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Budgeting for a Windfall

Things are looking up. The departmental chair has assigned me not one but two summer courses, God bless him! Even though it appears the magazine writing course will not make, that’s still seven sections for 2011 (assuming three sections materialize in the fall). Pay for seven sections amounts to $16,800, or a net of $13,272. We await the credit union’s offer in the pending renegotiation of the upside-down mortgage on the house M’hijito and I naively got ourselves into, but it can’t be any worse than we were paying before we got the loan modification at the time I was laid off. In the worst-case scenario, I would owe $9,600 in 2010. My teaching income is the sole source now of cash with which to pay my share of the payments. Think of that: $13,272 − $9,600 = $3,672, a nice little windfall!

What on earth am I going to do with $3,672?

Seriously. After a year of living frugally, I actually had to think about how I could spend an extra thirty-seven hundred bucks.

The obvious, of course, is stick it in savings! But in February another unpaid sick-leave reimbursement will come in. It will fund my Roth IRA with about $1,650 to spare; what I can’t put into the Roth will go into the brokerage fund. The net represents 31 percent of net 2011 earned income. So I don’t feel any great urgency to stash the the cash I’ve earned by actually working.

Au contraire. It’s time for me to have a life.

There are a few things I’d like to spend some money on. For example: air conditioning. I do not ever want to have to spend another summer sweltering inside my home with the thermostat turned up so high the activity of tapping on a computer keyboard breaks a sweat.

Then: water. In the summer of 2009, as some of you may recall, I kept a mostly unsuccessful container garden under the orange trees. Because plants in pots have to be watered every day and because I could afford to be lazy while I had a job, I would carry the hose to the pots and set the timer for ten or fifteen minutes…every single morning. The container garden was a fail, but the water bill was cause for celebration down at the city water & sewer department: $214 in July 2009! That’s about $90 over my water budget.

The $214 water bill, as it develops, produced nothing that summer, but it did buy a fantastic bumper crop of glorious oranges. By last February the trees were loaded with big, juicy fruit as sweet as candy.

Last July’s water bill was a far more  modest $96.10. I shut off the drip watering system, dragged the hose to the landscape plants, let the xeric planting in front go without, and most certainly did not indulge in container gardening. Or much of any other kind of gardening, come to think of it.

The result: Tiny little parched fruit on the orange trees. This spring’s crop, what there is of it, is hardly usable.

The fruit took a beating from the hail storm. About a third of the oranges dropped off the trees; maybe half the surviving fruit was all bruised up, left with brown scars on the orange skins. The fruit that managed to cling to the branches is stunted—no larger than a tennis ball, and many pieces smaller than that. While most of the surviving pieces are reasonably juicy, they’re not very sweet. Some are almost flavorless.

Obviously, orange trees need a lot of water to thrive. And since I adore those oranges, I want them to thrive.

The highest electric bill of last summer was $239.08, which was $14 over budget. It was hotter than the hubs of Hades in my house—truly uncomfortable, enough to start me thinking about moving away from Arizona. Supposedly the new hyper-efficient air conditioning will hold the power bills down a bit this year.

Right. I’ll believe that when I see it. The first power bill with that unit in place came to $85.64; the January 2010 bill was $104.34. Difference was only twenty bucks…but then, we didn’t have a hard frost last winter. Until the summer bills come in, we can safely assume the new Goodman will cost about as much to operate as the old Goettl unit did.

So, I figure that to cool the house to a reasonably comfortable state (say, no hotter than 76 or 78 degrees) and to irrigate those citrus trees adequately will take about an extra $300 per month.

Okay. That’s $900 for the three hottest months of the year.

Now. I need a pair of shoes, and I wish to shed the Costco jeans and start wearing some decent clothes. That’ll be $150 for one new pair of pain-frees and let’s say $200 per shopping spree in the midsummer and post-Christmas 2011 sales: $150 + $400 = $550 to upgrade the wardrobe.

The house needs a lot of work. To repair the foundation crack on the west side, repaint the sun-blasted gables, touch up eroded exterior paint, paint the office door (a job that never did get done!), spray-paint the grungy interior of the garage, and build a French drain to direct ponding rainwater water away from the patio will cost about $500.

