Funny about Money

The only thing necessary for the triumph of evil is for good men to do nothing. ―Edmund Burke

Money Worries: I’ve gotta stay away from the computer

Probably I’m better off if I don’t know. Sitting in front of the computer mulling over the money worries is not helping my mental health.

Any way you look at it, there’s no way my savings will support me for the rest of my life, unless I die tomorrow. Nor is there any way my lifestyle is going to get any better. I am so damn sick of pinching pennies…my whole life has become pinched. And especially I’m sick of working like an animal for sub-minimum wages. Our current client hasn’t paid us; I sent him a bill payable net ten days and haven’t heard a word. Ten days, however, won’t be over until next Friday. Meanwhile I didn’t finish the work I was supposed to have done for him because the perfectly excruciating piece of ersatz lit-crit I was editing expanded to fill all space—I’ll make a grandiose $360 for 30 hours of work on that thing, and the real truth is, it  probably took more than 30 hours to drag through. Between that, the nonpaying client’s work, and the Holy Week frenzy of singing, I haven’t been able to break loose enough time to work on the real estate course.

I feel pretty discouraged about the real estate scheme, because I kinda doubt that I’ll make any more at that than I do at my various other schemes, largely because I’m not much of a people person.

Consequently, a view of my financial future goes beyond “pretty” discouraging to “radically discouraging.”

Yesterday I asked myself if I might take a small drawdown from savings to give myself enough extra money that I could pay the bills and have just a little bit extra to spend on things like clothing, shoes, an occasional concert or visit to a museum, or maybe just not having to feel strapped after the car has to be fixed. Math not being a stronger point with me than people skills are, I had to think this through each step of the way.

First, Social Security covers less than half my expenses, which include a $734 payment toward the downtown albatross house. Teaching income is peanuts, and because it’s extremely irregular (I’m actually paid only 8 months out of 12, and for long stretches no two checks are the same), I put that into a money market account and then transfer a set amount to my checking account to cover expenses. Right now, the amount is $2,050 a month. It just covers expenses; in the summer, now that utility bills have gone up, it actually does not cover expenses (my winter bills are now almost as high as summer’s sky-high bills were two years ago). Nor does it cover expenses in a month like this one, when I get hit with a $450+ car repair bill. One out-of-routine expense will put me in the red, and “routine” does not include a meal in a restaurant, a hair styling, a trip to the botanical garden or a museum, a concert that I have to pay for, a day trip to a tourist attraction.

So the first question is, while I’m teaching seven sections a year, how much beyond teaching income do I need to pay my bills? Right now I’m pulling $930 a month from a long-term emergency savings fund (every month is an emergency when you’re permanently unemployed), which resides in the credit union making zip. Sooner or later, I’m going to be forced to buy a new car, at which point I will need that money to pay for it—seeing it drop by almost a thousand bucks a month makes me cringe.

Another way to look at this: presently I’m running in the red.

Retirement savings average about an 8 percent return, so a modest drawdown (up to about 4%) should not reduce principal over the long term. Can I draw down from retirement savings without having to eat into principal?

Another $500 a month would cover the rising bills (my homeowner’s just went up another $55) and give me enough extra to enjoy life in a modest way. It wouldn’t cover expenses during the summer or during the month-long winter break, when I have no income other than Social Security, but it would be better than nothing. What percent of my savings would I have to draw down to engineer a net $500/month increase?

Okayyyy…. Let’s think about that.

A gross drawdown of $20,592 a year is 3.69% of savings. That’s almost four percent (the amount money advisers suggest to make savings last for most of your remaining years—and based on family lifespans, I expect to live into my mid-90s). Almost four percent while I’m teaching the maximum allowable number of classes!

Holy God! Does that or does that not mean I will end up in freaking poverty when I can no longer dodder into a classroom? Speak to me, ô Oracle of Excel!

