Job offers – the magic numbers

I was talking to my brother about the various parameters of the job offer, tax rates. etc. Just came up with a list which might be useful to folks looking for a new job. Here it goes – let me know if I am missing something:

 Offer components
 
1 Annual Salary
2 Sign On Bonus
3 Stock Options / Awards
4 Relocation Package
 Home furniture
 Car reloc
 
 Things to evaluate an offer
1 Type of role, which company, technology
2 Annual raise
3 annual bonus
4 annual stock options , awards
5 401K match
6 ESPP plan
7 State tax
8 Rents / Home purchase prices

                                                                                                                 Useful links    

1 Federal taxes http://www.irs.gov/formspubs/article/0,,id=150856,00.html 
2 Rents comparison    
3 Home prices    
     
     
     
     
 Offer Comparison Chart    
1 CA http://www.bankrate.com/brm/itax/edit/state/profiles/state_tax_Cal.asp   
2 WA 0   0
3 WI http://swz.salary.com/salarywizard/layouthtmls/swzl_statetaxrate_WI.html#taxrate   
4     
     
btw, he is graduating 12/15/2007 (if your company has openings, please send me a note )

how much money is enough?

well for starters, this is not a philosophical discussion. I was thinking from the lines of folks who are working in the US because of the fact that the USD is 40x of the INR and are thinking of going back when they are “financially strong”.

So it starts off with what are the expenses on a monthly basis in India. Can a family survive with Rs 40K per month? There are some many factors (rent costs vary a lot, #family members vary, lifestyles vary). But here are some numbers:

Rent / Mortgage 12500
Groceries 4000
Electricity 2500
Telephone Bill 1500
Mobile Bills 2500
Movies, Eat Outs 4000
Weddings, bday gifts 2500
Vacation 5000
Medical Expenses 7000
Petrol 5000
health Insurance,
medical costs 5000
Internet 1000
Maid 2000
Water 1000
Paper, Milk 1000
Car EMI 3000

47000

Now the question, how much savings do you need and how should you invest to get a monthly return that satisfies the above? technically that leads to financial independence.

stay posted and let me know if I am missing something huge (kids, school expenses,…..)

to wire or not to wire

The dollar is at 39.5 right now. apparently, the rupee is said to gain some more in the next few months. So the question is should we wire $$$ to India right now and how?

well, I did wire a few 1000s yesterday because of need in India. So the basic question is what do you plan to do with the wired $$$? for starters, the interest rates in India are at 9.5% for rupees, stock market in general is doing well and there are smart investments that you can do. if you plan to do any of this, well than converting at 39.5 or 43.5 may not be a biggie again assuming that it is a few 1000s. and more importantly if there is an important need, then all these reasons are not a factor at all.

How to transfer? a friend of mine (BK) had done enough research a couple of years back and come up with a recommendation which i follow. it seems like SBI does a good job in getting the maximum conversion buck. so the best thing is to wire money in $ to a SBI NRE account, which means that the conversion to rupees happens in India. Sometimes, you might be able to negotiate the bank to give the best rate over a period of 3-4 days. depending on how much you transfer, the wiring fee ($42) will still not make a difference

happy wiring and happy investing.

get real, estate

You probably have heard this over and over again – real estate is the best investment, to make it big, etc, etc. In many ways, this is true, if you look at the US taxation system, it allows $250,000 of capital gain with no taxes to pay – that is a big plus when compared to something like stocks. In the case of stocks, the short term gain is pretty steep (around 30%) and the long term at best can be around 15%.

Had I invested in real estate in 2001, the returns could have been really good. hindsight is 20-20. The fear of losing jobs, lot of instability was happening in 2001, maybe I did play on the side of caution. moving forward, today real estate is ’slowing’ down, not many buyers, prices stabilizing and dropping at times. some factors for people to consider:
- understand the costs in closing a real estate deal (the closing costs, escrow commisions, etc)
- if you are starting off your career or plan to be in the same place for 3-5 yrs, maybe it is still a good idea to re-consider real estate as an option. Imaging getting a property for 350K 3 BD town home (hey cal guys, this is still possible in the NW if you move a good 30 miles away from Redmond).
Let us say that mortgage rates are 6.5% => 22.75 K interest every year. With the interests tax deductible, approximately 25% can be recovered. so this will end up to be 22.75 * 0.75 = 17.0625K per year. Let us say, the principle paid is about 1K. That would translate to about 18K per year or $1500 per month for a 3BD apt which is not too bad.
If you are single and in a position to have 2 roomies, this simple translates to $500 per month and building equity.