I need a new pair of progressive shades in the frame style I favor, which I’ve already ordered. Price tag: $720.

And this last week I made a surprising discovery: going to concerts makes me feel happy. Yes. Very happy. Music tameth the neurotic beast. A week of attending Bach concerts every second day left me feeling an unaccustomed calm, unruffled by the usual minor aggravations. As you can imagine, I wish to continue this.

Season tickets to chamber music are $200 for eight concerts, which works out to a fairly reasonable $25 per performance. When you buy them one at a time, it’s $30 apiece. The Downtown Chamber Series is only $10, but they don’t do many performances. The Phoenix Chorale is doing four performances this season plus several special events; prices are $5 less for us old bats, and you can attend their rehearsals for free. The Louise Kerr Cultural Center has a jazz series; price is about the same. The Desert Botanical Garden has its “Music in the Garden” series, mostly jazz. Plus the community college and the university music departments mount performances all the time, at very reasonable prices. So there’s a lot going on. Five hundred dollars would buy two series and entry to a number of miscellaneous events.

Soooo…. What would this spend it or bust budget look like?

Holy mackerel! I can’t even think up enough ways to spend the extra money!

Whence this spectacular new lucre? Well, it’s happening because I finally gave up trying to avoid drawing down retirement savings. The nest egg recovered pretty well in 2010, to everyone’s amazement. Really, I don’t think the boys down at Stellar believed, in their heart of hearts, that the market would come back the way it has. On their advice, I tried my level best to get by on just Social Security and the piddling $14,160 that Social Security allowed me to earn from teaching last year. That was difficult; it just wasn’t enough for me to live on.

With happy days here again (except for the 17 percent of Americans who remain unemployed or underemployed, myself among them), we’ve changed the strategy. Right now I’m spending down the post-tax savings I had accrued before GDU laid me off, to the tune of about $1,100 a month. This should last until September, at which point I’ll start a 3 percent drawdown from retirement savings. That plus Social Security amounts to just enough to meet my base monthly needs. So, everything I earn teaching can be used to meet expenses beyond bare survival.

My initial thought was that the teaching income—virtually all of it—would go to pay the mortgage on the downtown house. And that would have been so under the onerous earnings limitation imposed by Social Security in 2010.

However, in 2011, I’m free at last of the earnings limit.  That allows me to take on two extra courses, about the max the community colleges will hire me to teach. Net income from two extra courses is almost $3,800.

If a miracle happens and the magazine-writing course makes, then I would net about $5,570 more than needed to pay the mortgage.

It’s a miracle!

Now, if I saved the money instead of spending it on myself, in three years I’d have enough to buy a brand-new car in cash, despite the low trade-in value of a decade-old gas-guzzling minivan.

But I figure…what the hell. Since I can’t dream up enough ways to diddle it all away, unspent cash is going to accrue in savings willy-nilly. My car has 100,000 miles on it. The mechanic par extraordinaire thinks it will run to 150,000 miles. That’s five more years. By then, we should have much better choices of fuel-efficient vehicles, and some of them will be a year or two old, available at post-depreciation prices. Hang onto the Dog Chariot until it’s ready to fall apart, and I’ll only have to buy one more car during my remaining lifetime. How to go about paying for this new vehicle is a problem that will have to solve itself when the time comes.

As for how we’ll cover the cost of the mortgage when I can no longer work—about four years from now, by my estimate—fifteen or twenty grand in savings would delay but not solve that problem. The mortgage also is something we’ll have to deal with in due time.

Image: Mitsubishi Electric Car. Tony Hisgett. Creative Commons Attribution 2.0 Generic license.

18 thoughts on “Budgeting for a Windfall”

  1. Congrats on the windfall. The only thing in your list that I did a double take on was spending $720 on one pair of sunglasses. That’s unfathomable to me but I’ll trust that you have your reasons and feel that spending roughly 20% of your windfall on that one item is worth it to you. Me, I’d probably pick one of the following: do some landscaping, buy a computer, buy a TV, replace some bathroom and kitchen sinks, put new glass block windows in the basement.