Right now I need $3,040 a month to cover everything (that amount can only go up, but let’s avert our eyes from that inconvenient truth).

Got that? A near-four percent drawdown will not allow me to cover my bills if I’m not teaching! That $530 shortfall x 12 months comes to $6,360 a year, the equivalent of 2.65 sections of freshman comp. What it means is that I will always be short of what I need to live on unless I teach forever, until I die.

Uh huh. Can you imagine a 95-year-old Ph.D. in English getting hired to teach roomsful of fractious 19-year-olds?

How much will I need to cover my bills if and when I can’t teach anymore?

Lovely. I will need over 5% of savings to live like an ascetic. And I hate living like this.

Having seen what happened to an acquaintance when she ran out of money at the end of her lifetime, however, I can assure you that I do not want to draw down more than 4% of retirement savings! Better you should shoot yourself than go through what that woman did—and she had friends running interference with the horror show for her. If you were all alone, like, say, me…you truly would be better off dead than old.

Most Americans would be better off dead than old, IMHO. That’s the nature of our society.

Oh well. Moving on.

So, suppose I cut the proposed pay increase from $500 a month to $250 a month? Then how much would I have to draw down?

Okay. I could increase the monthly budget by about $250 if I continue to teach 3 +3 +1 and draw a little over 3% from savings. That’s more reasonable. But…what happens when I can’t teach anymore????

Wow! To get by with just $250 added to my present “income” from savings after I can no longer teach, I will have to draw down almost 6 percent from my savings.

That’s assuming a 20% tax rate, which is about what I’m paying right now. I ran the figures at 15%; that made almost no difference in the amount I would have to draw down to survive. It’s sure unlikely taxes will ever go down. And you can be sure expenses will never go down. Matter of fact, that 6 percent drawdown does not account for inflation.

We’ve seen the vagaries of the economy: what goes up must come down. I lost $200,000 in the crash of the Bush economy. It’s pretty well come back over the past four years—only because ever since I was laid off I’ve struggled to avoid drawing  money from investments. But all it will take is one more (inevitable) market drop, and the amount I’ll need to take out of savings will be one hell of a lot more than 5.7 percent.

I’m screwed. Unless I die soon, screwed.

Author: funny

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19 Comments

  1. What would happen if: you told your son you couldn’t put quite as much into the shared house? I KNOW he doesn’t make that much; I KNOW he doesn’t want a roommate, but…what would happen? What would lowering your contribution by $100-$200 do?

    The 4% rule is for a 30 year retirement, i believe. As you get closer to 70, I think you can take a bit more out.

    I thought your sponsored posts were bringing in $800/month????? Doesn’t that make a dif?

    • @ frugal scholar: I did ask. He said he’d have to move out. We would then default on the house.

      Thirty years, hm? Well…That’s good. Probably one wouldn’t live much beyond 100. Though one dear friend was still kickin’, with all her marbles intact, at 104.

      Well, the current spate of monetization brought in $800 for two or three months. We’re back down to around $125 to $150 right now. I probably will draw down $4000 from the S-corp as salary and dividends this summer to get through the hotly expensive months. But I’ve already used two grand for this fancy computer I’m typing on right now; Tina has to be paid for her work, and we each pay various underlings to handle stuff we either don’t know how to do well or that we truly do NOT wanna do.

      That reminds me: PR lady. Must look in to hiring marketing underling. Possible good return on investment.

