How I don't overspend on a CC

As I drew up a complete budget, I've tracked my spending for 2007, detailed all money spent on a CC or cash, and finally I understood what my percentages are. I realized why I always say people can use a credit card but not overspend if you are controlled. Because we have a built in control using our budget. What?

Well I've realized that 55% of our income is gone pretty much before we see it. Then another 30% is gone to housing, a conscious decision. So 85% of our income is gone before we have a chance for it to really be seen even as cash from auto-debits. It is invested, saved, gone to bills.

So I have 15% of our income to really play with in our checking account. We now take home less than what we did when we were both graduate students and making 1/3 of what we make now! Crazy! Of that 10% goes to fixed monthly bills. Bills which we've agreed to pay and decided is important to our lives. So we spend 5% of our income a month as choose in "fun".

Our 10% includes things like homeowner's dues, car insurance, car tax, electricity, cable/internet/phone, natural gas heat, cellular phone plan, pet health insurance and food, and blow allowances. The electric and gas are on budget billing with it's respective company so I use that amount and it works out well.

Now some of these bills are auto-debited on a credit card, but they are budgeted as a fixed amount. So I have 10% of monthly fixed obligations, which can be decreased if we lost our jobs and needed to tighten our belts, such as cable, internet, etc, but which we have deemed currently as important and necessary to our current lifestyle.

Strangely it's even how I ranked them in our budget unthinkingly. Our budget goes Income, pre-tax savings/deductions, taxes, after tax savings/deductions, fixed expenses, and variable expenses. Everything I mentioned goes in the fixed expenses with the mortgage, property taxes, insurance.

Food, eating out, entertainment, fun, personal care, clothes, etc are all variable amounts. I get 5% with which to prioritize my spending. These are charges on the credit card. I have a dollar amount monthly with which I can spend on whatever categories I see fit. I have "budgeted" amounts but I don't have to stick to them as long as I stick to the monthly 5%.

I realized this is something we've done since forever. This is how we've always budgeted and paid CC in full. We never really have had a lot of variable expenses. Most of our expenses have been "pre-set" even if paid for by a credit card. We view them as a monthly obligation and not "our" money.

During my 2 month cash experiment, all our fixed bills were still paid by credit card or auto-debit. Nothing changed except my 5% was in cash. It made me way more frugal in a negative way, because I refused to buy groceries then ended up spending more $$$ to compensate afterwards to restock the pantry. A more appropriate behavior would have been to just use the cash naturally and grocery shop every week instead of trying to go 4 weeks without shopping (I spent less than $100 for 3 adults in a month, it was ridiculous). I also specifically did not eat out because we didn't want to spend the cash.

But now that I have my cash data, my budget percentages, I realize that I don't have a real problem overspending because I don't have much money to overspend with. I consciously have $X/month. I know I have $X going to savings for specific target funds (tuition, property taxes, etc) and those funds are untouchable.

Because of this I don't have large CC bills. On average probably $1k/month including all fixed expenses charged and variable expenses. But my budget busters come when we pay for DH's tuition on a credit card and slam down $25k/year (but at 5% back who wouldn't use a credit card?).

So while CC aren't making me rich, they are helping with my frugal behavior. So I guess this is my personal plan on how not to overspend on a credit card. I have a lot of fixed expenses, hence 95% of my income is gone before I can have fun. I do realize that part of my fixed expense are for fun and it's ironic I only consider 5% fun money.

My plan is to one day have 50% fixed expenditures and 50% fun money. But I'd have to make a lot of money to do that!

Practical Applications of the Credit Crunch

Because of the move, here's a guest post today by Jonathan @ MasterYourCard. We traded posts a while ago, here's mine, but I was saving his for my move. This is a wonderful treat and the start of reading guest posts by people from the PFBloggers. A new perspective on the credit crunch. Enjoy!

Practical Applications of the Credit Crunch

Few of us need to the government to tell us what we already know – we’realready in a recession! Every day it seems the price of gas and food goesup, while the value of our homes and the buying power of the U.S. dollargoes down. Banks and other lending institutions continue to tighten theavailability of credit to help protect them from the weakening economy. Even though you may think that some of them might not affect you directly,you should be aware of some of the direct and indirect effects of the credit crunch on your family and your pocketbook.

First, banks are tightening up their lending standards for the consumerborrower. Whether it is for secured loans (homes, autos, etc.) or for unsecured loans (credit cards, signature loans) the availability of credit is becoming scarce. Only those with stellar credit profiles are finding many lending institutions willing to offer them loans of any type. Those who have credit histories with blemishes in them may find the credit spigot being turned completely off for the time being. What can you do tolessen the impact? Consider putting off major refinancing or debt purchases for the time being. Work on paying your debt down instead of trying to obtain new debt.

You may already be noticing that the credit card companies areaggressively reviewing their portfolio of accounts. Card issuers are closing accounts and increasing interest rates even as the prime rate(which most APR’s are tied to) decreases. Again, your best bet here is to make sure those payments arrive on time every month. Don’t apply for new credit cards and keep your balances low. Card issuers are looking for anyreason whatsoever to raise your interest rates – don’t give them a reason! If you think you may be heading for some financial turmoil, call your card issuers and start working with them ahead of time instead of putting off the problem until it is too late. Many are more than willing to help you manage the payments instead of letting you default – which means another loss for them.

