Tuesday, December 4, 2007

November Net Worth

Nothing outstanding this month, just the usual routine of saving. My net worth rose by 6%, and it’s now $3,737. I haven’t gotten financial aid this month, so I hope to get two-months’ worth in December, and put it away.

Cash makes over one-third of my assets already. Wow. Am I getting a little conservative? The thing is I’m working on saving about $1,600 to be able to open a checking-savings account with a minimum balance of $1,300. Concentrating on this, I started ignoring investments totally. Now, I have to remind myself, that this savings account can surely wait, and I’d better put more money in my index fund. After all, one-third of cash certainly is not my ideal allocation.

Monday, December 3, 2007


Today Russian citizens have chosen the parties that will sit in our parliament for the next four years. I voted for the first time in my life. I knew that United Russia, a monstrous party with vague promises, that reeks a little with totalitarianism and a cult of personality, and is headed by our current president, would get the majority of voices. Other parties had lesser chances to obtain seats in the parliament. Still, I believed that my voice could make a difference. I actually like two parties from the opposition, both sharing democratic values. One of them appealed to me the most, so I voted for it.

The rough estimate is already known. United Russia gained over 60%. Three other parties won much less voices, but also made it to the parliament: first, the communists (their position is usually strong, because almost every senior citizen always votes for this party), second, a party aimed at persons aged 55+, and third, a funny party, which has a very charismatic and entertaining leader, but which political positions I can’t figure. My party and the other party that I like have gained about 1% each. Oh, by the way, the total number of parties was eleven.

I’m used to being a member of small groups. For example, I am a student in Moscow – we don’t make up to 1% of the population, I guess. I invest money in mutual funds – less than 1% of the Russian population deal with stock market either. But now I am in a small group again, and the consequence is that I, my values and my aspirations are not represented in the government. OK, I don’t want to think about politics anymore. It’s too frustrating.

Thursday, November 15, 2007

My First Investment

A year ago, on November 12, 2006, I purchased my first mutual fund. At the time, only about 300,000 Russians out of 140 mln population were buyers of stocks and mutual funds. My family and friends were suspicious about stock market, but I was interested in mutual funds and determined to buy one. I’d been contemplating for half a year. It was so difficult to choose the right company and the right fund! But finally, I picked an index fund of the subsidiary of my bank. One day after classes, when I was alone, I braced myself and went to the nearest office, which happened to be five minutes’ walk away from my dormitory. It was Friday, about 7 p.m., and already dark outside. I was nervous and scared. It seemed like I was doing something shameful, as I didn’t want anybody see me and ask me where I was headed. I probably just didn’t want anyone try to discourage me.

People in Moscow usually buy mutual funds in big, expensive offices in downtown. The small office near my dormitory, which is situated very, very far from the center of the city, usually processes loans and savings accounts. So, it turned out I was the first person in the district who had an idea to buy mutual funds there. The manager was able to sell me funds, but she didn’t know exactly how to do it. Luckily, she didn’t send me to another office or ask me to come some other time. The manager couldn’t call the main office to consult, because it had closed at 5 p.m. She used her cell phone to call someone, and then called somebody else. She was the only manager in the office. A man lined up after me and stared at me intensely, wondering why I took so much time. I think I spent there more than half an hour, nearing an hour. But when I came out of the office and breathed in frosty air, I felt a surge of excitement and pride.

It seems incredible that a whole year has passed, and my first investment has grown by 27.92%. Now, looking back, I laugh at myself. Buying funds is not a big deal anymore. It’s now a simple operation like depositing money in a savings account. I’ve even learned to do it online. Now I feel I can be more open about my investments in real life, because I’ve grown more confident about them. I’ve gotten a lot of experience and knowledge during this year.

Sunday, November 11, 2007

Inflation Is Rising

Since 1995 the inflation rate in Russia has been steadily decreasing. Last year it was 9%, down from 100+ % in 1995. I am young, so I don’t really remember the times when the inflation was increasing. I thought in 2007 it would be somewhere about 8% or less.

But this year everything changed. It all began in September and October, when some products suddenly became more expensive, for example milk, plant oil and cheese. I think I must mention that in Russia food is a major factor when estimating the inflation, because it is still the largest expense of an average household. I guess this price hike is a part of a global trend, as this year the price of wheat skyrocketed everywhere, and dairy rose in price in Europe. Anyway, the result is the inflation rate here is already about 9%, so by the end of the year it will probably be above 10%.

For me there’s nothing scary in this news, even though I spend a lot on food. This year I finally started eating more healthily, reduced the consumption of processed food, and my class schedule allows me to take more meals at home, rather than eat out. And I recommenced bringing my lunch to school. So I hope my food bill will even be shorter than it used to be. The price of non-food goods seems to be the same. I also know that the majority of my savings earn no less than 7%, and my mutual funds’ performance is way above the inflation. What I’m interested in is if our analogue of Fed rate will be raised. It currently stands at 10%. If it gets raised, the savings account rates will probably rise too. Then I will finally set up a savings account (seriously, keeping money on one’s Visa is a little weird) and lock these attractive rates. I think of this pike as a temporary deviation, after which the downward tendency will resume.

I admit that I’m probably overly optimistic about the future. Actually, I barely remember the crisis of 1998, when Russia went bankrupt and the ruble plummeted. Since then the Russian economy has been rising. So I remember only the relatively good times, and thus I’m inclined to believe that everything will be okay. When I heard the opinion of my acquaintances and media, I understood I am an egoist. While I thought of my financial benefit, the others worried about the future of the whole nation. It was clear that everyone thought about the hyperinflation of the low nineties and the tumult of 1998. My peers, who hardly remember it, were reminded of the hard times by their parents. I heard opinions like “Russia is going bankrupt”, or “It’s a crisis like the one in 1998.” There is no ground for such statements now. It shows that people get used to relative well-being, and it’s scary for them when something unexpected happens. Especially if a history of a particular market economy is so short. We’ll see.

October Net Worth

This month I put aside the extra money I’d got from a small October work. Like in the previous month the stocks continued to pick up, and the ruble rose a little higher against the dollar. To achieve my goal of 100K rubles I now need $4,050 instead of $4,000. At the end of October I had $3,516.

I think I have too much cash, and I’m eager to put a part of it in my mutual funds. However, I am not disposed to do it right now, because Russian stock market makes new highs every day, and stocks seem expensive. I want to wait for a correction.

Thursday, October 25, 2007

An Exhibition

Recently I went to an exhibition "Personal Finances", organized by several banks, brokerage firms, insurance companies and publishers. I was interested to see what was meant by "personal finances" in that particular case. I wondered if I could learn something new. I must confess I have never seen people in real life who invests their money. Almost nobody will talk to me about handling money for more than ten minutes. All I know comes from books, magazines and the internet. So, I just wanted to see other people who were interested in pf.

Well, this exhibition turned out to be deadly boring. It was aimed at well-to-do middle class Muscovites and was held in a luxurious hotel in the center of the city. The visitors were mostly middle-aged men, several young men and few women. Somehow nobody would notice me and try to sell something to me. Sales managers probably couldn't perceive me as their client. They focused on more prosperous visitors trying to sell them average mutual funds with exorbitant fees, brokerage accounts (oh, trading is so in vogue here) and, strangely enough, tuition in private schools for their kids.

I went to a random presentation, where some pompous man gave a speech about stock market. The presenter told about disadvantages of mutual funds and encouraged everyone to buy stocks directly. He claimed he can easily get 100% ROI per year. This man hinted that successful people who made lots of money on stock market couldn't wear cheap bad suits. Apparently, we had to trust him, because his outfit did look expensive. Ugh. He obviously was a smart professional. But his speech was inaccurate and misleading, some facts were not true. My own experience and common sense sometimes disagreed with his words. I saw that his only goal was to make people set up a brokerage account with his employer and trade intensely, thus feeding the company with fees. I felt uneasy and wondered why the audience didn't laugh at him or challenge him (two men opposed him a couple of times but that was all). Then I realized that the majority of those sitting in at the presentation were listening intensely and actually believed what the presenter was saying. I remember a man in the audience ask "If I invest my money in stocks, will it be safe there? Will I get everything back?" He probably thought stocks to be some kind of bank deposit with extra high 100% APY. The answer he got was unclear and ambiguous.