  2. My heart truly does go out to you but what if (and I think I asked you something similar to this before) you moved into a much smaller house/condo and even somewhere where you didn’t need a car. Your bills would be much lower. You have lots of equity in your house thanks to good foresight on your part.
    I will, I imagine, have to move from my present house to an appartment when I retire. The thought of this for me isn’t too awful; cheaper utilities, less cleaning and gardening and hopefully nearer town! I also will have more money in my pocket for the very things you talked about, theatre, concerts, trips etc

    • @ Ash: Given a choice between a cheap house in the old (dreary) part of Sun City and an apartment, I’ll take Sun City. I truly do hate apartment living. The best places around here cost upwards of $800 a month, and construction is so cheesy you’ll have $300+ power bills to heat and cool and 800-square-foot space, and you’ll enjoy (as I did, over the period of a year’s lease) the sound of the upstairs neighbor’s urine cascading into his toilet (to say nothing of his television, his stereo, and his pillow talk), the quacks and tweets of people’s car locks in the parking lot, and the wee-hours serenade from the boom boxes of morons who stop their cars in the parking lot and let the racket blast the neighbors for half an hour or more.

      My house doesn’t actually cost that much to operate: the desert landscaping requires minimal watering and upkeep, the place is reasonably easy for me to clean, and power, while high, is lower than most of my friends’, especially during the six or eight cool months. The big month-to-month expenses for me are taxes and insurance, followed by food, gasoline, and automobile upkeep. While I do crave to keep the beloved Dog Chariot running, it gets all of 18 mpg on a good day and these big repair bills are becoming routine. Over the long run I’d save money with a newer vehicle that gets better gas mileage.

  3. How in the world do you get an 8% return on retirement savings? Where/what are you invested in? I am getting 1% on CDs and minimal if not negative on a stock fund. Along the lines of the other comments, in order to survive it looks to me like you need to reduce expenses somehow. Roomate for son or you? Sell son’s house or have him refi to get you out of it. Drive car until it hits 200-250K miles or sell now and buy used, small compact car. Accept the fact that you must teach until you drop. You will not be alone in this. Many of us boomers will work until we drop. On a more positive note, buy a Groupon for a massage and consider it a mini vacation and then stop thinking about this!

    • @ Barb: My money is invested in stocks, bonds, mutual funds, REITs, and cash instruments. I do not have CDs because the return is pathetic. The IRA is professionally managed. My financial manager invests in blue-chip stocks and is pretty active in the way the money is allocated.

      If you’re getting a negative return on your stock fund, take a look at Vanguard’s Wellington fund. Of course, everybody’s investments tanked after the crash. But when there’s not an economic crisis happening, Wellington has done pretty well historically. When I was managing my non-tax-deferred investments myself, I had half the money divided between Vanguard’s Wellington and Windsor II funds and the other half in Vanguard’s Short-Term Corporate Bonds fund. They’ve changed the name of the latter but the symbol is still STC — you can look it up.

      But remember: I’m not an investment adviser. Caveat emptor: it’s important to look into these things and read the prospecti yourself.

  4. Ahhhhh, Funny. I’ve been reading you now for several years. Seems you feel hostage to your house (and that **** pool) and to the investment house.

    Maybe you SHOULD sell the investment house (rather than default on it!). That way your cash flow would improve, even if you do lose $$ on the house. iI you wait till after you are a real estate agent, you can keep the 3% commission yourself.

    • Real estate values are rising fast here now — especially in the price range of the investment house. Bidding wars are so furious that houses in the $100,000 to $200,000 range often get a dozen bids within a day or two of going on the market, and investors are quickly bidding up prices.

      It’s entirely possible that within three to five years M’hijito’s house will once again be worth what we owe on it. If we wait, we could come out OK, without having to do a short sale or strategic default. In any event, he could in theory take on a little more of the mortgage, if I’m forced to quit my job.

      I’m holding my own for the time being, if you count the money that’s coming in to the S-corp. I’ve been plowing CEDesk revenues back into the business, but by this summer there should be enough to carry me through most of the expensive hot season. I just need to make myself use the money for living, rather than for buying capital equipment and paying subcontractors.