You are also being affected in ways that you can’t see directly. Businesses use credit the same way you do and when they have trouble obtaining credit you can feel the impact through higher prices and stricter payment terms.

One example is the student loan industry. Student loans are financed by selling the loans on the open market. Recently many student loan providers have had no bidders for their student loan offerings – this is having a rippling effect through the entire education and student loan system. Some student loan providers are simply not writing any new loans. If you are a child or parent of a child attending attending college make sure you get your FSA(Federal Student Aid) profile submitted early. With less money to go around you need to make sure that you are first in line for whatever aid might be available.

Nobody knows for certain how long the economy will remain depressed; the best bet during tough economic times is to put off major spending and focus on repayment – a good task no matter what the economy is like. Keep your eye on the mail you get from your lenders and credit card issuers tosee what rate changes may be affecting you directly. If you are affected consider taking on, even temporarily, a second job to pay off the debt. You’ll find that by getting rid of debt and building your credit profile up that no matter what the future may bring for the economy you’ll have one less thing to worry about and a lot of extra money to go towards the things that make a difference in your life.

Site Moved

My new site is www.livingalmostlarge.com Not in perfect shape yet, but it's coming along. I'll be switching feeds no worries. I also will be publishing here for a couple days.

Thanks!

Moving Site

I am in the process of moving my site to a self-hosted site. Please bear with me as I try this out. I am unfortunately slower than most people because I have no idea what I'm doing. Trying to get it up and running as we speak.

Free Upgrade or Downgrade?

I have to laugh about this because it's so dumb. DH is away on business and signed up to rent a compact Ford Focus. Got a great deal with budget rent a car, and was planning staying an extra day to go snowboarding.

Well last night he got in and was informed that they were out of compact cars. Great he says give him whatever they've got, as long as it's the same price. No problem. They say they'll upgrade him for free. Sound good right?

Well turns out the smallest car they had available was the Ford Edge. Which while, roomy and spacious, is a horrible gas guzzler. I had to laugh because they thought they were doing DH a favor by upgrading him to a larger car. When it turns out he'll end up paying way more in gas. Sigh.

And the lady behind the desk said "You need an SUV to go snowboarding. How did you expect to get there in a Ford Focus? It's only a 4 cylinder." DH didn't bother correcting her that we go boarding all the time in a Focus or Corolla.

Moral of the story? Sometimes a freebie ends up costing you more!

Oh well, at least he got a car. And he tells me that driving such a huge SUV, is sort of very manly. I told him "get your fill, we're not driving a gas guzzler anytime soon."

Store Credit Cards - Yea or Nay?

I guess as a follow-up to "my secret shame" is the question "are store credit cards - yea or nay?" I've got 4 and I am not sure I should cancel them or not. I don't use any but I do get some nice coupons from them.

I know exactly why we got two of the cards, we had just bought our first condo and needed to buy a washer/dryer/fridge and paint supplies. So we got a 10% discount on both purchases from Best Buy and Home Depot respectively. We saved $100 on the washer/dryer/fridge and had 18 months 0% interest. We paid it off on schedule. For our home repairs we saved $75 and had 1 year of 0% interest. This was back in 2002. I think we didn't cancel the cards after we paid them off because they kept sending us coupons. We still do get coupons like $10/50 at home depot, or $5/15 at Best Buy. So though nothings been charged in many years on the cards, we still have them.

The Gapcard I have no excuse. I think I got it back in 1998 and haven't used it since. But again they have lovely coupons. Though I'm less likely to use the coupon than either BB or Home Depot.

Finally we just got a furniture card this summer with our new couch. We had $100 coupon savings on the couch and 0% interest. It's paid off but they wouldn't take the coupon without using a credit card and no I asked they wouldn't give discount for paying cash. I either live where people don't give cash discounts or they don't give discounts either way. Anyway this card is still open because it too gives nice coupons. I have coupons for $100 furniture, and for cheaper IMAX movie tickets and food. Nothing I want to see, but I'm hoping to get more movie tickets for Batman this summer.

But are these the reasons people like store cards? Are they not using them but hooked on getting the coupons? Or do they actually shop there? I have to say we actually shop a lot at home depot. The other stores not so much, although everytime a $5/15 comes our way I buy DH a itunes gift card at Best Buy.

So I'm undecided whether store CC are yea or nay. What do you think?

My Secret Shame

So I have a secret shame. One which I hadn't even realized until yesterday. I am an avid credit card user and have been very responsible about using it like a checking account. No late fees, no overcharges, no interest. All bills are paid in full.

But the secret shame? Well guess how many credit cards I have? I decided to count yesterday, drumroll please. We have at least 14 cards between the two of us that I know about. Ouch.

My secret shame is I haven't cancelled a credit card in years. I don't exactly know why not either. We've got 4 store credit cards (BB, HD, Gap, Jordan's), none are in use, but I do get coupons for having them.

For the other 11 cards, well DH and I each have a individual american express, discover, and visa, probably because we were trying to build his credit so he got his own cards years ago when we first meet. That's 6 cards, and the other 4 are joint cards. We definitely use 2 mastercards, one exclusively and the other as a backup if we max out our rewards for the year.

I think that's the problem. We couldn't settle on a backup card for our usage. I am considering getting a Citibank CashReturns Card which gievs 5% back for 3 months. Because I am charging DH's tuition to the tune of $15k. Hence 5% back is $750.

But until I sit and discuss with DH what we should keep or cancel, I guess I have to live with the secret shame. Also I will probably need to pull our credit reports to check everything out. So how many credit cards do you have?