So get real, estate is still an option in the US.

Now, look at what has happened in India, in the last 5 yrs. Returns of 2x, 5x, 10x has been unbelievable. Places like Sriperumbudur in chennai, magarpatai in Pune, etc have skyrocketed. Certain properties in Hyderabad and Bangalore are going at $750,000. Capital gains in real estate if re-invested within 3 months in another property apparently has no tax implications. but it has now beyond range. So it begs the question, should we invest in India at all?

I think the smarter investment is to move to tier2 cities like coimbatore for residential which seem to be the next logical point to increase. from a commerical venture perspective maybe places like OMR (renting an apt on a corporate lease is also a good option which I look as this one). But in India, getting a real estate is an issue – you can end up buying a piece of land which is already owned by a couple of folks

Last I heard was that prices are stabilizing in chennai ciy as well. As the properties going at 1C, 3C are slowly coming down. So it may still be a good time to invest as a joint venture with a bunch of friends getting into a commercial venture – a 3000 sq ft showroom.

Interested? Send me a note …..

yahoo finance article – 35 mins to riches, duh?

35 mins to riches

Contributing to 401k is one which folks dont seem to get right away. I, for one, is defintely going to be breaking the 401k before 59.5 yrs and pay the penalty but still there are reasons to contribute. I have discussed with friends, some of whose companies dont even match. Still, I think it is a good idea to contribute.

Consider this scenario – assume someone makes 70K per year, is in a company that does not match the constributions and is going to  leave the US in 5 yrs. Let the contribution be 7K per year and assume the person stays in CA, taxed at 35%.

No 401K contribution: take home over a year = 70*0.65 = 45.5K

401K contribution: take home over a year = 63*0.65 = 40.95K, difference between not contributing is 4.55K and over 5 years this accumulates to 22.75K

Over 5 years, the 401K accumulates 35K – hopefully it will grow at a healthy rate of at least 5%. but for argument, let us assume it stays constant. if the person breaks the 401k and pays the 10% penalty, it leaves 31.5K in the kitty. Assume the person draws 15K the first 2 yrs and then the 1.5K. As per the US tax slab, the person has to pay taxes of 10% which means they get to enjoy 31.5 * 0.9 = 28.35K which is still about 24% better than the 22.75K.

Now if your company is matching, it makes these numbers even better . I dont know if there is a State penalty that you need to pay for breaking the 401k. Interestingly moving to a state with no income tax seems to even cover the contributions made in another state with income tax. so move to WA if you paying the biggie in CA

Similarly about the ESPP, simply contribute, take the discount, sell it at the end of the period, pay the capital gain and enjoy the money. This is still better than the folks who dont contribute due to fear of investing.

Next is having your savings in INGDIRECT or in HSBC or both like me – I really like INGDIRECT, they have your $$$ in savings account still give you 4.5% APR and you can do a bunch of wire transfers into your primary banking account. Usually the transactions take about 3 days which is pretty good.

 Diversified stocks, mutual funds this is a tough one. I still think that figuring out the winning combination is pretty difficult. this is definitely glorified gambling, IMHO

Credit cards – definitely, this is an easy one. Always negotiate the best interest rates with your credit card and lower whereever possible. For folks who are starting off building a credit history, take a “covered” credit card where you have a deposit in your bank and pay the card fully and at the right times. Slowly, you will get the credit cards that offer you 1.99% APR or even 0%. if you are smart and meticulous, you should take advantage of the 0%, take the $10K pay the $75 balance transfer fees, have it in INGDIRECT at 4.5%, make the minimum balances every month (set it up if you have a free online banking) and then before the 1 year ending, pay if off in full . You can save about $300 over the year which will cover your air tix when traveling in the same zone (within west coast for example)

Read it – now let me know what ya think?