What did I learn at this exhibition? Well, I believe that the personal finance industry in Russia is beginning to boom. The business seizes every opportunity to benefit from it. Not always their practices are and will be beneficial for their client. There's still little good advice on money matters and little information. People here need basic knowledge, like what a stock and a bond are. But at these presentations no one will muse on dollar-cost averaging, reducing debt, minding fees, long timeframes, indexing vs. active management and so on. There's a talk about 100% and quick big money. So people get easily impressed and start trading stocks actively, not really understanding how it works. They don't watch fees, they estimate the price of a manager's suit.

I also learned that I know enough to tell when people try to dupe me. I'm literate enough not to believe everything I'm told. I can make my own decisions. Thank you so very much, pf blogosphere :)

Tuesday, October 16, 2007

My New Card

Till recently I had two debit cards, given to me by my college, but issued by different banks. Both of them are free for me, and both are Visa Electron. (By the way, I was so surprised to learn that this type of Visa cards is not issued in the US, Canada and Australia. It's the most popular debit card here in Russia.) Well, the first one is an excellent card which is very convenient. But I never liked my second card. It has no online banking, the customer service is poor, and the number of available ATMs is limited. But my college puts my stipend on it, it costs nothing, and I need to have a second card in case the first one is rejected at a point of sale. So I kept using it.

I've just gotten a new card, which is a debit Visa Classic. It's also free, has convenient online banking, gives me a 5% discount at my grocery store and the location of ATMs is good. The checking account linked to the card will earn me 7.00% APY for one year, insured. Actually, I was wary when I was offered this card. It seemed to me that it was too good to be real (and free). Before signing up I scrutinized closely the terms and conditions, searching for hidden fees or something like this, and reading the reviews on the web. But everything seems clear.

The APY is something I'm very happy about. It's not that much, because the inflation rate this year is going to be about 9%. But earlier I used to earn close to nothing, because none of my other accounts offered me more than 1% per year. (Savings accounts with higher APY work like certificates of deposit and require a high minimum balance, which just doesn't work for me.) In December, when the "7% for a year" offer is closing, I'm going to sign up for a MasterCard with the same features. Thus I will get extra two months of earnings. Maybe using debit cards as savings accounts sounds weird, but it will probably work, at least till the next December.

One nice feature of my new card is that it can be used in online transactions as a perfectly normal Visa Classic. (Electrons can't.) So, I can now shop at Amazon or eBay at last! Honestly, when I found out about this possibility, I felt an immediate desire to splurge. For a long time I was longing to buy some books that I couldn't find anywhere in Moscow, but wasn't able to because I lacked a proper payment method. Now that I have such a means, I still must think twice, because the shipping rates to Russia are something to count with :)

The drawback of this full functionality is a higher risk of fraud. My first two cards are really safe. They have no CCV and cannot be used in internet or phone transactions. That's why even if someone learned my Electrons' numbers, they couldn't do anything harmful. Now I have to be cautious and protect the number, CCV, and expiry date of my new card.

So, my second card goes on holiday. I intend to use it once a month to cash out my stipend, and then I will roll the money on a better card. It seems that I’ve found a good deal.

Sunday, October 14, 2007

September Net Worth

The September was quite favorable for my finances, even though I had to pay dorm fees. The $3K mark was passed rather easily. The main reason for that is I got the stipend and financial aid for July, August and September. By the way, since this September stipends in Russia will be 50% higher than they used to be. A nice bump! Also, the stock market picked up substantially. The ruble rose quite sharply against the dollar, so the change of my net worth in dollars is greater than it is in my currency.

I tweaked my goal bars in the sidebar to make my net worth goals more clear. It now states my short-term goal is $4,000 by February. At my rate of saving it seems rather doable. Why do I pursue exactly this not very impressive number? At the current dollar/ruble ratio $4,000 equals precisely 100,000 rubles. The six-figure line is important for me psychologically, because it's like getting on the next level. I guess after that it will be all the same, 123K, 150K or even 200K. I'll concentrate on tracking my NW in dollars, because small numbers are more convenient. But right now I'm so excited to approach one hundred thousand milestone.:)

I also decided that I want to have $10,000 when I graduate in June 2009. Right now I have about $3,000. I keep in mind that by that time my birthday deposit of about $2,000 will have matured. I think I'll be able to save the other $5,000 in the next two years.

Saturday, September 29, 2007

Back-to-School Expenses

In September I had to pay dorm fees. It's the only money I have to pay to my college. This year the cost of living in the dorms slightly rose, at least for me.

In the past every student used to pay the same fixed amount of money, but this year the dorm fee correlates with one's electricity consumption, which is calculated on the number of electric devices one has in their room. In the beginning of September one was to make a list of devices and hand it in. Nobody knew if any formal checks would be made to verify the list. (I think now that such checks are probable but highly unlikely.) I honestly declared that I used a desktop computer, a printer, a microwave, a mini-stove, a fridge, a teakettle, a hair-drier and an iron. Even after my roommate paid me for the devices we share, I was still a person who seemingly paid more than anybody else. All my acquaintances decided that hair-driers, irons and printers were not worth mentioning, and as laptops were sort of inferior to desktops, they could be forgotten too. Some people were even surprised at my honesty. They told me I could have saved money by omitting several items. But I decided there were other ways of saving money, which would keep my conscience clear. At least now I know that everything I use is absolutely legal, so if any check occurs I'll be okay.

And, by the way, do you know how much I paid? It was only $246 for the whole year. I really find this sum very affordable, especially when I remind myself that I'm getting an education for free, and I'm paying only a fraction of the actual cost of living in the dorms. If I had come up with a blank list, I would have saved about $130. I personally think it's not worth the lying and tricking.

Sunday, September 16, 2007

August Net Worth

Oops. In August my net worth has slightly decreased for the first time since I started tracking it. That happened because I didn't contribute anything. The only thing I did was relocate my money by buying more mutual funds in the middle of August. The stock market took a dip, and it hurt my net worth.

I look forward to the end of September with great anticipation. I have a little money to contribute, and I'll probably hit the $3K goal. Of course, I can't be absolutely sure, because everything financial is so unpredictable right now. Stocks are volatile, dollar/ruble ratio is constantly changing. We'll see.

Friday, August 24, 2007

My Funds and the Current Turmoil

When I started buying mutual funds, I really didn't know much about stock market. But from the very beginning I decided that I wanted to invest for a long time, so I naturally chose "buy and hold" strategy. I promised myself that I would not sell my funds in the near future, even if there was a big correction.

During these months I saw that Russian stock market mostly reacted to local news. It also correlated with the price of oil a little, and, to a lesser extent, it was sensitive to the other emerging markets' performance. There were ups and downs, but the whole financial outlook was rather positive. This August our market suddenly became aware of other countries' markets. It tumbled down because European indices took a dip, then it closely followed the DJIA performance, after that Asian indices plummeted, so our market took a huge dip, too, and then turned back to the US. It doesn't care at all about the local data. Our market and my funds are just following the rest of the world.

Of course, I don't know what will happen next. I can't predict the consequences of the mortgage crisis, and I also can't say how it will influence the economy of my country. I still stick to my funds. When Russian indices were 10% lower than their recent historic high, I bought some more. We'll see how it will turn out.

Saturday, August 18, 2007

Identity Issues, part 1: Passport

In Russia, there is no analogue for the US Social Security Number. We do have Individual Taxpayer Identification Number, which is given when a person pays taxes for the first time. Many people, however, don't know their ITIN, because most often they don't need to. Driver licenses can be used as ID only in limited cases. So, the most important document here is a passport. I use mine in every formal procedure – when I buy mutual funds in my bank, buy train or plain tickets or get a package in a post office. I'm used to carry it around, because even when I pay with a card in a store, I'm sometimes asked to show my passport for verification.