An Envelope Budgeting System

I was asked to Beta Test a New Envelope Budgeting System. It's called IntelliPenny. It should be an interesting trial. I'll post a review when I use it for a bit, starting this weekend. But for now please read about it in a post from the creator!

IntelliPenny

Introducing a new software program to help keep track of your personal finances! IntelliPenny helps you manage your bank and credit card accounts and allows you to budget using the envelope system. It simplifies the task of allocating money to envelopes through a process of automatic envelope deposits. IntelliPenny also helps keep spending in check by using a wishlist to track items you hope to purchase in the future. This can help eliminate many of the impulse buys that eat away at income. Do you like to use your credit card for day-to-day purchases and then pay it off at the end of the month? We call this using your credit card like a debit card. IntelliPenny makes using your credit card like a debit card a breeze. Customizable reports, bill payment tracking, transaction importing, password protection, data file backup, are just a few of the other features that IntelliPenny contains. Visit Intellipenny to download your own copy or for more information.

Guest Post @ Master Your Card

I wrote a guest post last week for Master Your Card. A blogger part of the PF Blogger Forum. Please check it out here. I will post it later this week as well.

2007 Taxes DONE!

Gee whiz, I can't believe what happened looking at our taxes. We finished our taxes last night, I lost some paperwork and we had to scour our files looking for an approprimate date to ask the company for a statement. So we receieved it last week and we were able to finally finish our taxes last night.

Well we did good. Turns out we paid an active tax rate of 5.74% to the federal government. Wowwee. Yep we paid almost nothing to the federal government this year. We ended up with an almost $3400 tax refuned going to DH's tuition savings.

We also paid 4.8% to the state, but got it almost dead on and am getting back $75! That's the closest we've been in a long time.

This got me thinking, we've not really gotten raises since 2005 when we started out. And since then our taxes have dramatically dropped. Last year we paid 8.92% in federal taxes and probably close to the same state because it's a flat 5.3% - standard deduction for everyone. But in 2005 we paid 14.2% to the federal government (which was enough to buy a Honda Accord new). So what happened?

Well we got a large mortgage in 2005, which decreased our taxes by half in 2006. Then DH started school in 2006, but we didn't pay much in tuition. In 2007 we got all mortgage deductions, all tuition deductions, etc. And before you get jealous we had HUGE capital losses, enough to rollover for a few years, plus we had to pay taxes on it in 2006. So we had losses on top of losses (long, complicated story). So we ended up paying even less than we ever. It's reminiscient of 2004, when we first married and paid 1.23% to the federal government.

I know people say pay off the mortgage. But seriously with this drop in taxes? I'd be crazy to not to take advantage of every tax break. It's just that we have a lot of the "correct" expeneses like mortage, tuition, etc. This year it might be slightly higher beause DH got a bonus/raise and DH not playing the company stock game anymore. Like I said we had huge losses in 2007 (5 figure losses).

So maybe I shouldn't vote for the fair or flat tax. It appears we're in the category of people truly benefitting. But for what it's worth, I don't know if we'll be able to repeat this tax thing again. Potentially we'll make more money and owe more, stop paying $30k in tuition, and never again lost 5 figures on a stock.

But I am happy to have filed.

As a side note, we used Turbotax this year and did it ourselves. We had to have help the two previous years because of the stupidity of our company stock grants. And because I'm cheap we also did not pay $18 to e-file instead we'll just wait for our refund to be DD.

Quality or Price?

I just bought 2 pairs of Brooks Adrenaline GTS7 shoes from Amazon.com. Each pair was $60, but I think it's reasonable. I need comfortable shoes and they are sturdy. I only bought them online because I was fitted in a regular shoe store first and each pair was $95 in store.

But the real expense was the Spenco Orthotic Rx. Those run $29.99/set and they can wear out. I also bought a couple of pairs of orthotic supports.

So is it worth buying expensive shoes and supports? I've always thought so but never really had the money to really buy good quality shoes. To me $20 shoes were adequate and I took care of them. Same with DH, he wears $30 sketchers mostly. But since I broke my foot 5 years ago, I've noticed a difference in my walk. It's been aching enough for me to see a podiatrist and have new supports reccomended instead of cheap OTC supports.

I guess that's a new lifestyle change. Realizing that cheap isn't always best. And sometimes that you have to spend more to get more value. By buying more expensive shoes and inserts, I (hopefully) will be happier walking. And because of that, I'll have a better quality of life.

If this works, I am guessing I'm never going back to $20 shoes.

Downgrading your lifestyle?

How do you downgrade your lifestyle? I think it's much harder to downgrade a lifestyle than to upgrade it.

Hence why I think I'm finding it so difficult to go back living like a student. This is why I enjoy spending $75-100/week on food. Whereas previously we could survive on $25/week and there were few complaints. Granted food was a lot cheaper 6-7 years ago, but still $25/week didn't buy much.

We never bought meat, except ground beef for a special treat. We didn't eat a lot of fresh fruit and veggies, again special occasions or great sales. We ate a lot of cheaper, unhealthy foods. We ate a lot of processed foods like hamburger helper, mac and cheese, pasta, etc. So now the thought going back to that lifestyle feels like nails on a chalkboard.

What else? Well cable, we never had tivo, extra channels, or even an extra cable box. We had minimum cable or no cable channels. We always had cable interet or DSL, which made sense for downloading papers, work, etc.

