Monday, July 30, 2007

Using Compound Interest to Your Own Advantage

Last time, we explored the topic of compound interest.

How can we use the power of compounding to our own advantage? By saving for the retirement as early as possible.

The answer seems simple but I know many people who would consider it to be absurd: “I mean, come on, who would think about retirement at such a young age, in the 20’s?”

Biz Girls, you would!

The following example shows how essential time is for money growth. We have 2 biz girls, Allison and Barbara:

Biz Girl Allison:
Allison started saving $100/month in an aggressive investment account since she was 20 years old. She stopped saving money at age 45.

Biz Girl Barbara:
Barbara started saving $100/month at age 25 in a similar investment account and continued until she was 65 years old.

Who will end up with more money at age 65?

The most obvious answer would be Barbara, since she invested $100/month for 40 years while Allison only invested the same amount for 20 years. Not really!!!

By age 45, Allison accumulated $108,000. If she keeps this money growing for the next 20 years at, say, 8% per year, she will end up with $503,383 at age 65!
By age 45, Barbara would have accumulated $66,000. Even if she keeps adding $100/month for another 20 years, she will only end up with $385,000 at age 65.
Allison had around $40,000 more than Barbara at the same age. So even if Allison stopped saving, she ended up having more money than Barbara when they both retire.

Now you can see how time is such a major factor in money growth.

Try it yourself with this calculator!

What can we learn from this lesson? Start saving for the future as early as possible!!!

Now that you have seen the example above, I feel that you’ll be more open to discuss retirement plans! So look out for the future entry about "401K: the 'Must Have' Retirement Account".

In the meanwhile check out the next entry about "Rise and Shine: How to Get Ready in 30 Minutes."

The Biz Girl

Friday, July 27, 2007

Time Is Money: Simple Interest vs. Compound Interest

The first time I heard about the ‘Compound Effect’ I wanted to rename it ‘the Modern American Dream’. I will explain this more in the next blog entry but first I want to make sure that all Biz Girls are on the same page when it comes to financial terms. Let’s define* 4 terms today; the first 3 are:
Principal: the original amount of money on which interest is calculated
Interest: a fee paid on borrowed money
Interest Rate: the percentage of the principal which is paid as fee (the interest) over a certain period of time

Let’s say you invest $100 (principal) with a 5% interest rate per year. By the end of the first year, your money will grow to $105 ($100 + $5 in interest) instead of the original $100. On the second year you will have $110 and so on.

This sounds cool, right? Free Money is always cool. Let’s explore another kind of interest: Compound Interest.
Compound Interest: is interest based not only on the original principal, but also on any interest that has been added to the principal in previous years.

Again you invest $100 (principal) with a 5% interest rate per year. By the end of the first year, your money will grow to $105 ($100 + $5 in compound interest). The second year, instead of having 5% on the principal, it will be 5% on the $105; therefore, you will have $110.25.

Below you can see how your $100 bill grows in 40 years when simple interest and compound interest are applied to it. Notice that the real growth happens during the later years of compound interest because the interest is computed on a bigger amount (so between years 3 and 4 the money grew by $5.79 but between years 39 and 40 the growth was $33.52); whereas simple interest keeps a steady growth of $5 since the interest rate is only applied to the principal.

As you can see, money grows over time; therefore, time is money. Watch out for the Sunday posting about “Using Compound Interest to your Own Advantage”.

*Definition from

The Biz Girl

Wednesday, July 25, 2007

There's No Crying in Baseball

A question frequently asked by new graduates is: “which is harder, school or work?” People often answer: “work is much easier because when you are done at the end of the day, there is no homework!” (well, that was not always the case in my job! )

I think that the main difference between the two is soft skills. You can not survive at work, especially in corporate America, if you don’t build the necessary soft skills (work management, stress management, team work, etc.)

Stress is a big issue in corporate America and people do not necessarily know how to deal with it. Remember, your coworkers are not your family and they are not your friends either, they are your coworkers. They have different personalities, personal problems, and hidden agendas that you might no necessarily know. When stress hits, reactions vary: people might yell, get frustrated, snap for no reason or small reasons that act as a trigger.

