Category Archives: Money

Playing financial roulette

Last week our debit card was declined.

We had to pick up a few things at Target for my trip on Thursday night. The total was less than $15. When the cashier told us the card had been declined, we asked that he run it again. Declined again. Isn’t it scary when that happens?

We gave him another card, which cleared, but I was panicking by the time we got out of the store. I knew exactly how much money should have been in our account, and there was no reason for that charge to be declined. I was terrified that our account had somehow been hacked, emptied by an identity thief.

But could it have been my mistake? We recently received our tax refund, and I’d been moving money around between our checking and savings accounts. Had I moved too much? Would my mistake cost us?

When I finally checked our bank account, we saw what happened. Tony had somehow mixed up his debit card for our joint account with the one for his personal account. The cards look the same (except for a mark on the back he uses to differentiate them), but the balances are drastically different — his personal account usually holds under $200. The mix-up happened at some point before he paid for our new tires, so by the time he used his personal account debit card at Target the account was overdrawn.

When Tony realized what he had done, he panicked. “Are we going to be charged overdraft fees?” he asked. I knew we wouldn’t.

You see, this time it was an accident, but when I was in college this was a game I played often. When my account came dangerously close to empty, I sometimes spent more than I had anyway if I knew I had money coming in. I’d deposit cash before the withdrawals cleared. If the deposit and withdrawals cleared at the same time, I avoided fees. Sometimes. But sometimes I paid hefty fees. It was a dangerous game.

Because none of Tony’s charges had cleared yet, we were able to transfer money from the joint account into his personal account and avoid overdraft fees. Whew.

I’m thankful that it turned out all right, and that this time it was only a mistake. I’m grateful that I don’t play financial roulette anymore. Now when I use a debit card, I know I have the money to cover it.

Time for new tires — or why I’m glad we have an emergency fund

new-tires
photo by kalebdf

Last week Tony took the car in for an oil change and brake check. I wasn’t expecting the news he gave me when he came home. One of our tires had a bubble and needed to be replaced immediately. The other three were on their last legs and needed to be replaced as well.

Our car only has about 20,000 miles, so we weren’t expecting this for some time. There was a time when a surprise like this would lead to panic and, most likely, debt. I didn’t have $200-$500 available for new tires at any given time, so I would have charged it on a credit card (unless my cards were maxed out).

This time it was a surprise, but that doesn’t mean we weren’t prepared.

Every month, we save $25 for car expenses. We’d accumulated about $90 in that account since using it to pay for maintenance before driving to Indiana in December.

The $90 would help, but it wasn’t enough. If we replaced all four tires, it would cost about $450.

I wanted to be sure that it was necessary, though. After all, the tires only had 20,000 miles on them. We knew we needed to replace the damaged tire, but I wanted to make sure the other three really needed to be replaced before taking money out of our emergency fund. We did the penny test and discovered that the back two tires were still okay.

We decided to replace the front two tires. We’ll monitor the tread and condition of the two back tires to make sure they’re still safe, and try to save up the money to replace them within the next few months.

We called for quotes at three different places — AAA, Wal-Mart, and Firestone. Firestone was the cheapest by about $100. The total for two new tires at Firestone was $215 with installation and other fees. Because we save additional money for car expenses, we only had to use $125 from our emergency fund. No big deal.

This is the first time I’ve had to tap the emergency fund, and I can’t tell you how glad I am that we have it. Before our emergency fund, I lived in constant fear that something like this would happen (and it always did). Our emergency fund made a normally stressful situation much easier.

I also learned that we’ve been too lax about tire safety. Just last weekend I drove over 100 miles on those tires — and one of them probably already had a bubble. I’m so thankful that I didn’t blow a tire going 70 miles per hour on the highway. Yikes.

From now on, we’ll keep a closer watch on our tire pressure and tread and check for tire problems, especially before long drives.