    Either way, good luck. Just make sure you’re not counting on the market continuing to go up. I’ve seen many warnings that they feel it’s overvalued and we could be in for a correction. I’d hate to see a post a few months from now lamenting that the $3,600 would have come in handy because of a bunch of investment losses that put on the squeeze. Plan for the worst, I always say 🙂

  2. @ Money Beagle: After a fiasco with a couple pairs of low-priced glasses, I discovered that the only way to get a pair of progressives adequate to read a music score and see the choir director (and incidentally, to read a newspaper or edit ARCs) is, of all things, to pay for them. Last year I paid $720 for a good pair of progressives in a high-quality frame and discovered that for the first time in literally years, I could see.

    In Arizona, you need a decent pair of sunglasses. You need them all year round, really, but especially in the summer, when the glare off the pavement is blinding. My sunglasses are many years old — the prescription is way out of date. The left lens keeps popping out (once it actually hit me in the eye, and my the eye was open at the time…); no glasses technician has been able to figure out why it does that or how to fix it. So, now that I’ve got some extra money, I’m going right straight back to the outfit that sold me the $720 progressives to get another pair, only with dark lenses.

    @ FB: 🙂 I’m going to

    a) buy a new pair of sunglasses at an outrageous price;
    b) hire the handyman to do $500 worth of repairs and maintenance on the house;
    c) run the air-conditioning full-blast throughout June, July, and August;
    d) deep-water the orange trees regularly during the hot months;
    e) buy about $550 worth of shoes and clothing over the next year; and
    f) start attending concerts and other cultural activities that occur here.

    If anything is left from the “windfall” after that, it will go into savings toward next year’s mortgage bills.

  3. @ frugalscholar: Vacations are pretty much out of the question. Really, I “need” (if need is the word) these things more than I need to gad around the country. I’ve already traveled and lived all over the world. I’ve come to truly loathe airplane travel — as long as my son is within driving distance, you couldn’t get me on a plane for love nor money.

    And I live in a resort destination — people pay richly to come here. Why should I go somewhere else?

  4. I came back to read again, b/c this is such a happy post. I didn’t mean vacation involving a plane–more like that trip you took to the mountains last summer.

    Also, since you are 65 (?) and in a very low bracket, is a Roth IRA even necessary? I’m curious to hear what your money guy thinks.

  5. @ frugalscholar: The Roth has two benefits, even for us old bats:

    1) You don’t pay taxes on investment returns; and
    2) It can be passed to your heirs with a great deal less hassle and expense.

    A regular IRA is fraught with pitfalls for your heirs, and they will receive a fraction of the amount in an IRA’s investments. My son will be lucky to retrieve half of the money in my regular IRA, which, unfortunately, holds the bulk of my savings.

    I may take a trip or two around the state. If a thousand bucks or so really survives the depredations of this year’s various expenses, I even could go to Santa Fe. Trouble is, every time I go to Sta Fe, I want to move there permanently. And no one who’s not a rock star, a bank executive, or a technomagnate can afford that.

  6. Your post really made my day. I’m all about investing and being frugal, but sometimes it can be helpful to enjoy the fruits of your labor (orange pun intended).

    In regards to your oranges, you might do a little research on how much water they need. From what I’ve found, contrary to what would make logical sense, apparently citrus trees don’t like their roots to stay wet. So, what seems like parched fruit could be the result of just the opposite. I don’t know, though; you might just check into it. I have a nice garden, but living in Kansas doesn’t lend itself to much citrus tree experience. 😉

    Good luck with your oranges, and congrats on your windfall. 🙂

  7. What a fun read. I too, will sit with a paper and pencil and carefully parse out any windfalls that come our way. The planning is almost as much fun as the actual spending!!!!!

    Sometimes an increase in income just means upgrading our very frugal lifestyle. For instance I am now encouraging husband to buy his favorite bread at Costco after a lifetime of buying at the day old bread store. (Rolls and buns still come from day old bread store.) We also finally upgraded our razor blades, from the bottom of the barrel cheapo brands to around the middle of the barrel.

    Ain’t life good?

  8. It is so much fun to think about spending a windfall like that! When I found out what my bonus was to about the time I got paid, I thought of at least 7 different variations of what I was going to do with it!

    I like your % breakdown between responsible and practical.

  9. Back again (sorry). Are you perchance eligible for the Saver’s Credit? That’s a tax credit for lower-income types–you get back a percentage of money put in an IRA.