I used to take this very personally and cried many times… until a very strong lady became my manager (amazing manager!), she took me aside and told me:
There’s no crying in baseball! If you want to cry, you can get jobs where women are allowed to show emotions and compassion. You can be a teacher, a nurse, a helper in a non-profit organization, etc. but if you choose to be in the tough world of corporate America, you will need to get a thicker skin. Unfortunately, some men still do not consider women as equal competitors; you can not give them any chance to confirm this nonsense belief. Men automatically interpret your tears as a sign of weakness. You can cry when you go home, but don’t ever show any emotions at work. You are as strong and smart (or even smarter) than a lot of men out there!

This speech changed my life. It was one of those ‘Aha’ moments. I have never seen a man cry at work but have encountered many girls that broke down in tears, including myself. Women tend to be perfectionists, take things to heart and even personally sometimes. This is predictable, as from childhood, girls are allowed to show emotions while boys are encouraged to suppress them (how many times did you hear mothers say: “you can not cry, you are a little boy!”)

Today is the day where you promise yourself that as a Biz Girl, you will never ever show a tear or any sort of emotions at work unless it is passion, excitement and enthusiasm.
At home, you can cry, eat a pint of ice cream, and watch ‘Sex and the City’ to feel better. But the next morning put on your best outfit, drink a big cup of confidence and walk in your office with that Biz Girl attitude of yours :-D

Look out for my next posting titled ‘Time is Money

The Biz Girl

Monday, July 23, 2007

How to Survive on a Budget (Contd)

In the example from last time, our Biz Girl had only $125/month for entertainment (I can only imagine your reaction right now :-D ). But that is reality, and we tend to forget that escaping reality (through entertainment) is luxury! So be creative, instead of spending money on expensive dinners organize potlucks, cooking nights, have dinner at home before going out to a movie, or just rent the movie instead. In other words, be creative, you can have a lot of fun on a small budget!
Also check if your company offers discounts on shows, movie tickets, etc. through employee discount programs.

Budget Tools:
Ideally, you should write down you daily spending to have an idea about how and where you spend your money – but who has the time, especially when you are a Biz Girl? That’s where budget tools are useful to track spending, types of spending, credit cards, and any other finances.

My favorite tool of all is Yodlee*:

By listing all your accounts, credit cards, etc. along with your log in credentials to the corresponding websites, Yodlee logs into these sites for you to provide you with a real time view of all your balances and transactions.
This way you can see how much is your net worth. If you remember anything out of this blog, it should be to find out how much is your Net Worth.
Net Worth = what your own - what you owe
Of course, the aim is to build a positive net worth.

Please take some time to learn how to use Yodlee and feel free to post any questions that you might have, I will make sure to answer them.

* some people might be concerned that you have to put your account information in Yodlee – so far, I have been using Yodlee for the past 2 years and was extremely satisfied with their service

Check out the Tuesday posting titled “There’s No Crying in Baseball!”

The Biz Girl

Friday, July 20, 2007

How to Survive on a Budget

As a kid, I was the one who ate all the candies at once instead of saving them for the week and savoring them one at a time. On the other hand, as a teenager it seemed that I always had plans for the next 5 years and knew exactly what I wanted to do. I am not sure what happened in the middle for this change to occur!

My goal in the next 5 years is to start tracing my own path towards financial independence, and by this I mean that my source of income will not solely be my job.

This blog is for women who want to take charge of their future starting today. Sometimes you will find that my ideas are too serious or too strict when it comes to money management, but this is the way I chose to live my life to achieve my goals as a Biz Girl.

Last time we discussed a Biz Girl budget; here are some tips to help you live on this budget:

If you live in the city, you might not even need to buy a car. Otherwise, take your time, shop around and preferably buy a used car in a good condition. I bought my car for $2000 in my last semester before graduating and spent another $2000 on fixes. It ended up being a good deal: the car has been cooperative for the past 2 years and now that I have learned how to manage my finances, I am ready to get an upgrade that I can afford. Make sure you do research about car types, prices, etc. before any purchase. You can save thousands of dollars!