Am I sticking to it because it’s costing me?

treadmills
photo by ario_j

It’s been almost three months since I joined a gym. Initially, I was concerned about the 12-month commitment. If my enthusiasm didn’t stick, I might end up stuck with a monthly fee for a gym membership that I wasn’t using.

The good news is, that hasn’t happened. When going to the gym after work became too much of a struggle, I switched to a morning schedule. I’m tired earlier in the evening now, but I love getting my workout out of the way first thing in the morning. I start the day with extra energy, and I don’t have to dread working out after a long day at the office.

This is the most consistent I’ve ever been with a workout regimen. I typically controlled my weight through portion control and healthy eating, but my fitness habits have always been lacking. This is the first time in my life that I’ve worked out every single day for longer than a couple weeks.

I can’t help but wonder if it’s directly related to the $20 being withdrawn from my bank account every month. In the past, I’ve worked out for free either outdoors, in a campus gym, or in an apartment complex gym. This is the first time I’ve paid a monthly fee to work out. Every other time I started out with a lot of enthusiasm, but eventually I started going fewer times per week until I finally stopped going at all.

This time I’ve made it a point to work the gym into my schedule every day. I know I’m paying for it whether I use it or not, and I can’t bear the thought of wasting that money every month.

Tony offered a different theory. My frugality and financial organization have made me more goal-oriented and regimented, he says, which in turn have led me to follow those same principles when it comes to fitness.

I don’t recommend joining a gym just to motivate yourself to work out. If you’re not truly committed from the beginning, all the gym membership will do is add to your expenses. But if you’re like me — strict about money and lax about fitness — and you’re truly committed to a healthier lifestyle, paying for your workouts might just strengthen your resolve.

How my husband plans to save while I’m away

The following is a guest post from my wonderful husband Tony about how he plans to save money while I’m away.

Karen has joked that I’ll be “living the bachelor life” for four days while she’s away at a conference in New York, which isn’t entirely true, but it does have me worried. The “bachelor life” to me never meant many of its stereotypical elements, but before I met Karen, I will say that the “bachelor life” certainly meant spending money frivolously. I’m worried about spending time apart from her (the first time in almost three years!) and how that might lead me to spend money where I don’t need to.

I’m determined to keep costs down, so here’s my plan, as much for you as it is for me:

Leftovers, leftovers, leftovers.

Anyone who reads here regularly knows that I’m a bit of a foodie, and my greatest financial vice is wanting to spend a bit too much at the grocery store. I like trying new foods, and in the past this has run up our bill. My plan for the days Karen is gone will be stick to our go-to meals and focus on leftovers. Pasta that could feed both me and Karen lends itself to two (at least) portions of leftovers. Without splitting it with her, I’ll have four meals for myself. That’ll help cover lunches and dinners.

No Trip to the Theater

Movies are passion of mine, and I’ll admit that at first I thought one of the ways I could pass my time while Karen is gone is to take in a matinee one day after I teach. But still, even paying only for myself, that’s an expenditure I don’t need. I’ll focus instead on the campus library, RedBox (which has some newer releases I haven’t yet seen), and our trial membership of Netflix.

Talking to Friends and Playing with Our Dog

When you’re alone, you seek out conversation. I’ll have friends and family I can call, but there is the pesky matter of being on different networks and having to use my minutes before 9 p.m. That’s why I’ve begun using Gmail’s video chat feature to talk to some of my friends back home. It’s user-friendly, completely free, and as long as you have a camera and a microphone, you’re set to go.

Also, I’m a little worried how our dog is going to react to just me at home, so I’ll be making sure he gets a lot of exercise to keep him occupied — and that’s absolutely free.

Just Another Week

I think one of the most important things to consider when you’re regular schedule is upended is to tell yourself: this is just another week. Yes, I’m going to miss Karen tremendously, but if I tell myself something is “okay just for this week,” it’s going to get me in a lot of trouble. I’ll still have classes to take and teach, so it’s not like I’m going on a vacation or anything.