What drives me mad is the necessity to get a new passport at some stage of life. It seems that the only reason for this is updating the picture, but a new passport also gets a new number. A person must get a new document when he or she turns 20 (my case) or 45, within a month after the birth date, at his or her permanent address (Hometown for me). Luckily, my birthday is in the middle of summer, and I could easily spend several weeks in Hometown while my new passport was being issued. So, after a couple of weeks of waiting, I got my second ever passport, with a new picture and a new number.

A month ago I bought a plane ticket to Moscow. It was rather cheap because of the special offer at the time. The problem was I bought it before my 20th birthday, using the old passport data. An airlines representative claimed the ticket invalid and suggested I should sell the ticket back (getting only 30% of its price) and buy another using the new passport data (the special offer expired). Isn't that ridiculous? After a bit of fighting they eventually agreed just to change the data in the ticket. When I'm in Moscow, I'll probably have to go to my bank and ask them to change my info in their database. And then there is my asset management company, which also uses passport number and such for identification.

Honestly, I would rather just glue a new picture over the old one. I'm so glad that my birth certificate and ITIN need not be changed. It feels so odd, being the same unique person, but having to prove who I am just because some number in some document has changed.

Saturday, August 4, 2007

A Birthday Present

In my life I've gotten a wide range of birthday presents. Sometimes it was a book, sometimes clothes, sometimes just cash. What all these presents have in common is although they are very nice, they are depreciating. I've read some stories on pf blogs, in which someone's children were given bonds or other assets. Such stories amused me, because I never knew anyone who gave their children appreciating presents.

This time my parents surprised me. They gave me €1,500 (about $2,000) put in a savings account. I think Russian high-yield savings accounts are somewhat similar to US certificates of deposit, because one can't take the money before a certain day. If one cashes it out early, he or she gets no interest. On the other hand, some accounts (like mine) allow depositing extra money. The terms are great, mine is a 2-year account with 7% non-taxed APY. As it was opened half a year ago, it matures in a year and a half, when I'll be graduating.

I would gladly add this money to my accounts, and then my net worth would boost to an amazing amount of $5,000! But the account is in my mother's name, because it was supposed to be a secret, so technically it isn't mine. I can't even check the account balance. So I probably wait a year and a half when this money will be legally mine. It will be a great graduation gift.

Thursday, August 2, 2007

Jule Net Worth

This Jule I have nothing to brag about. My net worth almost didn't change. It's not surprising, as I didn't contribute anything to my savings, and my stocks, after a period of high volatility, have reached the level of the end of June. This is my first flat month since I've started investing and tracking my net worth, but I'm not upset very much. I knew my summer's finances would be boring.

Also this month I was very much absorbed by my offline life, but now I'm going to drag myself back to the blogging world.

Friday, July 13, 2007

8 Random Facts about Me

I was tagged by SF Money Musings and Millionaire Mommy Next Door for the latest meme!

Well, here are eight facts about me:

1. Extracurriculars
When I was in school, I took ballet. It was hard, but I really enjoyed dancing. I think I danced on my points rather well.:) However, it started to be very time-consuming, I realized I didn't want to become a ballet dancer and quit. I entertain my friends by performing ballet movements now and then. Oh, by the way, it seems to me that I earned my first money from dancing. There were some events, people bought tickets, we danced and got money. The amounts were ridiculously low, but still.

2. Foreign languages
At five I decided to start learning English on my own. I remember that my first words were "a cat", "a rat" and "a bat". I explained to my friend in kindergarten that the object from which she used to drink tea was actually "a cup" – I must admit, I was a bit of a show-off. Oh, I even learned the word "a dandelion"! When I came to the words "a tame quail" and the sentences like "The cock's beak is not so sharp as the eagle's" I felt a little overwhelmed and thought English language to be too difficult. So, I made a pause. In my school everyone was to learn French from the first grade. At 12 we started to take a second foreign language, and that's how I continued to learn English.

3. Personal transport
I have never driven a car. My family have never had one, even though I'm sure my parents could afford it. I've always lived in places with well-developed public transport networks, and I'm perfectly able to dispense with a car. However, sometimes I think that I should get a driving license just in case. Maybe I'll need it someday.

4. Cooking
I can cook a lot of meals in a microwave oven, not only thaw or heat up something. I can cook rice, pasta and chicken fillets in it. Once I even microwaved an egg. You shouldn't try boil an egg in shell (it will explode), so I cracked the egg into a glass full of water and microwaved it. The egg was cooked into a shapeless something, but it tasted OK and was fit for salads.

5. Food fastidiousness
My food preferences change with time. For example, I used to dislike eggplants and cauliflower, but when I started college I suddenly found out that eggplants and cauliflower are delicious. Maybe I have grown up? I am still wary of dates. I had to eat them in kindergarten, but I hated them. Now everyone I know adores this fruit and can't believe I don't. To be fair, I don't even remember the taste of dates, so I might give them another chance.

6. Writing by hand
I have bad handwriting. Other people are always being polite by saying it's OK, but sometimes even I can hardly decipher it. Fortunately, I live in the era of computers, so chances are I won't suffer from my bad handwriting in future very much. I really like typing more than writing by hand. The problem is, I still have to make notes in class and then use them to prepare for exams:)

7. Pets
My favorite pets are parakeets (budgies). I had a green one for nine long years, since I was 8. He used to wake me up in the mornings and entertain my family with cheerful songs. I was very attached to him.

8. Media addiction
I don't watch TV. When I started college, I didn't have a TV in my room. I soon figured out that I could live without watching TV programs. The Internet is another story. When it's down, I feel uncomfortable.

Well, I took part in this meme rather late, so the majority of those who I know have already been tagged. I intended to tag Millionaire Mommy Next Door, but while I was writing she was tagged by someone else, revealed 8 facts about herself and tagged me:)

I will tag 3 Things About Money.

Monday, July 9, 2007

Back into a Parallel Universe

So, I'm back to Hometown. I've grown so accustomed to living in Moscow that now it feels like I am in another world. It's said very often, that Moscow isn't Russia, because it's very different from other Russian cities. The capital and its people has money. Life is more expensive than in the rest of the country, but the wages keep up with the prices. In an average Russian city life is so much different.

I'm amazed at the prices here. A bus ticket costs around 20-40c. Apartments in good districts cost much less than $100K. The price of a cup of tea in a side street café is $0.39! A reasonable cab fare is somewhere between $3 and $5.

As far as I know, an average net income in Hometown is $400 per month or $4800 per year. I still can't find where to buy business or personal finance magazines here. I guesstimate that only several hundred people in this 600,000 city have put their money in stocks or mutual funds.

On the other hand, people seem to be more kind here. I think they are less sophisticated and more open. It's so peaceful and quiet in Hometown, that I'm beginning to forget about big city frenzy.

That's what I do every time I go to or from Moscow - I switch between two so different worlds.

Friday, July 6, 2007

It's Like a National Holiday

Yesterday was a big day for my country, because the city of Sochi was chosen to host the Olympic Winter Games in 2014. Frankly speaking, I wasn't very much interested in this 2014 campaign. However, when I heard the decision of the Olympic committee, I felt really proud and happy. It seemed like everyone in Russia was bursting with joy, and I don't remember the last time when I saw so many people smiling and laughing!

And now the personal finance aspect of this event. Real estate in this Black sea resort has been rising for several years, since the first speculations about Sochi-2014 emerged. In 2002, a one-bedroom apartment in the center of the city cost $15,000-20,000, in 2007 it costs about $180,000-200,000! Now, when Sochi has become the official host of the 2014 Olympic games, the prices are expected to rise even more. Well, in 2002 real estate in Sochi was a great investment. I say, the net worth of an average homeowner skyrocketed there!

Thursday, July 5, 2007

Choosing My Mutual Funds

The other day I was reading a Russian personal finance magazine. There was a review of mutual funds, and my two funds were named the best based on their performance in the last 6 months! I've been investing in them for 7 months. This report was a very pleasant surprise indeed, but I understand that 6 months is a very short period to draw any conclusions. What's important is that I have an inner feeling that I have made a right choice.