Another upgrade was having cell phones. For a long time DH didn't have a cell phone and I had a cheap plan to just call home. We cetainly didn't have a family plan until a few years ago. Now it's part of the lifestyle.

All these upgrades in lifestyle, it's funny how it's so easy to enjoy a better life, but difficult to let go of it. I wonder if this is what causes perhaps credit card debt? People having an expectation of a "lifestyle" then losing a job or having a financial issue. Then being unable to maintain their current lifestyle they turn to credit cards to supplement their finances.

Could you downgrade your lifestyle? Personally I think it would be really hard for us, but if absolutely necessary I could start doing it.

The Money Charade

This week MP Dunleavy wrote about "Are you afraid to look poor?" Another interesting article. She says that keeping up with the Joneses is wanting to look rich, but afraid of looking poor is entirely different. I have to say I actually agree with her two definitions. One is rooted in pride and the other fear. And yes neither is good, but there is a difference.

Basically it's being afraid to use coupons, get a better deal, or basically seeming cheap, is what MP calls "afraid to look poor." Of course in both cases you are putting up a facade of you think the world needs to see.

Some psychologist call it the fear of looking like you don't fit in. It's not a self assurance thing like the Joneses, it's more a fear I think of being looked upon with pity. That you can't afford anything better and hence must "settle" for your lifestyle. And MP writes she's made her own mistakes with such behavior. But she's accepted it for what it is.

I wonder if both KUWJ and afraid of being poor aren't symptoms of our society being ashamed and embarrassed about money? That we aren't pushed into such behaviors because we are supposed to NEVER talk about money. It's passe and eye-brow raising to ever discuss any type of finances in real life. I mean to ask someone about their salary is a NO-NO. Nor should we discuss debt, credit, mortgage, etc. Even among close friends and family to talk about money is TABOO!

I wonder if this isn't the reason people are driven into these behaviors? Maybe the lack of reason and accountability that would be there if we were open with others would help. We would feel less inclined to spend money we didn't have if others helped us accept our own financial statement? Or if we knew their financial statement, and realized we weren't alone?

I don't know what the answer is. But I hope one day we can end this money charade. That perhaps we can start to civilly discuss finances. Where we can talk about money more comfortably than we talk about sex. Truth is we are more likely to admit anything about sex than about money because of the shame.

But would it solve the problems? Maybe not, but it would help.

Budget backwards with priorities

My budget looks neat and tidy right? It's pretty easy to see very definite percentages for our living expenses. It appears that we feel right into line for most categories.

But how'd we do it? Truth is we backwards budgeted. We prioritized everything backwards. We took our gross salary and said we're saving $x for retirement. Before taxes, before everything else. Second, we said we have to pay $x for taxes. That left us with $x.

From there we decided a house mortgage, property taxes, insurance. Then we built in stuff like eating out, cable, internet, cell phones, etc. So we listed things we wanted based on priority.

Thus, if having a nice car is important, it can be built into the budget. Say $500 car payment, can be actual payment or savings into account. Things like that can be "budgeted" for.

This way you prioritze what's important and what can be the first to go if times get lean. Often times people just build budgets according to what they want. They don't stop and say I have to live off of 75% because 10% goes to tithe, 15% goes to retirement, then from the 75% that pays taxes, then the mortgage, food, then all other "wants".

We did that by backwards budgeting. We kept our house higher than normal ~30% because we were young and starting out. Our incomes would grow and it has. But we also kept it high because a nice house was more important than a nice car or eating out. But for some travelling and a smaller home might be important.

So you "tweak" the budget as you see fit. But this way you build it with clear goals. There is no other way than 15% to retirement and 10% to tithe. Then you can't buy a house with 50% of income or a car with 25% of income. To prioritize your needs versus wants.

I've found this has worked for 10 years. We used to prioritize housing over retirement. But we made so little and even renting took up nearly 50% of our incomes, that we had no choice. But we knew it was a priority for us.

So try it. Backwards budget your annual income. And see where your priorties lie.

Our Budget...Finally

I finally drew up a complete budget with percentages. This is a budget solely without bonuses but base salary. To see how we spend our money. We bring home about 55% of our income. Of that we spend 45% of our income with 10% going straight to tuition.

We should pay 16% to all Federal, SS, State, Medicare taxes. Which is awesome. Remember that taxes is a graded system and though you make a lot, only the top is taxed at your highest %. We unfortunately have a large mortgage and tuition payments, so our federal taxes are very low compared to income.

We save 25% of our income to retirement, 10% to taxable savings (ie tuition). Our PITI is 29% contributing to the bulk of our living expenses. We also have large tuition payments but a lot of that is deferred so we basically save it monthly and pay it in chunks over the year.

Our biggest problems is we don't have any set amount being saved for car replacement. So we are running a very lean budget. I think once DH is done with school we will be able to redirect our money to building up sinking funds for car replacement, more travelling, and paying back our student loans.

Also we still have our friend living with us, paying us some income. This actually lowers our housing expenses to 26% as well our utilties are decreased by 1/3. He unfortunately did not get to purchase a place through the low income lottery, but is still looking and has found some pretty good deals with the softening market. He believes he'll be out by the summer. He's been paying minimal rent, but it's allowed us to afford a vacation last year.

Right now I need $15k for tuition by 8/2008. We have $8000 and with a tax refund $3400 and rebate $1200 we should be right on target to hit it.