Whenever something comes up that I want to do because I’ve got nothing else to do, I’m going to ask myself: would we do this on any other weeknight?

Now, I know I’m going to go a little stir crazy being alone for four days, so I do have a few activities planned. I’d like to try a southern barbecue restaurant that was recently voted the best in town, so perhaps I’ll go there for lunch one day (since the lunch menu is cheaper).

I’ve got a new attitude

This morning, like every other morning, my alarm went off at 6 a.m. Since daylight saving time began, my morning wake up call happens before the sun rises. Some mornings, it feels like I’m waking up in the middle of the night.

I’ve been getting up at 6 a.m. for the past couple weeks to work out for 30 minutes, but I don’t have to be at work until 8:30. I lay in bed for a few minutes, and I found myself considering staying there for another hour.

What finally motivated me was a compromise. The thought of getting through my whole workout was overwhelming, but that didn’t mean I should skip it entirely. I made a bargain with myself — in exchange for getting up and making it to the gym, I’d shave 10 minutes off my normal workout.

My first thought this morning was that it had to be all or nothing. Either I’d get out of bed and make it through my whole workout, or skip it and stay in bed until 7 a.m. It didn’t occur to me right away that it’s okay to compromise, and it’s okay to do only what you can do right now.

As I pushed myself through my workout, I started thinking about how often the all or nothing mentality interferes with my diet and exercise — and my finances. When a surprise expense forces me to set aside money in the budget that normally goes to something else, it feels like my goals are shot for the month. If I can’t send the usual amount to savings and debt, then I’ve failed.

When I convince myself I’ve failed, then I start to lose the motivation to do it at all.

If I didn’t make it through a 30-minute workout this morning, then I failed. When I start thinking that way, why even push myself to get out of bed at all? If I’m failing either way, I might as well get an extra hour of sleep.

Instead of all or nothing, I’m going to start just giving my all. If a surprise expense reduces the amount that I can send to debt and savings, then I’m going to happily send what I can and praise myself for coming this far. If I can only make it through 20 minutes on the treadmill, then I’m going to be proud that I still got out of bed an hour early and made it to the gym.

Goals are important, and I’m going to continue setting them for myself and striving to reach them. But I think I’ve been missing the point for some time now. Instead of setting a hard and fast rule and beating myself up if I can’t reach it, I’m going to set broader goals and work to do a little more each time.

I’ve realized that my rigid goals are limiting me. If I’m just pushing myself to save a certain amount every month or make it through 30 minutes at the gym, then I’m less likely to do more than that.

Instead of setting a goal to work out for 30 minutes every single day, my new goal is to go to the gym every morning and work out as long as I can. Instead of saving the same amount every month, I’m going to look at my budget, set a number based on my expenses for the month, and make sure I’m saving as much as possible.

Hopefully, this new positive attitude will motivate me to exceed my previous goals. Most importantly, I won’t feel like a failure every time I hit a setback.

Moving on a budget? Consider staying where you are

moving-boxes
photo by mtmiller

I think I hate moving more than anything else. It’s expensive, stressful, and exhausting. But since we’re renters, we’re always tempted to look for something better when it’s time to renew our lease.

We don’t love our apartment. It’s comfortable, but the building is old. It costs a fortune to heat and cool because our entire living room wall is a sliding glass door. We’re constantly calling maintenance to patch leaks and fix problems. We also kind of hate the neighborhood.

Last year when it was time to renew our lease, we strongly considered moving. We did a lot of research to find out how much other apartments in our area cost, and what kind of deal we could get. In the end, we decided to stay put. Why? Well, there are a number of reasons:

  • Even though we don’t love this neighborhood, it’s less than a mile from where Tony teaches and attends classes. He’s able to easily take a bus to campus, so we only need one car.
  • The building is old, but rent is cheap. Our two-bedroom apartment costs the same as smaller one-bedrooms in newer, fancier buildings. We like having the extra bedroom for guests.
  • We’d lose $300 in non-refundable security and pet deposits if we moved, and then we’d have to come up with the money for additional security and pet deposits for the new place.
  • We’re probably going to be making another big move in less than 18 months, so we decided we’re better off saving our money for that move and dealing with the problems here. After all, no apartment is perfect. If we weren’t dealing with these problems, it would be something else in our new place.
  • I hate moving. I moved seven times in four years during and after college, including an 800-mile move. I’d really like to stay put as long as possible now.