Based on the example of last time, our Biz Girl had $375/month for food, if we divide it by 30 days we get $12.5/day.

Obviously, eating out on a daily basis is not realistic. Welcome to Compromise World: you might want to have lunch with your colleagues, so you will have to eat breakfast and dinner at home. A common trick is to keep the exact amount of cash reserved for eating out per week so you don’t spend money you don’t have.

Trust me, you can buy a lot of food for $375/month in a supermarket and more importantly you will be healthier! Stack up on fruits and vegetables, cheese, dairies, lean meat, etc.
Take your own snacks and meals to work.

For example (very simple example):
if you buy a pack of soda from the supermarket, the can would cost on average 25 cents versus $1 if purchased from the vending machine. You will basically save 75 cents. Let’s say our Biz Girl drinks 1 can of soda per day at work, 5 business days a week, she will save $15 a month if she brings her own soda can. This translates to $180 a year! Or let’s say an iPod (oh, now it makes a difference!).

Your best friends are Outlet Malls and Sales. You can easily buy 2 well tailored pants and 2 shirts for $125 from a very good store in an Outlet Mall. Remember, your work wardrobe is going to keep growing, so don’t feel like you need to buy the whole wardrobe on the first week of your job. Use the tips posted earlier on this blog to mix-&-match your clothing items. I will definitely come back to this subject in more detail.

Keep tuned for more budget survival tips on Sunday :-)


The Biz Girl

Tuesday, July 17, 2007

Your First Budget

It had been 2 weeks since I joined Corporate America and the day had come where I earned my first real Paycheck. I made it; all the hard work at school had transformed me from being the ‘almost geeky’ girl to the richest woman of the day (or so I thought).

Slow down cowgirl, what about the bills? You know, the ones included in your independence package that eat up most of your brand new Paycheck. Well, no one really tells you about the bills, let alone how to set up a BUDGET!

I was watching the Tyra Banks Show (I love you Tyra!) where Lynette Khalfani, a personal finance expert, listed the maximum % that needs to be set aside for each expense type.

I added a third column to Lynette’s table to show what it means for a Biz Girl who earns (say) $2500/month:

Notice that this budget does not even include credit card debt or school loans.

As you can see, partying in New York can be very limited on a $125/month budget. Of course, you have a choice: ignore the budget and live beyond your means (which is a very common practice) or focus in what is necessary to ensure a wealthy, debt-free future. Biz Girls follow the latter.

As a rule, you will have to save 3 to 6 months worth of living expenses as a permanent savings cushion. Following the example above, our Biz Girl needs $2000 to live (if you exclude savings, clothing and entertainment) which means her permanent savings cushion needs to be between $6000 and $12000. This is to ensure that you are covered during the time you are looking for another job if anything happens to your current one (on average it takes 3-6 months to get a new job).

Please don’t let this entry discourage you, if you feel scared, don’t worry, this is a normal feeling and it means that you understand the importance of this reality check. My next blog will list tips on How to Survive on a Budget that will help you maintain and enjoy your budget!

Check out the links below:
SoYouWanna Set Up a Living Budget?
How Much Savings Do I Need?

The Biz Girl

Monday, July 16, 2007

The 10 Commandments for the Perfect Business Attire (Contd)

A piece of dress code advice that seems to be the common theme among self-improvement books is to dress for the next level. This does not mean that you should look 10 years older but instead dress sharp and clean (remember my previous blog, no more pink fuzzy shirts).

The next 5 rules to create a Biz Girl outfit:

6- Well tailored pants – avoid skinny pants that cling to your figure and have a ‘teenage’ look. Black pants are a must; own at least 2 pairs.