  5. I know that our situations are different — you were forced into reduced income and I chose to reduce my income so that I could have the time/energy to live as I prefer. I also live in a somewhat blighted (therefore, lower cost) rural area and not a city, but I know that it is possible to live on a lot less than your current income. You just have to give up on the idea of living the boomer lifestyle we all thought would last forever. I heat and cool only one room at a time, not the whole house. I drive only to work and back and one additional “errand” trip per week. I don’t buy meat. I don’t buy alcohol. (And believe me, not because I don’t like’em!) I have just enough “good” clothes for something different to wear to work each day of the week, the rest of the time I’m in jeans and Goodwill T-shirts. I just traded in my 10 yo 186,000 vehicle for a 2 yo Versa — a nice little car that will get me from here to there, but certainly no Dog Chariot! (Although my 3 dogs seem to like it fine.)

    I don’t mean to be preachy, but if you read back through your posts you might see that you really spend a lot on “discretionary” items — and I understand that we all like to buy pretty new things — but if you had to, you could not buy them.

    I’m going to make the suggestion that all the financial blogs make — for one week write down everything you spend money on and see where your money goes, then try going for a week without spending any money — fill up your car ahead of time and eat out of what is already in your house.

    I also urge you to get rid of both those houses!!!

    You can do this!! and believe me, not having to teach those classes would be worth anything you have to give up.

    • Those are all excellent strategies.

      I do all those things except abstaining from alcohol (though I do quit buying it every now and again, for two- or three-month periods) and cooling just one room at a time. I can’t imagine how you would cool one room at a time, in 118-degree heat, with a central AC system — the only way you could do it would be to punch holes in the walls and install room air conditioners, which would do serious harm to the property value. I’m not willing to lose that kind of money to save a few bucks. I actually looked in to installing a room AC in the bedroom but after consultation with contractors and a real estate agent decided it was a bad idea.

      My area borders an increasingly blighted neighborhood of slum apartments. That’s why the houses here are affordable. I would have to pay $50,000 to $100,000 more than I can gross (not net, after closing costs!) on the sale of my house to get into a smaller house of lesser quality in a close-in area. Believe me: I’ve looked. I’ve worn out real estate agents looking. The only choice, really, would be to move out to Sun City or to the far East Valley, neither of which are areas where I want to live. My life is in the central core of the city, and I intend to hang onto it as long as I can.

      Meanwhile: yes, I also no longer eat meat. There’s still some in the freezer, but once the stockpile is gone, meat will no longer be part of my diet. And I also avoid driving as much as possible. I, too, do all my grocery and household shopping at stores that are on the way between the campus and my house. I do not drive out of my way to buy much of anything anymore, because I can’t afford the gas or the wear & tear on the car. I do not think my lifestyle can be described as some sort of extravagant “boomer” thing. My friends will not come into my home, because it’s too uncomfortable — hot in the summer and cold as the tomb in the winter. Most people expect to have their homes heated to about 70 degrees in the winter, and most people here expect the interior of a house to be down around 80 degrees in the summer. That is not possible for me, and so I not only do without a comfortable environment, I do without entertaining friends in my home.

      The mechanic believes my car will run at least until 150,000 and probably until 200,000 miles; but sooner or later it will have to be replaced. Fortunately my dog is smaller than the animal I owned back in AD 2000, and so she can fit in a compact vehicle. But by then she’ll probably be dead and gone, too.

      Would you seriously evict your only child from his home? After you had talked him into buying the house, after he had invested more than he could afford in the property, after he had put up with months of disruptive and frustrating renovation projects, and after he had made his home there? Would you ask him to wreck his credit rating and put future job searches at risk (he works in a branch the financial industry) to get you out from under a deal you got him into? Really?

      I can’t bring myself to reneg on that promise, not as long as I can possibly hold up my end of it. There’s a limit. At some point “frugality” becomes abuse…that’s where it needs to stop.

  6. I can see how you and your son are both stuck for the time being but there certainly seems light at the end of the tunnel with respect to your son’s house. At least you have a sense of humour most of the time about it all!