Since we knew we wanted to stay here for another year, we decided to ask our landlord what kind of deal they could give us for signing early.

Of course, we didn’t tell them we’d made up our minds. We just told them we were starting to look at other options (even though our renewal isn’t up for another two months), and asked what they could offer us. I’m so glad we did.

Not only did they offer us another year with no rent increase (it usually goes up about $15 a month), but they knocked $300 off the rent for the first month of the new lease. We were expecting our rent to go up $35-$45 this year, because last year we negotiated with them to get washer/dryer hookups installed in our apartment. Our rent should have gone up another $30 then, but they cut us a deal. If we had waited to renew, they probably would have added that $30/month to our rent plus the normal increase of $5-$15.

Honestly, if you’re renting and considering moving, take a serious look at why you want to move. If you just have normal gripes about apartment life, I encourage you to consider staying put for as long as possible. Not only will you save the money it costs to move, but you might be able to negotiate a great deal with your landlord.

Living in “poverty” on $500,000 a year

I know I’m a little late with this, but I haven’t had a chance to write about it until now. As part of the stimulus bill, banking executives won’t be able to make more than $500,000 a year. The New York Times ran a sympathetic article on Feb. 6 explaining the hardship executives will face due to this pay cut.

Among the “necessities” that bankers will struggle to afford on their lowered salaries:

  • $45,000 a year for a nanny
  • $16,000 a year for two vacations
  • $240,000 a year for a summer house
  • $75,000 – $125,000 for a chauffeur
  • $65,000 for private school tuition

Not to mention the inflated yearly costs of housing and lifestyle, as well as other “necessities,” like a few designer gowns a year for charity galas. (Side note: there is, of course, no mention of a yearly allowance for charitable donations.)

I’d like to say the reporter was being facetious. Unfortunately, that doesn’t seem to be the case:

“As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, ‘The Manny,’ and the daughter of Peter G. Peterson, a founder of the equity firm the Blackstone Group. “Five hundred thousand dollars means taking their kids out of private school and selling their home in a fire sale.”

Sure, the solution may seem simple: move to Brooklyn or Hoboken, put the children in public schools and buy a MetroCard. But more than a few of the New York-based financial executives who would have their pay limited are men (and they are almost invariably men) whose identities are entwined with living a certain way in a certain neighborhood west of Third Avenue: a life of private schools, summer houses and charity galas that only a seven-figure income can stretch to cover.

So, you see, even the absurdly wealthy are living paycheck-to-paycheck, and we’re supposed to be feel sorry for them because they’ve gotten so used to the luxurious life that they’ll no longer be able to afford on a half million dollar salary. Give me a break.

Many of the people facing lay-offs are worried about whether they’ll be able to feed their children and keep their modest homes. They were already living on $50,000 a year or less, but now their yearly income is half that. You’re telling me I’m supposed to view these bankers as victims because they might have to give up their bi-annual vacations?

To me, this is a prime example of people with too much money and no ability to look outside their own sheltered bubbles. Give. me. a. break.

Just for fun, I’ll also share this post from the Consumerist — their suggestions for how CEOs can cut costs and survive at $500,000 a year.

Personal finance is romantic

love-and-money
photo by jeeked

I know I said yesterday that love and money have nothing to do with one another. That’s not entirely true.

It’s true that love doesn’t cost money. There’s no reason to spend any money on love. But money can certainly affect your relationship, especially when you’re having financial problems. It can increase fighting, distract you from the important things, and even lead to divorce.