When I started investing, I was so naïve, so overwhelmed by a variety of available funds, I just couldn't choose the right one. Looking back, I'm glad I didn't make any of major errors that beginners are said to make usually.

Some basic things that I think I did right
1. I didn't base my choice only on past performance. There was one fund at that time that boasted about its 1-year 90% return (after fees, before taxes). Well, even considering that 2006 was a year of surprisingly high returns on Russian stock market, 90% was overwhelming, and thus very, very appealing. Luckily, I didn't yield to temptation. If I had put my money in this super fund 6 months ago, I would have been in the negative territory now.

2. I wasn't influenced by advertisements. There were a lot of aggressively advertised mutual funds, but I took an effort to look for more options and compare different funds. Some of those advertised funds turned out to be not so great at all.

3. I wanted to get good returns, of course, but I was not driven by greed. If I had been obsessed with the idea of getting the best return, I would have failed, because no one can predict the future performance, and no fund can be the best forever. So I decided to find funds which would give me good returns, run by a reliable company with good service.

The company
I found my ideal investment management company. It happened to be a subsidiary of my bank. I liked it because it offered a good index fund. It also turned out to be very convenient. The thing is, I couldn't just make a few clicks on a site, send a check or use a credit card - done. I had to visit the office of a company every time I wanted to make an investment, and this company had an office within a five-minute walk from my dorm which was open even on weekends! A bit later I found out it offered free Internet banking, so now I can invest using the Internet, though I haven't tried it yet. Also, due to the fact that this company is affiliated with my bank, I don't pay any fees for transferring money to my funds. It is big and super reliable - something you really want to double-check in Russia.

The funds
Choosing the right fund out of hundreds can be headache. I decided to choose my funds according to their strategies. That's how I ended up with an index fund and a fund, focused on an industry sector.

Fund #1
I think that six months ago index funds were not a popular kind of investments. I didn't see them advertised, they weren't included in popular surveys and reports because they were considered to be a special kind of mutual funds. I learned about index funds by spotting the offers at investment management companies' sites. What I did next was get more information about them and compare figures. It was a revelation for me that the majority of actively managed funds performed worse or close to indexes. So I thought - why not an index fund?

Fund #2
About a month after making my first payment to the fund #1, I decided to consider a mutual fund which invests in electric power industry. The reason is it is now the hottest industry sector in Russia. There was a single huge enterprise owned by the Russian government, but now it's being divided into many smaller enterprises which are going public. There's a lot of IPO's and buyings by strategic investors that eventually lead to the increase of the industry stocks.

What I did was simply find an investment management company that was ideal for me, choose two of its funds with strategies I liked and start investing. So far it worked for me. I like the returns and the convenience of investment, provided by my investment company. And it turns out that, according to the magazine, it's the best placement I could have made 6 months ago - something I couldn't imagine half a year ago:)

Tuesday, July 3, 2007

June Net Worth

In June my net worth increased 12.2% to $2,814. Thanks to my final exams I didn't have much time for shopping and eating out, so I managed to save quite a bit. I also got my June stipend (I had thought I wouldn't get stipend in summer) and financial aid ($58 given by the college now and then). All that money went straight to my savings. My stocks have finally started to pick up.
So I have to save only $186 to reach $3K. I'm pretty sure I'll hit this milestone in September.

Friday, June 29, 2007

Connection Failed...

The internet connection in my room has been cut. Sigh. In fact, internet in my dorm isn't free, even though it is provided by my college local network. It costs about $35 per month per room. I share the bill with my roommate. Last time I paid for it on May 27. So, one month passed, I didn't pay, they cut me. OK, I think I'll manage to live without internet for three days. I'll be in Hometown on July 1st, and I'll have internet access there.

It's amazing how I'm dependent on the internet. I have to learn again how to do some simple things without it. For example, today I needed to go to a place I had never been to before. The only thing I knew was the address. In good old days I would launch the russian analogue of Google.Maps, named yandex.maps, punch in the address, get the picture and directions, save it in my PDA and go out. Today I had to rummage through my things to find a real, solid, paper map of Moscow. Luckily I have one!

Then I wanted to see a movie. How could I figure out what was on and where? What people do in such situations, if they don't have internet - phone to the cinemas or what? I decided to take a lucky shot and just went to my favorite multiplex, hoping that the movie - it was Ratatouille, by the way - would be running there. It was indeed, and I had to wait only one hour.

The movie was great! I'm now enjoying free wi-fi, provided by the cinema, and trying to publish this post (blogging through a PDA isn't that easy!). There's a guy here who has been sitting here with his laptop for more than two hours. Maybe he's saving on internet bills? :)

Tuesday, June 26, 2007

An Indian Restaurant

Yes, yesterday I was not so frugal, because I went to a restaurant. We'd been planning this dinner with my friends for a long time, and finally we were free and could make it. So my week of frugal living couldn't be an excuse to skip it. And besides I really wanted to go, because I had never tried an Indian meal before. I was really curious.

We were three: N., (my roommate), T., (a girl from the room next to ours) and me. While we were waiting for our orders, I got a possibility to talk about personal finance. I don't remember how it happened, but we started to talk about retirement. T. said when she retired she would very likely be poor and miserable, because "our country doesn't care about the old people." I asked what she knew about her future retirement. I figured out she didn't even know how Russian retirement system works. For example, she thought that a person gets some money after retirement only if he or she has spent years working for the government, while working at privately held enterprises doesn't count at all. That's complete rubbish. So I spent several minutes explaining the system to her, talking about saving, encouraging her to take care about her money. She didn't seem to be very much excited or even interested in the subject. It really amazes me. She just knows that she will be poor and the government won't give her much money, and I can't change her opinion, because she doesn't want to hear about all the possibilities she has. Maybe she thinks she is too young to think about such things, I don't know.

So I stopped talking and concentrated on my order. I had a butter chicken, potatoes and a garlic naan. It was so delicious, I really did like Indian cuisine! I felt like I really was in India, because there were a lot of Indians in that restaurant and there was a singer performing songs in Hindi. Even though I left $17 there, I don't regret that dinner. :)

Saturday, June 23, 2007

The Word Is Frugal

My finals are almost finished. Actually, I have already passed all exams, but I still have one paper to hand in, so I don't consider myself really free. I passed the exams in due time and got good grades, so it seems I'm eligible for the stipend in the next term. There are rumors that stipends are getting a little bigger as of this September. We'll see!

Luckily I don't feel like I need to splurge on things, as I feared I would. Quite the opposite, I try to save as much as possible before leaving Moscow. I have about one week left before going back to Hometown, so I decided that this week would be my "week of frugal living". I wanted to cut back on grocery expenses. I recently whined that I go to the grocery store too often and I can't help it. However, this week I did decide to try buying a lot and cooking in a bulk. I'm sure reading inspirational pf blogs helped a lot.

So, I spent about $20 in a grocery store on June 20th and cooked a substantial amount of food. The next day I even took my lunch with me, something that I haven't done for a long time! Now I try to pass the whole week on this food. The only thing I still have to buy often is a bottle of my favorite mineral water. I know that tap water would cost me nothing, but I can't make myself drink 3 pints of Moscow tap water, even filtered, because I hate the taste. Yesterday I read that tap water in New York is as tasty and pure as bottled water. I wish I were so lucky.

By the way, I remember when I learned the word "frugal". Seriously. It was somewhere in September 2005, when I was reading a book for my English class. The book was Three Men In A Boat by Jerome K. Jerome, and the line was "Then we run our little boat into some quiet nook, and the tent is pitched, and the frugal supper cooked and eaten." At that time I really didn't know such a simple word! I even thought that the word "frugal" is not really often used. I certainly didn't read pf blogs then! ;-)

Monday, June 18, 2007

How Often to Check Funds' Performance?

When I first started investing in mutual funds about 7 months ago, I was somewhat obsessed with performance. I would come home, switch my computer and then go directly to my investment management company's site to check how much I had. I just loved to download new data and build charts - daily! Maybe it's just investing was so new to me, and I was fascinated by the ups and downs? I think I did so about half a year, until I felt weary at last. Now I check my funds just once in a while.