7- Shoes – I love high heels; they make me feel powerful. I believe that at least a couple of inches are necessary for a Biz Girl outfit. Choose elegant, closed-toe shoes that are comfortable. Make sure your shoes are always clean. A tip for you: if you don’t have shoe polish, use a cotton ball and a small amount of body/facial cream on leather shoes (leather is skin – yep!).

8- Spanx – this one is for curvy girls. Spanx are a miracle sent from heaven, you put them on and your body becomes a smooth flawless figure. Invest in at least one pair of spanx (they are around $40-50 but will last forever).

9- Bras – ALWAYS wear a bra even if your size is a -10 AAA. One common mistake women make is to wear a white bra under a white shirt. This is a no-no. Buy a skin color bra to wear under clear color shirts.

10- Be creative – I am not saying put holes in your well tailored pants and paint butterflies in your platform shoes, but include a touch of your personality in your conservative outfit… you will look polished and unique. You will look like a Biz Girl!

I hope you enjoyed these tips about creating a Biz Girl look. I will definitely write more about this subject including make-up, hair and a specific example for each commandment.
Below are some links that you might find interesting:
How to Dress Business Casual - Women
Dress for Success

Watch out for the Tuesday posting about How to Set Up a Budget – you don’t want to miss this one :-)

the Biz Girl

Wednesday, July 11, 2007

The 10 Commandments for the Perfect Business Attire

When I graduated from school and got my first job, I faced a dilemma that no one told me about: the dress code. Gone those days where ripped jeans were viewed as ‘cool’ and when a pink fuzzy shirt made me look like the hottest ‘almost-geeky’ girl in the Computer Science graduate department. Corporate America is based on brain power, looks, positive attitude, looks, achievement, looks, over-achievement, looks… as you can see, ‘looks’ come up at all times.

The problem (or the challenge as they prefer to call it in the business world) is that it is expensive to dress well for your first job, especially when you are a recent graduate and the shadows of school loans are throbbing in your head.

No worries! I am going to share with you some tips and rules in how to create a Biz Girl look:

1- Crisp and Clean shirts – always make sure that your shirts are clean and ironed (keep a ‘Tide to Go’ in your purse at all times!)

2- Solid and Clean colors – in my definition a ‘Dirty’ color is any color that you can not name, for example the green/brownish colors that you might attempt to call ‘Earthy Khaki’ (this camouflage will not work so well in the office!)

3- Black and White – some of you might think that this combination is boring. However, a fashionable Black and White look (by combining steps 4 and 5) can be a winning business outfit

4- Simple Accessories – Accessories such as belts, silk scarves, etc. can change the look of an outfit (no extravagant choices please!)

5- Layering – adding a vest over a business shirt or a business shirt beneath a dress can create a whole new outfit

The pictures below depict these 5 rules.

Check my posting on Sunday for the additional 5 commandments.
The Biz Girl

Tuesday, July 10, 2007

The Biz Girl

My high school friends would describe me as a geek, my college friends would nod affirmatively to this description, but my grad school peers would say ‘not geeky enough’ (well, that is expected in the computer science department).

But now I would describe myself as a Biz Girl.

Here is how it all started…

1 year and 5 months ago, I walked in Wall Street to my first day of work in one of the prestigious consulting companies. The energy of this street is unbelievably intimidating for a first-timer. Young professionals, dressed to impress, all walking towards the power of corporate America. You can sense ambition, overachievement and fierce competition. At least I could sense it and I felt so awkward in my business casual clothes bought on sale the day before.

This was 1 year and 5 months ago, not too long but long enough for me to gain the confidence I was lacking, take control of my life, and learn how to walk head-up in Wall Street.

I want to start this blog for all young women who want to take control of their lives, their appearance, and their money in the challenging world of Corporate America. Strangely enough, they never teach such subjects in school: retirement 101, investment 101, business fashion 101, life 101…

In this blog, I will be sharing my work experience, money tips, fashion/make up advice for work, and much more.

I will publish my postings on Tuesdays, Fridays and Sundays – and the first one would be this Friday about the Perfect Business Attire a topic that every fashionable Biz Girl should know.

The Biz Girl