there are still several issues that I need to think about more before fully committing to this.

A belated father’s day post

Growing up, I was lucky enough to have parents who valued higher education, and saved a good chunk of change for me and my two sisters. In 1999, when I chose to attend the University of Massachusetts, Amherst, its tuition matched up nearly perfectly with what was saved for me. I could have gone to a in-state school in Ohio, and saved that extra money, but I found UMass to be my perfect school. I feel very lucky that I was able to attend the school of my choice.

Unfortunately, when I prepared to go to school in fall 2000 and my father started withdrawing my college funds to pay for tuition, the market had already been declining for nine months. And each semester, when the tuition bill would come in, my father would again have to withdraw more money from a floundering stock market. The last of my money was withdrawn in early 2003 - at the lowest point the stock market had been since 2000.

In the end, I came away with about $30,000 in loans from college. Yet they weren’t owed to FAFSA, or Sallie Mae, or any of the other student loan programs. My father was instead able to secure the lowest rate loan through his house mortgage. Hence, in the end, I owed this money to my father.

Being someone who always puts his family before him, he would hear nothing of me paying interest on the loan. Nor would he even tell me what he wanted me to pay each month. Instead, he just asked me to pay what I could.

The problem was that right after finishing undergraduate school I decided to go to graduate school for a master’s degree. The good news is that after a initial $4000 loan to pay my first tuition bill, my wife and I were able to pay the tuition without taking out any additional loans. The bad news is that I didn’t have much money left over after that, and could only scrape together $100 per month to send him. Again, he told me even the fact that I was able to send $100 while paying graduate school tuition meant a lot.

So, by now you might see the problem. I had a near $30,000 loan owed to a generous parent who only asked me to pay what I could afford. As my financial situation has changed over the years, I have always tried to adjust the amount I send him to be fair. Right now, my loan is down to about $22,500.

My goal is to have this paid off in two years, meaning I’ll have to average about $825 in payments every month - no small feat (you can check on my progress under my goals section on the right sidebar). However, I have to say that this is no check I look forward to writing more every month.

This weekend, over a large I.C. Caramel coffee at Panera, my wife and I spent an hour discussing our future career plans. It was actually extremely fun and exciting, because we were talking about a new idea we had – working together.

I consider my wife an incredibly smart and ambitious woman. She recently applied for a job at a receptionist level and two weeks later was promoted to an operations manager (this has happened at both of the previous jobs she worked for too!). At this new job, she has a chance to really learn the ins and outs of working with clients, and also a fantastic opportunity to network with people. In several years, she will have quiet a skill set when it comes to managerial skills.

I am happy working as a web content manager, and will soon be rolling out a new online presence for the company I work for, including learning all about system administration. I also have a solid decade of experience in this industry, and the education that I (somewhat reluctantly, I should mention!) pursued.

As my wife has always had an interest in consulting, and I an interest in technology, we thought technology consulting would be an excellent business idea to pursue. So we sat and talked about what would be involved in running this type of business (good people skills backed up with solid technical support and reliable, skilled employees), the initial capital needed (not very much at all!), and when we would see ourselves fully committing to this (probably not for ten years).

The funny thing is that I always was fascinated with the idea of starting my own business, but never really considered it a plausible idea until recently. Part of what helped was reading not only about how successful small businesses can be, but how most of the millionaires today got to that point not through inheritance or the lottery, but by innovative ideas that they formed into a business plan.

So I would encourage anyone who has ever had even the slightest inkling to start their own company to sit down and brainstorm about what kind of options there might be out there for them.

With my wife working again, we will be what one family friend referred to as DINC’s, or double income no children. We’ve already redone our budget, with the only additional expense being her monthly commuter pass (which at $160 isn’t exactly cheap, but is much better than driving and parking in Boston every day). We set aside some money for each of us to help float our checking accounts a bit more, and then dedicated the rest to savings and paying my student loan.

The savings will first go towards our $10,000 emergency fund, which is 25% of the way there so far. After that, it’s time to save up for a house. And what a challenge that is going to be!

I’ve recently been enamored with the concept of compound interest (whereby interest you accrue in an account, and that stays there, helps the account build interest even faster). Unfortunately, I became a bit too enamored with it, and assumed that it would help just as much over a few years as it would a few decades.

Of course, that’s not the case, and we’re going to have to do most of the house savings with our own money, with interest accounting for about 10-15% of the money contributed. So how much do we need to save?

First, we need to know how much the actual house is going to cost, of course. I took a look at the average house cost for some communities we like and found it to be about $375,000.

Second, we calculate the down payment as being 20%. This amount is always the recommended down payment, and also allows you to avoid paying private mortgage insurance, which can cost $50-$80 a month. So we would need to save $75,000 for a down payment.

The next question is simple: When do we want a house? We’re both 25, so let’s say we want one by age 30. Using a savings calculator, assuming we get 5% interest in an online savings account, I found that we would need to save $1150 a month, not including any other savings, to have that money in five years!

Unfortunately, I don’t really see that being possible. So what are our options? First is to simply wait an additional year before buying a house. Second is to buy a cheaper house, and third is to pay less than 20% on a down payment. At this point, the first option seems most likely, but I still have quite a lot to learn about paying for a house.