I guess my daily obsession was really useless. I don't trade daily and I don't intend to sell my stocks in near future. Perhaps I should just stick to regular monthly investing, and not even bother about the current price. On the other hand, if I watch my funds and I see them taking a dip, it can be a good time to buy some more. So, how often do you do you check your funds' performance?

Saturday, June 16, 2007

How I Have Chosen My Grocery Store

It can seem that being a student on a tight budget I must buy groceries in the store with the lowest possible prices. But I don't, because I still value convenience and time a little more than low prices.

I figured out that the students who live in my dorm usually shop in about 4-5 nearby grocery stores. Among them there are two stores where prices are a little lower than in other stores. However, I just can't make myself to shop there. First, they don't take cards. (I hate paying with cash and I don't usually carry any.) Second, there are too much people there! When I used to shop there the aisles were always blocked with the carts of other shoppers and I always had to line at the cash register. Maybe if I stuck to shopping in these cheap stores, the money I saved would add up into something nice. But I think personal finance is not just about the lowest price, but about finding the right balance between what you want and how much does it cost. Well, the stores that I've chosen are convenient and have reasonable prices, that are much lower than in stores in the downtown. So I am satisfied with them.

Speaking of saving on groceries, I think I could spend more if I shopped less often. I can never reduce shopping to once a week. I don't have a car, so I have to carry all these heavy bags back to the dorm. I can't grab much things, so after two or three days I have to shop again. I remember when I was a first year, it was considered so money-savvy among my friends to go shopping in Aushan, a mall in the nearby suburb, 5 minutes by metro, 30 minutes by bus, 1 minute by walk, and buy a week's worth of food. Now I feel too old and too lazy for such an adventure :)

Sunday, June 10, 2007

I Don't Feel Like Building an Emergency Fund

I don't have a proper emergency fund, and, to tell the truth, I'm not willing to set up one. I'm inclined to put almost all my money in mutual funds, and I don't usually have much money in my savings account.

I will try to explain why. First of all, I must evaluate what is one month's worth of living expenses for me. Besides the money that I sock away, I have about $300-400 to spend every month. So, if I followed the rule of three to six months, I would have to keep at least $900 ($300 * 3 months) in an emergency fund. I don't want to do this because the interest rate of my savings account is much less than the inflation rate. I once said that Russian banks give generous interest, sometimes up to 8 percent. But to get the APY like this one has to deposit a big sum as a required minimum, and the money must be kept on deposit for a minimum length of time, like one year. If one wants to take the money earlier, the accumulated interest will be lost.

So, if I put the money in the high-yield savings account, my money would be tied in case of emergency. I would have to forgo interest to get it. If I kept the money in my current low-yield but flexible account, it would be lessened by inflation. A loss either way.

Putting money into the mutual funds doesn't seem to be a bad decision, really. True, the stock market can go up and can go down. But I'm almost sure that over a long period my mutual funds will outperform bank deposits. And I can cash out this money at any time. I will only have to pay 13 percent in income tax, so I will get my 87 percent of capital gains. The only problem is that I won't get the cash immediately. My investment management company says that it will take up to 15 days to transfer the money back on my checking account. That's why I always keep about one month's worth of expenses in the savings account and put the rest in the mutual funds.

Thursday, June 7, 2007

Tipping and Money Etiquette

Usually I’m not exposed to the places where tips are expected. I eat either in the student cafeteria, or cafeteria-style restaurants, or fast food chains. But if I am served by a waiter, a tip is a must.

Recently I was in such a restaurant with a bunch of friends, four of them. Everyone was supposed to pay for her share. I gave my share plus 10 percent which is a standard tip in Moscow restaurants. Another girl did the same, while the rest paid exactly the price of the meals, without tips. I tried to encourage them to tip, but what I heard was “Aww, come on! We don’t have so much money to give tips, you know.” I and the girl who also tipped ate a little less that the others did, so 10 percent of our share looked really meager. I felt very uneasy when the waiter took the money.

I believe that even though tips are not obligatory, if you eat in a restaurant, you should tip. Being “a poor student” cannot be an excuse. If one cannot afford pay the bill plus tips, one simply should choose another place to eat. I think that’s frugal vs. stingy. Not going to an expensive restaurant is frugal. Not tipping there is stingy.

But what should I have done then? Should I have made the others tip or should I have tipped more myself? Or maybe it was right to do nothing, because it wasn't my business?

P.S. While I was in the process of writing this post, I came across a post named Money and Etiquette: Why are the important things in life never taught in school? at Her Every Cent Counts, where she describes her embarrassing experience in a restaurant. I now feel certain that money etiquette is really complicated and I totally agree that it must be taught in school.

Wednesday, June 6, 2007

Final Exams Are Money-friendly

It seems that final exams are perfectly fit for frugal lifestyle. I’m having finals right now, and my spending has become really smaller.

We don’t have regular classes now, so all I have to do is sit in my room and prepare. Eating out is also limited, because for me “eating out” most often means dining in college cafeteria or somewhere near the college. Now I eat sandwiches at home :) Then, I spend less on entertainment. No movies. I don’t feel alone and deprived, though, because all my friends seem to be studying and not going out. There’s also less chance of impulse spending, because I literally don’t have time to go shopping. So I my daily spending is mainly limited to groceries.

The exams themselves usually don’t cost anything, if they are oral examinations or hard copies of papers are not necessary. Only one exam this year was a little pricey. I had to hand in two papers. My printer wouldn’t work, so I had to pay for printing them. Then the professor also expressed a desire that papers should be put in specific zipper pockets, and electronic copies should be provided on floppies or CDs. And I also had to buy a book to write one of the papers. Luckily, passing other exams doesn’t involve any spending.

Well, the finals may be frugal, but what will be after them? What if a poor stressed student will need to go on a shopping spree to recover from hard studying? Or there will be an absolute necessity to throw a Good bye, finals! party?

OK, I think I must concentrate more on studying now... and watch my spending after having finals.

Sunday, June 3, 2007

All the Comments of a Blogger

I wonder if there is a way to track all the comments that someone has left on other people's blogs.
If I read the blog of a blogger X and find it interesting, I usually can subscribe to the posts and the comments that other people leave on X's blog. The comments that X leaves on other blogs may be interesting too, but I just miss them. Why can't they make a special feed for them?
So far I have found two services that somehow deal with this: coComment and Blog Flux Commentful. Both are aimed at tracking and collecting one's own comments on other blogs, which is nice, too. Only coComment makes it possible to see someone else's set of comments, but this someone must have an account at coComment and notify his readers about it. Unfortunately, most probably a random blogger X doesn't have a coComment account, so I can't track his comments until he gives me such a possibillity.
It seems that both services provide access to one's comments and subsequent comments on the same post via rss feeds, firefox extensions and web. I think I will test these services to see how they work and if I like them.

Saturday, June 2, 2007

Should I Talk More About Personal Finance in My Real Life?

I usually don't talk about personal finance in my real life. But recently I had an open talk about financial matters with my roommate. She is an amazing girl and a sociology major. Though we are close friends, I never told her I was an investor. She knew that I somewhat liked economic and financial stuff, but she wasn't aware to what extent I was familiar with finance.

So, we were having tea and chatting the other day. She said they discussed investing in her last economic sociology class. The professor told that she didn't trust mutual funds at all, because she believed them to be just a sort of financial pyramid. Here I must explain that in the nineties a lot of Russians suffered from businesses that turned out to be mere financial pyramids, that's why they are so distrustful now. Anyway, it turned out that my roommate agreed with the professor. "But of course mutual funds are not financial pyramids!" I exclaimed. "Isn't it the way they work?" she asked. Then she sighed. "I wish I knew more about this stuff, because I have some money saved, but it suffers severely from inflation and I don't know what to do with it."

That's when I realized I couldn't keep silence anymore. I started to speak and went on and on, and she would listen to me. I confessed that I had been putting money in mutual funds for half a year already. I explained how they work. I told about stock market, stocks and bonds, corrections, ups and downs, bullish and bearish markets; about saving consistently and starting early, about compound interest; about retirement, good and bad debts, and so on. Maybe I didn't say much and the information was a bit messed up, but I gave her the general idea. I advised her my investment management company, showed some papers, and explained how to open an account in this company.