Again don't own company stock

Well on Friday Bear Stearns announced it bankruptcy. This forced the Federal Reserve to convene an emergency meeting, at which they cut interest rates by 1/4 point. And a deal was struck between JP Morgan and Bear Sterns to be acquired with help from the Federal Reserve.

But that's not the bad news. The bad news is that Bear Sterns apparently gave 401k matches and bonuses in the form of company stock. Which much like Enron was great when the stock was $90/share. But at it's current price of $2/share people are in serious trouble.

Granted Bear Stearns is a bank, but wasn't Enron an energy company? Who could have imagined such an implosion? It's a terrible idea to tie up not only your salary but also so much investments in one company. As an individual you are banking on the company doing well so your investments do well, and you keep you job. But then what happens?

I think it's horrible that company give matches in company stock and bonuses. This happened at DH's previous company, which while it's better than nothing, I think is a bad idea.

What happens is people because they work for the company often have black-out dates which they are unable to sell before or after "big announcements." This means they are often forced to hold on to a risky stock even if they wished to sell.

This poses the unfortunate circumstances that you could lose lots of money unwillingly and unintentionally. So should there be rules against it?

I'm not sure. Because on one hand, at least we're getting money from the company. But what it's actually worth is a whole different ballgame. So it's something, but is the 401k or bonus really valuable? Will it cost you money or make you money?

And it stands to reason the company is giving you stock because it's often cheaper than cash, while making you more invested in the company. So there is no downside for them, only the employee.

But the reality is, that the 401k match in company stock or bonus in company stock is horrible, it's still better than nothing. And if you are valuable enought o get a bonus or match, perhaps we shouldn't complain because we still have a JOB!

And right now it seems like it's just barely enough to hang on to the jobs we have.

Can you stop the worry?

When will you stop worrying about finances? Is there an income point or net worth point where you will stop worrying about finances? Or when you will not be so concerned about every dollar?

I got a horrible look tonight when DH says to me "If I make $xxk, will you stop coupon shopping and being thrifty?" I could only look at him and stare. He asked, "When can we stop being concerned about money?" And we can spend all our time doing what we want without worrying how it will affect our bottom line. Example, cooking because we like it, but eating out because don't feel like it. Not restricting ourselves based on cost.

Or is being frugal and thrifty and ingrained habit? Can you really give up your habits because you have more money? Is it important to do so?

What do I mean by that? Well there is a point where your time becomes more important than money. Where rather than trying to pinch every penny and shop every sale, you might value spending more time with your family. Maybe retiring early, or not saying "I have to work this weekend". It could mean saying "sure we can afford to have steak for dinner instead of non-meat meals or ground beef." It could mean buying better quality clothes and food, instead of the cheapest. It could mean buying things you want instead of necessarily need.

It could even be affording a pet, which is a true luxury item. But is there a point where you can let of all your frugal tricks and truly enjoy life? Where you aren't worry about what everything will cost you? Where you aren't clipping every coupon, chasing every sale?

Are you there yet? When will you get there?

Sweet Sixteen

My Post "Lucky moves or smart choices" is in the sweet sixteen finals over at Free Money Finance. Vote for it so it can move on, and have a chance to win $500 for charity.

Please participate in the voting!

Hidden Accounts?

On the WIR message board a woman asked if she should be worried about her husband's secret account. She said he said "he'd told her about opening an account awhile ago." The account was to be used on a mad money surprise for her or them. However, she was upset because the amount of money in the account was substantial, 6 months of mortgage payments. She said she didn't want to just blow such money. So she asked people should be suspicious? Also she said she paid all the bills and they only had joint accounts. But her husband had this in his name alone. Also she wasn't sure how long he had the account, which was bad because potentially they had to refile taxes because they hadn't claimed the 1099 income.

I thought about it and decided, it depends. First of all 6 months of mortgage is what, at least $6k? That is a lot of money. I think I would be a bit suspicious, even if my husband told me he had discussed it with me. I would wonder where did he get the money to fund such an account? We have allowances of $40/month. So I would be worried.

Second, I would be disturbed over how long he was stashing cash and not telling me. And worse yet if he did not reveal the account while we filed our taxes. It would worry me because we could be audited by the IRS.

But to play the devil's advocate maybe the husband is saving for a special surprise. So it could be completely innocent. Would you be suspicious? Do you have any secret accounts from you spouse?

I don't and while I could, I don't think DH could. But how would someone even hide secret accounts if you file joint taxes? Wouldn't it raise red flags with the IRS? Or is the chances of an audit so small it doesn't matter?

I think it's an interesting conundrum.

EDITED TO ADD: The amount of the hidden money is more than $10k. So it is substantially more than $6k. It is Five Figures Hidden.

Happy Hooker?

Finally a normal article by MP Dunleavy, "Happy Hooker has got to go...". I am happy she's telling people they need to wake up and see reality. That sure it seems like more money will solve all our problems. But the truth is it won't.

She is telling women it doesn't matter what you make if you make bad decisions with money. There is no easy way to deal with money and there is no magic solution. I agree sometimes I wonder if people don't think "wow easy money in prostitution (or any other get rich quick scheme)".

But we all do it. We all dream of the easy out and a way to afford a lifestyle we desire without working. But it really doesn't happen overnight, nor do money problems go away even if you suddenly earn $5k/night.

But how many people still wish and pray for an easy out? And figure that making lots of money will solve everything.