  7. Ah, well. That does put a different light on things. It sounded like his attitude was “if I have to pay any more, I’ll just walk off and leave you with it.” I must have misunderstood. (No chance the two of you could live in the same house?? — no, that doesn’t sound like a good idea!)

    I live in an old, mostly uninsulated house in the hot, humid South. It does have an old (and expensive) central AC that I keep at 88 in summer (to keep too much mildew from growing) and 50 in winter (to keep the pipes from freezing.) I know what you mean about not having company! However, I did stick an inexpensive window unit in the bedroom window — makes a world of difference to have one genuinely cool place. I guess you have windows that won’t take a window unit? (Of course, “split” central systems are available if you are replacing the whole thing — God forbid!)

    I do still urge you to track your spending for a while — it is amazing what you learn about yourself that way!!

    Good luck!

    • Hmmm… In the South, I can see how a room AC would be a pretty good idea. It might draw the humidity out of a single room and keep that room a lot more comfortable.

      Jeez. If there’s any way you can swing it, think about changing out that AC unit. The new 14-seer units are SO much more effective that some people in these parts are seeing bills comparable to the extremely cheap swamp coolers we use during the two dryer months of the summer. If you’re going to stay in the house, it might be worth the cost.

      Yes. My bedroom has only a pair of Arcadia doors–no window. The scheme was to cut a hole in the north-facing wall and install the AC there, so it would blow right toward the bed. 😀 Sounded good, eh?

  8. You sound a little panicky – who wouldn’t be faced with the prospect of teaching until they are 90? Still, I think you are in better shape than you think. The investment house isn’t forever, right? You can teach for the next several years (or do something else more lucrative!), and when the investment house finally sells. And when you get a bit older you will probably be sick of all the work your current house requires, and you can sell and move into a smaller more practical space. With the way prices are back on the rise in Phoenix, you may even get out with some extra cash. So you don’t have to work *forever*, just until you get rid of your two houses. I should have such problems! Is renting the investment house a possibility? Your son could move in with you until he finishes his studies, and the rental cash could go a long way towards the mortgage. Don’t know if that would work for you. Here in New England renting is the norm. It seems like in other parts of the country most people buy, so its only the really problematic people who rent. Your son would still have a home, and you both would have a smaller financial burden….

    • @ marzy doats: OMG! That was my father’s favorite Confuse-A-Kid jingle!! Marezydoats an’ dozeydoats an’ lillambsydivey! 😀

      Yes, it’s true that M’hijito’s plan was to hang onto the house for five to ten years and then move back to San Francisco. What he didn’t plan on was a recession-that-is-not-depression that would essentially foreclose on any chance to go back to the City and trap him, like the LaBrea Tar Pit, in a dead-end job.

      Another fact is, the house is really QUITE cute! Although it’s close to an even slummier district than the tenements near my place, the neighborhood itself is pleasant enough. I would not object too much to living in it myself. It’s only 1300 square feet, it has a nice, big, quiet yard that M’hijito has transformed into a lovely xeric garden (the man is amazing with plants), it’s within walking distance of my favorite gourmet grocer AND of a Costco and a Target, it’s within walking distance of the lightrail line. It still needs some expensive fixup: the cabinets we were persuaded to install by the unlicensed contractor we stupidly hired at the outset (he was later replaced by a real contractor) are junk; he did a bad job on the countertops and they need to be replaced; and the ductwork in the attic needs to be replaced or sealed. The antique French doors I snabbed out of a fancy house that was being demolished need to be replaced with custom (they’re HUGE) double-paned sliders or French doors, the front door needs to be replaced, and the old cheesy (but atmospheric) 1950s windows need to be replaced with energy-efficient windows. The garage needs some refurbishing and would benefit from built-in cabinetry; ditto the laundry area. I’d estimate it needs about $20,000 worth of work.