I know, most people don’t consider budgeting to be a very romantic concept, but money problems can wreak havok on even the healthiest of bonds. Working together to get your finances in order is one of the best things you can do for your relationship.

It fosters a sense of teamwork.

There’s nothing more bonding than setting mutual goals and working toward them together. Teamwork is good for any relationship. It heightens closeness, especially when you succeed together.

It decreases (or eliminates) financial arguments.

Couples fight about money than any other thing. Most of these arguments stem from differences in how you and your partner handle money. But when you take the time to outline your goals and rules together, it allows you to get on the same page about money management.

Maybe you still won’t agree completely, but talking it through allows you to find common ground and set mutually agreed upon rules. Though we don’t completely agree about every aspect of money management, Tony and I have never fought about money. We set the rules, and we know what to expect from one another.

It decreases money stress, allowing you to focus on other things.

Anyone who has experienced money troubles knows it can be hard to focus on anything else when your finances are a wreck. Your finances won’t be perfect overnight, but when you take control and start to work toward financial goals, you at least feel more in control. You’ll suddenly realize your mind is much freer to think about more positive things, like how much you love your partner.

It allows you to accomplish your dreams together.

Whether your shared dream is to own a home, take your dream vacation, start a family, or own your own business, getting your finances in order is the first step. There’s nothing more romantic than achieving your dreams together, and fixing your finances can help you make that happen.

This Valentine’s Day, take some time to look at your finances — your mistakes, your accomplishments, and your goals. It may not seem like a romantic way to spend the holiday, but it’s one of the best things you can do for your relationship.

Post-tax refund savings breakdown

I just finished filing our 2008 tax return using TurboTax Home & Business since I had to report a little freelance income for 2008. (If you’re not reporting freelance income, I suggest using TurboTax Deluxe.) The software costs about $40 on Amazon, but it makes it simple to do your taxes yourself. In my opinion, it’s worth the cost.

Since we got married in 2008, we’re getting a pretty hefty refund. It’s actually about $500 more than I anticipated.

We already decided that we’d be using the bulk of the money for savings. We’re putting 70 percent of our refund directly into our emergency fund. After that deposit, our emergency fund will be 55 percent complete!

It took us about 6 months to save that amount, so I’m hoping with our increased monthly savings amount we’ll be able to complete our emergency fund by the end of this summer (especially if we end up hanging on to some of our summer savings). Then we’ll start saving for our trip to Europe.

About 20% is going into our summer savings account to cover the fact that Tony isn’t paid to teach two months out of the summer. That fund is now complete. (Yay!)

My hope is that we’ll be able to hang on to a substantial chunk of that money and transfer it to our regular savings at the end of the summer. Our plan is to cut our spending as much as possible and try to live on my income alone for two months. However, it’s going to be a substantial pay cut (about 43% of our combined income), so I wanted to pay it safe and save enough to cover the difference. If we get into trouble, the money in our summer savings account will be there to bail us out without dipping into our emergency fund.

We’re using the remaining 10% of our refund to treat ourselves. Back in November, I booked a hotel in Washington DC for the last weekend in February at about $60 a night. The hotel is already paid for, but we decided to use a little of our tax refund to pay for a nice dinner and maybe some entertainment.

Originally we planned to spend no more than our monthly entertainment allowance on the trip ($50), plus the extra gas cost, which we’d pay next month when the credit card bill comes. Since our tax refund was a little more than I expected, we decided to use a little of the money for the trip. We still plan to spend as frugally as possible, though, and whatever we don’t use on the trip will go right back into savings.

Overall, our savings accounts have grown by about 50% as a result of our tax refund. Woo hoo!

If I had saved that money instead of loaning it to the government interest-free, I would have earned about $50 in interest. Sure, that’s extra money that I don’t have now. But when I consider the possible alternative (underpaying and owing a big chunk of money at tax time), it’s worth it to me to forego the interest income for peace of mind.

Whew. It feels good to be all done. :)