Gift Giving Guidelines

Hmm, interesting thought. Roomie actually asked me what an appropriate gift amount would be for a wedding. He's going to a pretty good friend's wedding and wants to give a nice gift. This got me thinking, what are the actual dollar guidelines for gift giving.

I told him, my mom says the cost of your meal. He said he'd heard that before as well in his Muslim community, and wanted to check it was the same. Thus for this particular wedding, it's in NY, so I was thinking maybe $100 for him and $100 for a date. NY is not cheap.

But then we moved to birthdays and christmas. How much to spend on your friends and family? Do you have guidelines? I told him I think $20-25/friend for either Christmas or birthdays. He agreed but wondered if that wasn't a bit much? But I felt that if you were close enough to exchange gifts then it should be higher than $5-10 right? Tough call.

Then we discussed family. My grandmother's 80th birthday is coming up and she's visiting. It's actually also right before Mother's day, so I sent her a check for $100 for her plane fare, and I figure we'll buy her dinner at least a few times. Was this excessive? DH didn't care (he never does for family, although we rarely give to his side only mine). And roomie said it sounded high, but then acknowledged that he spent at least $50+ on his family. So there appeared to be some variation.

I think for family I try to spend $50 usually, but this time it was for plane fare instead of an actual gift. I also prefer to ususally give gift cards to restaurants or massages, or movies rather than gifts. Usually because most people have everything and I can never come up with stuff to give them.

So we were debating, is it tacky though to send a check? Or to give cash for something specific in mind?

I wonder why we have so many gift giving and "etiquette" rules. Why isn't it more simple, that cash is not crass, and it's the thought that counts?

What do you think are some gift giving guidelines for weddings, birthdays, and Christmas?

Renting versus ownership

I knew renting in our area was expensive, but now I realize how tough it really is. This brochure for an apartment complex outside the city has prices and sizes. The cheapest 1 bedroom is $1499/month. A 3bd/2ba smaller than our townhouse is running at $2500. So how does that compare to our mortgage?

Our mortgage is $2263 + $200 HOA + 400 Property Taxes. So we're paying $2863/month pre-tax, with ~$650 going to principal. This means after tax we are actually $1700/month to "rent" our place. Of course this does not account for maintence of our home.

So in our area it appears we got a decent deal. Something we were pretty sure about. Also because of the time frame (three years and counting), the longer we stay put, the more likely buying will have won out over renting.

Now this only happens when you buy in an area of high rent. But if you buy in an area of low rents, ie San Diego, then you run into trouble. For example, when we bought prices were relatively low, so we got lucky with home appreciation. However during our 3 year period of ownership, the rent of a 1 bedroom apartment did not change from $1200/month (what our neighbor renting paid). Our PITI before taxes was $1000/month. But our purchase price in those three years went from $150k to $300k.

But since then the price of the same condo in 2005 to 2008 went down nearly $100k to $200k instead of $300k. And who knows how long until it regains it's previous levels. So renting would have put someone in a better position.

So moral of the story? Buying versus renting is completely location dependent. You can't just read a blog or expert and decide buying is always better or renting is always better. The market is dramatically different from city to city. It is impossible to understand the nuances of each market.

That being said I think the most important rule of buying is how long do you plan on staying put? At least 5-7 years, then perhaps you'll come out ahead in a "normal" market. But nothing is set in stone.

Coupon Donation

I forgot to mention that about 1 every couple of month I go through my coupons and mail them overseas. The military bases honor coupons that are expired. They are able to give them out to families who can use it to shop on the base. Please check out this website to ship coupons overseas! Yes you do have to do a customs form and it does cost a bit, but it's still a nice thought.

I thought I'd bring this up because this is the hobby of many elders nowadays. This article talks about people in retirement communities taking the time to mail off coupons. So even if you don't coupon shop, if you get the Sunday paper, maybe keeping the inserts, and clipping them and mailing it off once a month would be awesome.

That piece of paper

Does that piece of paper certifying you're married make a difference? I used to think not. And I still don't think it affects a relationship. However, as I grow older I am thinking that the little piece of paper does make a difference.

Yes, someone can still walk away and leave a marriage. Someone can choose to end the relationship. But that piece of paper means they are unable to just walk without untangling themselves legally.

It means that they have to make the time and effort to resolve their finances jointly. It means they cannot just bail and start depositing their paycheck elsewhere. It means they cannot just run away from their families (at least not legally).

That being said, I've always felt that if you get pregnant get married. Because you want to protect your children financially. So should you get married even if you don't have children? Do you have to protect yourself financially? Or is it a fair trade?

I believe that piece of paper gives you peace of mind that if something should happen like death or an accident you also have the legal right to determine the future of your significant other. That you are able to have input on what their wishes really were. The older you get and the longer you live away from home, usually you grow apart from your parents. And they may not realize your values have shifted from burial to cremation, organ donor or not, etc.

So while it still is a piece of paper, and does not guarantee a relationship, it can bring a peace of mind. It can secure your financial future or ruin it. And it can at least protect your interests and values.

But as a bit of background, I lived with my DH for 5+ years before marriage, so I'm not a good example. However, looking back, I wonder if we didn't make a mistake in not getting married earlier? That if something had happened, our parents for sure would have overridden our BF/BG inputs with their own values. But some things you only learn later :)

Root of Debt in America?