At first my roommate was very much surprised. Well, I can understand her, considering that less than 1% of Russian population are true investors, who buy stocks and mutual funds, and the majority of them have big money. Then she said I was "a brave girl" and reproached me for not having told everything earlier. She was really interested in everything I had told, and my information was definitely useful for her.

After that talk I felt a little ashamed. I really should have told all this stuff to her before, because she is my friend and she can benefit from what I know about personal finance. I've learned a lot about money during this year, and I also have the experience that none of my acquaintance have. Shouldn't I now share my knowledge with those who don't know anything about it? Isn't keeping it to myself egoistical?

May Net Worth

As of May 31, my net worth equals $2,508. I managed to save rather much in cash (32.77% increase), but the stocks, unfortunately, didn't perform well in May (a meager 0.92% increase, only due to the money I invested this month). While many markets all over the world were hitting their historical maximums everyday, Russian stocks were slipping. However, they seem to start rise again, so I hope to see a positive change in my net worth in June.

My next milestone is $3,000. My summer cash flow will be rather limited, so I don't expect to hit it until September or October 2007.

Friday, June 1, 2007

My Banks and Online Banking

I am a client of two banks. I didn't choose them—I got two debit cards from them in my first year just because I was a student. That's because I also don't pay any fees.

The first bank, the Bank of Moscow, which is the third or fourth largest bank in Russia and is controlled by the government of Moscow, issues debit cards for all students who study in Moscow. These cards, by the way, also can be used as a pass in the Moscow metro system, and the students mainly use them for this purpose. My parents transfer me money on this card, and I heavily use it for everyday purchases.

The second bank, VTB, which is the second largest Russian bank, is the one through which the students of my college get stipends. As I already said (Personal Finance in Russia, 6), debit cards are widely used in corporate world, where wages are put on them. Actually, colleges just followed the trend, and now it seems that every Russian college pays stipends through debit cards. I don't use this second card often. In fact, I used it to accumulate money by not spending the stipend and putting other savings on it.

I didn't even have a checking account until I decided to invest in mutual funds. I chose an investment company that is a subsidiary of the Bank of Moscow. That's how I got my first checking account and my first investments.

Today I signed up for internet banking service of the Bank of Moscow. Though it is not provided by default, the subscription doesn't cost anything. I will not pay for transfers among my accounts, but any other transaction will cost me $0.38. I'm really excited. I will be able to transfer money to a checking/saving account or put it in mutual funds from wherever I am. I still didn't manage to sign in (maybe the registration is not over yet), but I'm waiting impatiently to start working with this system.

It's such a pity that online banking is still not very much wide-spread here. First, all Russian banks are brick-and-mortar. Second, only a few of them allow some kind of online operations. Third, hardly anybody uses it, even if one's bank provides online service. For example, the Bank of Moscow appears to have one of the best internet banking service among Russian banks, but I didn't know about such possibility until very recently.

Monday, May 28, 2007

About Weddings

In most cases marriage means spending a lot of money. One sees a good deal of this topic in personal finance blogs. In this post I don’t even want to discuss who must pay for a wedding: newly-weds, their parents and relatives, or a bank that loans money (though I sincerely believe that the last option is a disaster). What I want to understand is why people desire to throw so much money on a wedding?

There is a fixed idea that the ceremony must be big and “proper”. So a bride and a groom draw up an impressive budget, even if they can’t afford it. Then they somehow get the money they need. After months of exhausting preparations, the ceremony takes place. The wedding leaves some pictures to remind about it, and a sense of accomplishment that “we did it right.” Is it really worth all this money? It’s a tradition, I may be told, and it’s unthinkable to dispense with any part of the established ceremony. It’s a dream of many girls to go down the aisle in a splendid white dress, with hundreds of people watching her. Well, I would like to know, is it a really good tradition that is so ruinous for a new family’s finance? That money could be spent in more family-oriented way like on mortgage down payment or house maintenance. It could be put into emergency fund or invested in appreciating assets—something that lasts. And you could still celebrate the wedding, but in a more modest way.

I understand that I am not going to be married in the near future, and if I were, my attitude to weddings could be different. I also understand that marriage deals with psychology, traditions and social rites, and I can’t judge it only from the position of logic and financial sense. But still.

In one of my favorite movies, Mona Lisa Smile, the character of Julia Stiles says: “We're married. We eloped over the weekend. Turned out he was petrified of a big ceremony...” You know, I would have eloped too. It doesn’t seem to be less romantic than a proper wedding.


About a month ago I found €2 in the street. The best thing that could be done with this coin was sell it right away to a bank and do something with the ruble equivalent. However, I decided to wait a little, so that I could get more rubles for two euros. I expected it to increase, because the euro has been gradually rising against ruble for some years.

I don’t know why I even bothered, because the difference would be just miniscule. Still, I waited. Unfortunately, the ratio peaked and started temporary decrease, so this €2 now has less value for me than it had at first.

That proves once again:

1. Trying to play in buy-low-sell-high game when you don’t understand the reason of price changes and the dynamics may be no good.

2. If something is rising in price today, there’s a huge probability of a dip tomorrow.

3. Caring about every cent, eurocent or kopeck is just silly, even if it’s just for fun.

4. Currency market is just not my cup of tea. :)

However, I still hold this coin stubbornly.

Sunday, May 27, 2007

How Much Money Do You Think You Need to Be Considered Rich?

Marshall Middle at How to Make a Million Dollars asks “How much money do you think you need to be considered rich?” I think this question implies that the answer is in other people’s idea of richness. And here comes another question, who are these people?

For every person in this world the expression “to be rich” has a different meaning. For a citizen of some poor African country everyone who lives in developed countries like the USA, Canada or Western Europe is really rich. In some places being rich still means having a certain number of cattle.

In my native country, Russia, one who has $1,000,000 is certainly rich. Such money may give an annual income of $100,000 that allows living in grand style in our country. But that is true only for the majority of Russians. In the circle of odious Russian oligarchs (business magnates) even those with several million dollars are considered close to poor.

In the USA, as I understand properly, having $1,000,000 is just enough to live comfortably in one’s retirement. A little bigger figures mean being well-off. Those with $50,000,000 may be considered rich. Still, I suppose that even they may think themselves to be only well-off and consider billionaires to be really rich.

So it seems that the idea of being rich varies greatly among people and it depends on a country, cultural traditions, environment and socio-economic status. It’s easy to be considered rich by a poor family in Malawi and more difficult among billionaires. The only thing a person can say for sure is what he or she personally thinks about it.

As for me, I think that $100,000 a year can be enough to live very comfortably in my city. Assuming a conservative 5% APY, I guess that $2,000,000 is cool. I may add a couple of millions for luxuries and come up with a final number of four or five million dollars in liquid assets, adjusted for inflation.

Main page

Saturday, May 26, 2007

One Reason Why I Hate Cash, but Love Debit Cards

I prefer debit cards to cash, because debit cards, like cash, don’t get me in debt, but they, unlike cash, don’t make me deal with change.

I assume that a lot of goods in the USA have prices like $x.99, $x.97, etc. So one’s just give $x+1 and gets $0.01 or $0.03. What do you do with these coins? Will you use it in your future purchases or will you just come to a bank, make a pile of coins and say “I want to deposit it, please”?

Things are even more complicated in Russia. Well, Russian currency is ruble and it one ruble divided in 100 kopecks. As of May 2007, $1 is roughly 26 rubles. It means that 1 kopeck (1/26 cent) has ridiculously small value. I can’t think of a thing that costs less than 1 ruble. However we still deal with kopecks and prices like 13.34 rubles. Also 10 rubles note is the smallest note in Russia, and everything between 1 kopeck and 5 rubles is coins.

When I buy something for 13.34 rubles I give 14 rubles and get a heap of coins in change. Coin by coin, my wallet becomes heavier.