    I’m sure you qualify for something based on income. Perhaps it’s not available to those collecting Soc Security. Check it out!

  10. 1) I agree with the acquisition of the progressive bifocals–damn the cost. I can see with progressive bifocals!
    2) Can you use water from shower or tub for orange trees? Surely, there is free water or already-paid-for water you can reuse. If rain is causing problems in one part of the yard, can the water be diverted? How about investing in a rain barrel and catch the free water instead of buying more water? Mulch under the orange trees would help retain moisture.
    3) You are practicing practical parsimony.

  11. @ frugalscholar: That’s an interesting thought…I’ll look into it. I kinda doubt I’d be considered low-income; even if you didn’t count the half-million bucks in retirement savings (after all, it does have to last another 30 years or so), the combined income from Social Security and seven sections of freshman comp comes to almost $32,000 gross. In Arizona, that’s not considered low-income.

    @ Practical Parsimony: About (3), I’m flattered!!

    Well, I tried diverting the laundry water into the yard. Heeeee! That was quite the fiasco! It backed up into the washer and made an amazing mess, even though I caught it early.

    Our plan is to divert the ponding rainwater, using a perforated underground pipe, over to the lemon tree and its pal, a long-suffering queen palm. The crushed granite that is the desert landscaping in fact forms a type of mulch. The big issue there is that the water basins aren’t large enough. I need to bully or bribe Gerardo to dig out water basins wide enough to bring the city water that comes out of the bubblers out to the drip line. That will help a lot, I think. Gerardo’s not thrilled at the prospect of messing with the desert landscaping; what with the language issue, I think he worries that he (or more likely, one of his flunkies) will butch it up through simple misunderstanding, and so he resists requests to change things around.

    It’s a rare season that brings enough rain to fill a barrel. To accomplish that, I’d need to install gutters. Gutters in these parts are problematic: they fill up quickly with leaves, which makes quite the mess to clean out, and more to the point, they foster dry rot in the eaves. It costs an arm & a leg to have a carpenter pull off fasciaboard and replace it, and the type of lumber used to build the fascias on these forty-year-old houses is no longer being milled–you have to special-order pieces to match it.

    About the best I’ve been able to do with rainwater collection is a) to use it to moisten the compost (compost bugs love rain) and b) to collect it in smaller containers as it pours off the eaves, when then can be stored to water the potted plants for the next two or three weeks.

  12. @ E. Murphy: LOL! Nothing like a half-way decent razor blade to make a man’s day!

    Are you buying a brand name bread at Costco, or have you tried the loaves they bake in the store? Around here, they make a couple of pretty incredible baguette-style loaves. The whole wheat is to die for, and being the retrograde reprobate I am, I persist in buying their white Italian-style loaf.

    For a long time, I made my own — it’s a lot easier than it sounds. Then one day out of total laziness I bought a Costco loaf and was amazed to discover it was better than my home-baked loaf!!! How they’re doing that, I can’t imagine, but they do make one mean loaf of bread.

  13. @ Jessica: Oranges, lemons, and grapefruit are surprisingly xeric. They can survive for a long time on rather little water, even in Arizona’s scorching climate. However, when they’re underwatered, they may produce less than ideal fruit, and over time they get pretty gnarly and withered. To thrive here, they need to be flood-irrigated about every two weeks in the summer; about once a month in the winter.

    It kinda looks like they really resent getting hailed on! 😀

  14. About the bread store, we have a Thrift Bread Store in my town. The bread usually still has at least three days until expiration, most of the time it is still five days from expiration date. At one time I just refused to eat frozen bread. Then, as I say, “I grew up.” Now, I buy bread that is whole grain, no preservatives, no hfcs, and still pay $.99/loaf, and that includes any kind of buns, rolls, cinnamon bread. I buy it and freeze it.This bread is $2.89 or higher with the same date but on the store shelf. Yes, I do appreciate specialty or artisan breads. But, this is cheap and good. I don.t each much bread, anyway.

  15. @ frugalscholar: No kidding?? Well, absolutely I’ll ask the new accountant about that. She seems to have her act somewhat more together than the lawyer, so this is something she should know about. Thanks for the lead!

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