Last night we picked up Super Smash Brothers Brawl for the Nintendo Wii. DH was excited to be playing. FWIW, I don't think we were the oldest people there without a child, but I guess this is what being DINK is.

So last night in line there were three registers working, however one register only took debit or credit cards. So we ended up cutting to the front of the line, because most kids were buying the games with cash (probably using their allowances).

Anyway this upset DH, who was outraged that so many kids were using cash. Sigh. He didn't understand that most children in the US don't have checking accounts linked to a debit card. Apparently in Canada this is very common and called "children's account." Apparently in Canada most children learn about checking accounts, bills, and credit cards by high school.

But in the US, most children are exposed to checking/savings accounts and credit cards when they go to college. And they learn all the wrong information about it from friends, rather than the proper information from their parents. They believe that that credit cards are free money, checking accounts never run out, or how to budget.

He suggested this the reason why the US is in so much fiscal trouble. That people here get a late start in financial responsibility. That is learned from experience and friends, instead of parental guidance.

Do I agree? I'm not sure, but potentially yes. I was a fortunate person who had all the same experiences as DH because my mom wanted to be sure I was a prepared adult. So the CC trap, budget, checking accounts, etc were not a big deal. I had a firm understanding and knowledge about money before I became and "adult".

So perhaps DH is right. Perhaps it is due to the fact that American's are ashamed about their financial knowledge and don't enlighten their children early enough. Or are unaware they even should be imparting financial wisdom, rather than waiting till their friends tell them the wrong information. What do you think?

Cheap lesson in life...

Okay so never listen to your friends about travelling for cheap. DH and I are pretty decisive people. We also typically book tickets that seem reasonable, fit our timeframe, and are convenient.

Well DH is going to Colorado at the end of the month. We just bought a roundtrip ticket today for $395! Crazy, insane price. But last month when we wanted to book, DH's best friend didn't want to because he was trying to get the best price. The price at the time was $305.

Yep, he thought it was way to high. Problem that we were "discussing" with him, is the realization that he no longer had the flexibility he once had as a graduate student. He used to take off 6-12 weeks a year. Yep you read that right. He didn't care, his work ethic was such that vacations were important, unpaid or not.

But for us, we've always had time constraints so we usually accepted the price of paying a lot more for vacationing on set days. Well even DH's BF paid a lot. His tickets were $300 and he is going to take 2 extra days of vacation instead of DH's 1. And he only gets 10 days a year. I'm not sure how it will play out with his boss, who already mentioned too much vacation.

But this is why you never listen to your friends when it comes to finances. Lesson learned, DH agrees. We're pretty easy going, and this particular friend's hobby is travelling. He does mileage runs (where you buy flights to get miles to stay premier), so he constantly shops airfares. Problem? He's never been constrained by dates.

Well it's a $100 lesson, but in the grand scheme of things it's a cheap lesson in life. DH says next time we'll reconsider listening to someone, and instead follow what our common sense tells us.

Oh well back to the drawing board...Do you have any lessons learned about friends? Was it expensive or cheap?

People thinking you're Weird?

On a Dave Ramsey message board, people were discussing in a thread, whether others thought they were weird. If they were sharing with people in real life about becoming debt free. And a lot of people said yes they got weird looks. Or that they didn't share about it.

So I decided to contemplate do people think we're weird? Honestly, NO. Most of our friends are not in financial trouble. They are pretty secure financially and pretty responsible. My two best friends, neither have credit card debt or car loans. They both had car loans out of college, but it got them good jobs. They both had student loans, but they got great jobs because of it.

DH's best friend has no credit card debt, student loans, or car loans. He thinks people are crazy. BIL has no car loans, credit card debt, student loans. And yes while he did cosign for his girlfriend's car loan (long, long story) and pay her CC bills (stupid tax), he never actually got himself into trouble.

And the rest of our friends? I know our MBA neighbors carefully calculated the cost of having student loans, but are against CC debt. And more than a few acquaintances don't have CC debt, but have massive student loans (they mentioned it). That seems to be a theme, we're not weird, we're normal for not having car loans or CC debt. And student loans is a part of our circle it appears.

Granted this might be true because we've been in school for so long that frugality is trait you need to survive. But it might also be true that not really having a "good" income for long also makes it harder to rack up CC debt because you don't qualify, or car loans because you don't qualify without a stable income. But student loans, well they just hand it out left and right.

But I haven't really found people who say CC debt is okay or you'll always have a car payment. More people tell us student loans are necessary evil. Or they couldn't pay for college, graduate school, professional school without it.

So I guess we're lucky. We don't have much pressure to be "normal". We're fortunate that our circle is pretty anti-consumer debt. I feel we fit in well. Now if only we could change how much colleges cost, then perhaps people could afford schools without so much student debt.

Carnival of Money Stories #49

The 49th Carnival of Money Stories is up at PiggyBankBlues. Please check it out.

March Madness

I forgot to mention I'm participating in the March Madness tournament at Free Money Finance. Please check out all the great posts for the 64 post competition. I've won my first round and moving on with my post "Lucky". Please vote and enjoy.

Also I will be trying to move the blog soon.

Not trusting mechanics

So I got a call this morning from the dealership. They wanted to know who told me I needed the water pump and timing belt done. Turns out they were wrong. Apparently what it turned out to be was a cracked thermometer, sepentine belt, and friction belt. They showed me the parts they replaced.