It’s even more complicated when the price is something like 40.12 and I give 50 rubles in one note. The person at the cash register doesn’t want to give me 9 rubles and 88 kopecks, so she asks me to give her 12 kopecks so that she could give me 10 rubles in one note. So I start rummaging in my wallet, I find 10 kopecks quite easily but 1 kopeck coin is relatively rare because it’s so small! Then I don’t find 2 kopecks and I get 9.88 in coins and it’s awfully heavy! While I am searching for coins quite a lot of time passes and there’s a line of other customers behind me...

The problem is not only with kopecks. When the price is 65 rubles, it’s usual to give 115 rubles at the cash register and get 50 rubles in one note. Well, I think I just lack mathematical skills to do all these give me X, I’ll give you Y calculations.

Things are much easier with debit cards. I just give a small piece of plastic and I get this small piece of plastic back, all rubles and loathsome kopecks taken automatically from my balance. It might be silly, but I tend to do all my shopping only in stores which take cards. It’s true that I don’t see this money, I don’t hold it, and I may not realize its value due to psychological reasons, but the convenience of dealing with electronic money means too much for me. I’d better take pains to budget in advance and watch my spending.

Friday, May 25, 2007

Summer Is Near

Today I got the May stipend and some money from a job I had in April. I was really satisfied with the sum. The money went immediately to my bank deposit. Today I also put $154 in my mutual funds. I don't want to contribute more for a while.

Now when I think about personal finance I feel a little deflated. Summer is advancing. That's really great in terms of rest, holidays, sun, going out, but it means no interesting stuff about my money. I'm going to spend the entire summer in Hometown at my parents', so I won't earn an income or get stipend for three months and I also won't spend my personal money.

Then there are stocks. I have a little money put aside for investing. But I really think this year a strategy Sell in May and go away is going to be very useful. I won't sell any of my stocks, of course, but I don't intend to buy anything for some time. Things are really complicated in the USA, Russia and other emerging markets. Russian market is having a temporary decrease, while American stock market is up, but it may tumble after climbing up for so long, and it will trigger even a bigger correction in Russia. That's why I won't do anything until things clear up a bit.

So it seems that this summer the finance part of my life will be uninteresting and mindless. Not that I am very happy about this.

Investing Overseas

In an article on MSN Money Jim Jubak talks about investing overseas. Russia is one of the countries he includes in the list of high-risk, high-reward markets. It's so funny, but this is the only country I can easily invest in, because I live there and the majority of the mutual funds available to me deal with Russian stocks. I don't think I have too much choice :)

My Net Worth: Can Be Revised?

In my net worth I include money on bank deposits and money invested in two mutual funds. As of April 2007 it equaled $2,280. But there’s also home equity that I don’t count.

Yes, technically I am a home owner. As I said, many people in the USSR and then in Russia were given apartments. My family got one in 1993 or 1994, I don’t remember exactly, in Hometown. By the way, our apartment has three bedrooms and is in very good location. I say, it was a very generous gift! We got it either from the government or my father’s employer, a large corporation. It wasn’t really ours, but we had a right to claim it as our property. We did it only in the summer of 2006 and I became an owner of one-third of the place – our family consists of three persons and each got an equal share.

So I decided to evaluate the value of my share of the apartment. It was relatively hard because I was well aware about real estate prices in Moscow, but I had no idea about this market in Hometown. Real estate in the capital is awfully pricey. A small one-bedroom apartment far from the center of the city costs way more than $100,000. I guessed that an apartment in Hometown was much cheaper than one in Moscow, probably about $10,000-$30,000.

However, when I searched on the Internet I figured out that a three-bedroom apartment with similar location in Hometown costs more than $60,000. Wow.

That makes me an owner of $20,000 in home equity and boosts my net worth up to $22,280+. However, I’m not going to include home value in my net worth:

1. I still don’t treat it as my apartment, or even my share of our apartment. This apartment is a gift from an enterprise or the government and my parents who included me in the list of owners. I don’t want to lay hands on it for a very, very long time. For me it’s a place where my parents live and don’t want to claim any part of it. In my life as an adult I intend to rent and then buy my own apartment.

2. Including it will make tracking the growth of my net worth very inconvenient. Compared to home value my cash and stocks look so meager. Their growth will be made invisible on a chart.

3. It is so hard to evaluate home value. Even $60,000 figure is rough. I also can’t track its price changes. So it makes home value some inexact constant figure that may be dropped for now.

So I’ll stay with my tiny $2,280.

My Life and Money: Résumé.

As of May 2007, I am 19-year-old, who turns 20 in summer. I lived in another city, which I will call Hometown, till I was 17. Hometown is the capital of a region (=state) in the south of Russia. Then I entered a university in Moscow and now I live and study in the capital of Russia. I’m currently a third-year.

I don’t have a job and my parents support me financially. I also get a stipend. At first my stipend was about $14 a month and now it’s $34 a month. Well, it’s not that much, but I could still eat about 10-15 times in the student dining hall on that money! However, I never spent this free “student money” on something insignificant, but rather let it add up. I didn’t touch it at all since 2005 and it sort of became my emergency fund. I used to be rather frugal so I usually didn’t spend all the money I got from my parents. I also saved everything I got from occasional jobs.

By the end of last year (2006) I had saved about $1,000. That’s when I made up my mind and decided to begin investing. I chose a mutual fund and put about $384 in it. It was such a new experience! I didn’t know anybody who invested in stocks or mutual funds and I had nobody to teach me. So I had to learn everything myself. It meant reading relevant books and magazines, surfing web-pages, BBS and internet groups on finance. I chose another mutual fund a bit later. I have been investing in these two funds till now. I try to spend less than I get and I save the entire stipend I get. So far I managed to save $650 in cash and $1600 in stocks.

Financial Side of Education in My Country

1. Where we study and how much we pay (or get).

For a long time education in Russia (formerly USSR) was completely free of charge. Colleges also used to pay stipend to students who got good grades (A’s and B’s). My parents tell me they were paid enough money to go home on holidays on plane.

Now about half of students in Russia pay for tuition, and the other half don’t. Those who don’t and get good grades still get the stipend monthly, but nowadays it’s relatively small. One can hardly have ten big meals in student cafeteria with that money. The students who pay for their education are charged somewhere between $1000-8000 a year in Moscow. In other parts of Russia the sum may be a little smaller, I guess.

It seems that the majority of high school graduates choose a college in their hometown. Consequently a lot of college students stay with their parents and their lifestyle doesn’t change much. However, a fraction of prospective students choose colleges in other places, mostly Moscow and Saint-Petersburg. There are also people from small towns and villages who either go to Moscow or Saint-Petersburg (the capitals) or to the capital of their region (state). All in all, there are students who move to another city and live in dormitories or rent, but they are in the minority, I guess.

Those who live in a student residence are charged with a little money. It may be $100-300 a year for a room in a dormitory, meals are not included. It must be a good deal, especially for Moscow, where it’s not easy to find a room to rent for less than $400-500 a month.

2. Students’ money.

Those who live with their family continue their lifestyle of a high school student. They get their pocket money that is spent on entertainment, clothes and eating out. But those who start to live on their own in another city are more finance-savvy and that’s quite natural. They get some money from their parents and they have to spend this fixed amount on everything: food, transport, entertainment, etc. That teaches them to budget and control their spending.

In Russia most students are not eligible for credit cards, because they are too young and don’t have a consistent income. I don’t think I ever heard anybody seriously complaining about this, though. The students should probably be happy about this because this restriction keeps them from having consumer debt.

An average Russian student is constantly whining that he lacks money. He or she eagerly awaits parents’ money or a monthly stipend. It’s practically impossible to use credit, so a lot of students have to work part-time.

All in all, I think Russian students are in such conditions, which are very healthy for their finance. Practically everyone graduates debt-free because student loans are not wide-spread and credit cards are not available for those under 21. Not many are aware how lucky they are. Some can be often heard complaining that stipends are too small and must be increased :).

Thursday, May 17, 2007

High Rates Everywhere

When I read American personal finance blogs, one thing is constantly in my mind – we, Russians, have such high rates everywhere! I mean credit and loans interest, but also inflation and even bank deposit interest rates and stock market revenue.