      On the other hand, if I’m a licensed real estate agent, I can list my own house, thereby saving approximately $14,100 on the sales commission. So, moving into that cute little cottage would really cost me only about $6,000 in upgrades. So, one option is simply to wait until he’s ready to move into the next phase of his life (like, maybe, he locates and marries the Mother of My Grandchildren????), then sell this house and move into his. To my mind, that’s not an unattractive option, as I’m pretty sure that area will gentrify within the next 10 years.

  9. A couple of thoughts – if a lurker can speak up…have you looked into teaching for an online University like Phoenix, or even brick and mortar schools that also have online courses? Also, subsidized housing (apartments) in some parts of the country are quite nice and of course based on your income and very affordable. Google Mills Construction in Brookings South Dakota to get an idea. I know, I know, who wants to live in South Dakota – but this Californian loves it here. Life is slower, much less expensive, and safer. Just a thought. (Don’t go to North Dakota, it’s COLD up there!) One more, have you looked into the online tudoring sites? Seems like last time I looked at them they were paying decently… Good luck!

  10. @ All: My son has a LOT of money in the house, not least of which is the contents of a Roth IRA he was allowed to cash out to use to buy his first home. He used this to help finance the down payment. Subsequently he paid for such items as a new air conditioner/heater (check prices, but hang onto your hat while you’re doing it), restoration of the swamp cooler, the great Rat down the Drain Adventure, and many other costs. Walking would cost him a lot of cash, and IMHO would be, moral issues aside, radically unfair to him.

    Alas, $558,000 in IRAs and brokerage accounts (not counting the substantial emergency fund at the credit union) do not qualified for subsidized housing make one. (LOL! Now THERE’S a sentence!) Seriously: just because I think I want to keep that fund intact so I’ll have something to get me through my extreme dotage does not mean the government (or anyone else) thinks I’m eligible for subsidization. I would be required to spend it all down before that could happen.

    Now…I must say, one could live high off the hog in Tahiti for a year or two on that money. And what the heck? With all those mosquito bites, one could die of whatever disease Tahitian mosquitoes carry before one had to return to the US. But if one survived, one could certainly beg for subsidization after two or three years of high living. I wish that were my style.

    If $2400/semester amounts to subminimum wage (which it decidedly does), you don’t even want to KNOW what pay from the UofP adds up to (or down to). Tina is doing those gigs. The pay is sub-sub-laughable. One could teach online for the District’s 100% online institution, Rio Salado Community College; pay there is based on the number of students who sign up for your class, and students are allowed to start and end any time they please. Imagine the shuffle (the time-consuming shuffle!) entailed in keeping track of THAT circus! And if you’re teaching for Rio Salado, you’re not allowed to teach in any other college in the district!

    Adjunct pay is ridiculous. However, it should be noted that the Maricopa County Community College District actually pays better than most colleges and universities for part-time contract teaching. Got it? One is lucky to earn $2,400 for 16 weeks of work!!!!

  11. I have Vanguard funds, stock index, balance and bond funds. I checked into Wellington. Not sure it’s all that different than my index stock fund and bond funds? What do you see as the difference? I could easily move some money around.
    On the expense note, maybe a roommate would be in order? I know it’s not a great idea, but I believe it is more common now even for adults. Me, I’d rather move to a trailer. I realize you have lots of constraints as we all do that make some of the ideas not workable.

  12. @ Barb: I compared Wellington & Windsor with the VG 500 Index fund. To my untutored (!!!!!) eye, it appeared that Wellington did slightly better overall, and that it didn’t seem to fall as far during the depths of the recession.

    Trailer sounds about 147.89665% better than a roommate. I have had roommates, and now that part of my life is behind me. Once and for all.

    This is why I would like to delay spending my savings until advanced dotage… One of the several unhappy events that happened to my impoverished acquaintance was that when she was stuck into a charity care home, they forced her to room with someone that she didn’t know and didn’t want to be around. Just what you need when you’re old and sick and miss your little cottage with its gardens and its comfortable privacy.