So apparently the guy who "diagnosed" our focus before didn't do the correct job. This is actually the second time it happened. The first time in SD we had a lot of problems after what we assumed was done correctly. Turns out when we paid an arm and a leg and took it to the dealership the guy was wrong. He'd replaced the wrong part. Um, what?

It pissed my DH off and we didn't go there again. Mind you, we're not against great mechanics, but unless the dealership is way overpriced we're heading back to the dealership. This second experienced confirmed that sometimes mechanics don't work on the make and model of your car a lot. Unlike the dealership mechanics, who probably see only Fords. So their knowledge of "common" and "typical" problems is more specialized.

It costs me $840 to replace everything, and I'm not unhappy about it. I am pretty sure I wasn't ripped off, I called a mechanic for a price and he said $750. So I know I'm inline again with prices.

So while I guess mechanics can be cheaper, I'm getting warier about trusting them to correcty diagnosis problems with the car. So I guess I'll just have to keep paying a premium to the dealership.

Car Dealership for Repairs

So today we decided to drop off our Ford Focus at the dealership to have the water pump repaired and the timing belt replaced. This is first time we've gone to a dealership for any major work.

We decided to do so because the difference between a dealership and a mechanic was minimal. I used the cartalk website to find 5 other mechanics. I called each one up last week and was quoted between $650 and $900 for the repairs. The dealership quoted me $700. I couldn't believe the rate was actually competitive.

I think the reason is due to the fact that there are so many dealerships around. This causes the dealership to actually try and compete for business. After people who are going to come in repairs are already Ford owners, and customer satisfaction probably plays a role.

But anyway because of the rush of cars dropped off this morning and the length of the repair, the Focus won't be ready until tomorrow. I hope nothing else is found to be wrong with the POS. We really need this car to last a few more years trouble free. This doesn't mean we wouldn't kick it to the curb if it started breaking down and costing a lot in repairs. But I'd rather sink $5k into a new used car than into this car.

So moral of the story? Call around, potentially the dealership could be the place to take your care in for repairs. I like the dealership because they have the parts on site and they are used to working solely on Fords (or whatever brand of car), versus a mechanic who has to work on many different brands of cars.

Thrifty Tip: Buy Forever Stamps

Now would be a great time to buy some Forever Stamps if you have a chance. The price of a letter is increasing to 42 cents! Up a penny, but this is a nice way to hedge against hassle of having to buy 1 cent stamps again.

February Wrap Up

I tried again the cash budget. I have no idea what I spent where, but I believe I spent $120 on groceries, and $142 on eating out. I still feel as though we could have spent less, but I completely lost track of our cash spending. Defintiely the eating out was higher than expected because 2x we went out in a group and spent way more than we needed to. I am tired of this trying to use cash. I feel a definite loss of control. Do we spend less? Yes/no. I find that we scrimp and buy less healthy food because of my cheapness. But overall I don't think we spend that much less.

As for our net worth, we got rid of our credit card debt by $244. We increased our retirement by $6800 solely due to contributions. Our retirement is at $74k, our cash savings decreased to $11887, and our taxable accounts decreased to $7800. But overall our networth increased by 0.85% = $1848.

Not a terrible month, but mostly we've been contributing to our Roth IRAs $3k out of $10k, $1200 into the 401k, and yet everything goes down. We also are contributing to DH's ESPP the maximum, but I can't figure out how much it is.

How to much to save?

The article I wrote about yesterday discussed the lack of savings in today's retirees. It's only going to get worse because of the decrease in SS and lack of pensions. So what should people in their 20s, 30s, and 40s be saving?

Well let's assume you need to save $1M for retirement. This will give you an annual income of $40k. That's pretty good. Of course these numbers can be adjusted based on your income. Personally I would shoot to replace 100% of your income in retirement rather than the suggested 75%. Mostly because previously people had pensions and employer provided medical insurance in retirement. That is a thing of the past. Those are bonuses that can no longer be counted on.

I'm not even sure SS can be counted. It's possible that for 20-somethings it will be distributed according to need. If you have a savings, you won't get it. Also with Medicare, I'm not sure if we can really count on it paying for 80% and if it won't go down to 50-60% coverage. Hence I would plan on replacing 100% of your income so you can buy supplemental insurance and 20% of your medical bills not covered by insurance.



Now assuming all savings will be done in either a Roth IRA or 401k, it means it's a tax deferred savings vehicle (no taxes paid annually). Also assume that you have $0 (nothing) saved. Let's also assume an 8% return on everything.

So if you are 55 with 10 years left to retirement, you need to save $68k/year (5500/month) for 10 years to have $1M. Ouch. But if you are 45 and have 20 years until retirement, you only have to save $21k/year ($1750/month). That's a bit more managable assuming you are in your peak earning years.

Now if you are 35 and have 30 years until retirement, you only have to save $8500/year ($708/month). That's golden! Basically if you save the maximum for a couple, in a Roth IRA for 30 years you will have $1M tax free for retirement for the DH and DW!

Of course if you are 25 and have 40 years until retirement, then you only have to save $3500/year ($290/month). This means if you are single and start saving the maximum into a Roth IRA for 40 years, you will have $1M for yourself.

Wow, now if you are younger and starting to save, I hope this motivates you. The longer you have until retirement, the smaller the numbers look. The easier it looks to achieve a large nest egg. The more feasible it is to think positively.

But even if you are older, now is the time to start. There is potential to save something for your retirement. And you could perhaps afford a better lifestyle than you expected if you save something rather than depending solely on SS.