I will give here some figures.

1. Inflation.

It might seem monstrous to somebody who is used to 3% inflation, but the official inflation in my country was 9% in 2006. It is even considered to be good, because this is the first year when it’s a one-digit number. As far as I remember – and I stopped being financially naïve not so long ago – inflation used to be a low-teens percentage. I did a search about previous figures on the Internet and that’s what I found:

2006 – 9%

2005 – 10.9%

2004 – 11.7%

2003 – 12%


2000 – 20%


1995 – 130%

Wow! We surely have made a long way from over a hundred to a single digit! It is also anticipated that the 2007 figure will be less than 9%.

2. “Federal funds” rate.

A number which corresponds to Federal funds rate in the USA currently equals 10.5% in Russia. Let’s have a look at its history:

2006 – 10.5%


2000 – 45% (ouch...)


1995 – 200% (I never knew this...)

3. Bank deposit.

Bank deposit interest rates usually tend to be a little smaller than “Fed rate”. I compared the current offers of three banks, which are among the biggest and most respectable. On average they give about 8% in interest if savings are kept in rubles and maybe 5-6% if in dollars or euros. The numbers depends on the amount of money put and the deposit period. And well, I distinctly remember 10%+ rates not so long ago.

4. Credit.

Oh, credit is such an expensive thing! The rates gradually decrease but are still soaring.

The most expensive is the money that is borrowed stuff like cell phones, TVs and computers. The rate here can easily go up to 20, 30 and 40%+.

Mortgage usually has a rate in low-teens. I’m not sure I have seen the offers with less than 10% rate.

Student loans are surprisingly expensive, no less than 10%. They are not very popular here. People either get an education for free or their families pay it without using credit.

It seems that auto loans are the cheapest. I’ve seen manageable figures like 3-6%.

5. Stock market.

That’s where high rates are something wonderful and very enjoyable. In 2005 Russian stock market revenue was up to 70% and about 50-60% in 2006. Looking back to 1995... Well, it’s amazing, it’s hundreds %. Why didn’t I have enough money, brains, guts and years to start investing then? :)

I can see a distinct trend here. Nineties were a wild period with enormous figures everywhere. From then the rates have been gradually and steadily declining. I think in the end Russian finance system will reach the state of mostly single-digit rates. It’s interesting to notice that people are very used to these huge numbers. Even financial advisers in personal finance magazines are blinded by them. Very often I see 20 and 30-year financial plans in these magazines where inflation is assumed to be somewhere around 10% and prospective investment 20% and more – such an optimistic hope! But the whole situation is changing and it’s more likely that all these rate figures will be much smaller in 20 or 30 years.

Wednesday, May 16, 2007

Personal Finance in Russia

Are Russian people financially literate? I wouldn't say so. In fact I can divide Russian people in two categories. The majority of people handle their money rather poorly, they don't invest and they don't think much about retirement. But there are people (very few) who have a significant amount of money. They may be heads of corporations, top-managers or running their own businesses. Those are very well aware about money. It's them who buy stocks, bonds and gold, consult with financial advisers and have their personal finance in order.
I think I belong to neither of groups. I don't have so much money as a person from the second group does, but I am a little more financially literate than a person from the first one. May be I am from that tiny group of people, who have a little money and know the basics of personal finance. I believe my group will grow in future and replace the first one. I see that there are already such magazines on sale like Home finance, Personal budget and Family budget. More and more people learn about controlling their money, saving and investing.

All in all, our personal finance sphere is in a transitional period. People who used to rely on government now start controlling their money on their own.

So, how do things go in my country?

1. Retirement.
About 96% of working Russian people don’t think about their retirement at all. It can be easily explained - for many years the government took care about people in their senior age. A fixed amount which didn't vary much from person to person was paid every month to a 60+ man or a 55+ woman. It's called pension. Now we're in the process of reforming the system. An average Russian person is still eligible for a monthly small fixed amount, but he or she can also make contribution in his retirement account. Also the employer pays about 14% and less of an employee's salary (it is paid not from the salary but from the employer’s funds) in his or her retirement account. A person then can choose where to put his retirement money. These 95-96% don’t choose anything and their money stays in a government fund, which, surprisingly enough, can invest this money only in bonds. So in recent years the gain was less than the inflation rate. However, the minority moved their money in private funds that can invest in stocks and enjoyed a good rise, as the Russian market grew significantly.

2. Saving.
It seems to me that Russian people always used to save. The main reason for that was "in case of emergency". However, the case of "paycheck-to-paycheck" is also rather widespread. It also seems that people use credit much more often nowadays and they don’t save that much.

3. Investing.
Sadly enough, people most often use a single financial tool for savings - keeping cash at home. There is even an expression "to keep one's money under a pillow". In nineties the inflation was extreme and it literally destroyed the value of saved money. Maybe that made people start using bank deposits, which can hardly beat inflation but is still much better than "under a pillow". And the majority of people don’t go further. I think there are less than a million or maybe half a million individuals (out of 140 million population) who invest in stocks directly or put their money in mutual funds. People are just not used to it. They also don’t trust such financial tools because many were swindled out of their money in the wild nineties by fake public companies and funds. Now it’s much more regulated and solid and people start investing in stock market, step-by-step. The number of new investors is growing exponentially.

4. Real estate.

In the Soviet time real estate – mostly apartments – wasn’t purchased. It was given to a person after some years in the workforce. If you wanted to buy an apartment – it was rather cheap. Now the situation has changed dramatically. Real estate has risen in price. However, it is still more or less affordable (excluding Moscow). People with good and stabile jobs have a mortgage and they pay it out rather easily.

But Moscow is the most sought-after Russian place. It therefore leads to acute real-estate shortage which in its turn leads to soaring prices. In two years they more than doubled. Now even people with good wages (as wages in Moscow go) have difficulties getting a mortgage. A monthly payment tends to be enormous.

5. Credit.

Credit has become accessible to everybody not long ago. As in many countries before Russia, people got used to it very quickly and now rely on it heavily. They use it to buy a car, a washing machine, a TV, you name it. There are worries that the country gradually comes into the sort of credit frenzy that can lead to troubles. Meanwhile now it’s more or less manageable.

6. Debit and credit cards.

Although the credit is easily available, credit cards are not widespread. Money is most often lent in the form of cash, and monthly payments are paid also in the form of cash to a teller. Of course it leads to lines in the banks. Banks introduce credit cards as a way to loan money. Not so many people use credit cards to make their daily purchases. On the other hand, it prevents them from piling up credit card debts.

Debit cards are much more widespread. I’ve seen somewhere that they constitute more than 90% of all plastic cards in our country. I think it’s because they’ve been somewhat imposed on people. You see, employees used to get their salary in the form of cash at the account, which led to lines and so on. (By the way, we never use checks. I have never seen one in all my life) In the end a lot of companies chose a bank which would issue debit cards for every employee. Now wages go straight on debit cards. However, most people immediately go to an ATM and cash all the money out. It’s rare to use cards to pay for goods like groceries, books and so on. But it’s going to change, I think.

Number One

Well, that's the first post here! I have never had a blog before, so this is going to be new experience for me.
I would like to say a few words about myself and why I decided to run this blog. I'm a Russian girl who goes to a university in Moscow. I've recently got very interested in personal finance. I started to think about saving, spending and - oh! - even investing. It was hard, though, to find people with who I could discuss such matters. It deals with a specific attitude of Russian people to money, I guess, and I hope to post more on this topic in the future. Anyway, surfing on the Internet I found some personal finance blogs and that's where I found what I'd been searching for. Well, the problem is that, first, these blogs are in English and, second, people talk about life and money in the USA. But these blogs still give me a lot of ideas, useful tips and information. It is extremely interesting to compare finance matters here in Russia and in a foreign country and to learn something new.
I decided to join the personal finance blogosphere because I wanted to tell about the way things went in another country. I didn't like being a passive reader and decided to become more involved in pf blogs life.
Everybody is greatly welcomed here! I would be very happy to meet new people, to talk and to share opinions.
Yours, a new pf blogger :)