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Personal Finance

Turning Freshman Comp into Personal Finance 101

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{Cackle!} Tina came up with a great idea for the transformation my English 102 sections will have to make, come next spring: give them, as their overarching writing theme, personal finance.

How obvious is that, anyway?

Old-timers here know that, to avoid having to read their ungodly clichéd recycled high-school senior English papers (“Why Marijuana Should Be Legalized”…“True Beauty Is Inner Beauty”…“The Drinking Age Should Be Lowered to 18”…gaaaaahhhhh!), I’ve taken to providing defined subjects for my stoonts to write about. Last year I went further than that: I actually assigned specific topics for each and every paper, requiring me to dream up several hundred reasonably focused essay themes.

Although that approach has some advantages, it was a time-consuming pain in the butt, and it had the disadvantage of not giving them a chance to learn how to frame and focus a workable essay topic. This semester I came up with a new theme—Public Education in America—and established four broad subjects within that theme. Each classmate will be assigned one of those topics to cover for all of the required papers, but they’ll have to come up with their own specific theses. Because it’s a new idea, and because it’s a TRULY gigantic pain in the ass to build a course around a preset theme, I applied both to my Eng. 101 and my Eng. 102 classes.

That’s fine for the nonce, but my 101 students tend to follow me into 102. So come spring, I’ll need a new theme for the 102 sections.

Personal finance. Great idea, isn’t it? How often have we PF bloggers bemoaned the presumed financial ignorance of our young pups? IMHO, it remains to be seen if that’s real, since the Millenials are now being called “the cheapest generation.” Frankly, I think a lot of the kids who show up in the community colleges are pretty savvy financially. Most of them are working their way through, and when asked “what on earth are you doing here?” they’ll often say they’re at the junior college to get the gen-ed requirements and prereqs for their major out of the way before they move on to a more expensive four-year school. The state universities here—especially the Great Desert University—have jacked up tuition so high that any freshman or sophomore with an ounce of common sense has been driven away.

More’s the pity for GDU: now the kids with common sense are in my classes! And since they’re intensely interested in issues like student debt, controlling the costs of college and setting themselves up as young adults, I think they’ll turn on to the PF topic.

So…what say you? They’ll need at least four broad subtopics to begin with. One of them, obviously, could be “Debt and the Modern Student” or some such thing. Within the broad theme of personal finance, what specific subjects can I ask them to write about? Check out the format for this approach at the course website. They get four topics on which to write (and are assigned to groups to give each other some moral support and to present discussion panels on their topics). These are listed in the right-hand sidebar, with a bunch of links intended as kick-off points for research. All of the 102 essays are source-based (i.e., research papers). What topics would you like the next generation to study about personal finance?

Is That Light a Will o’ the Wisp? Or a Train at the End of the Tunnel?

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Real estate is definitely starting to wake up around here, thanks to the influx of Canadian and Chinese investors. Everyone thinks the market is improving and will continue to rise. In Phoenix, the inventory of houses for sale has dropped by 42.1% and the median price has risen by 34.5%, with both indicators trending positive at the end of March. Unemployment here appears to be dropping; in January it fell .3 percentage points to 8.7%—not great, but better than a continuing rise. Last night the instructor of my new real estate class remarked that the people who will be taking the licensing exam at the end of this spring or early next fall will be in an excellent position to start working.

Moi, I remain skeptical. My mother got a real estate license in southern California, back when I was in high school. She never made a penny at it. However…she didn’t work at it full time, and she knew little about marketing or business practices. Though I don’t know much, I sure know more about it than she did. And of course, she had my father and so didn’t have to earn a living; I’m pushed by an element of desperation.

Exactly how desperate that element is remains to be seen.

Last night I was noodling with the numbers and realized that if I were to take a 4% drawdown now, rather than continuing to put off drawing down retirement savings until I really can’t work anymore, I could live in reasonable comfort. Actually, there are several ways I could bring enough money into the house to restore something like a middle-class lifestyle. Each has its problems. But it could be done.

One is to draw down 4% from savings.

Because of the mortgage on the downtown house, I’d still have to teach. But not much. The amount I’d need to come up with annually, above and beyond the drawdown plus Social Security, would be $4,400. That’s 1.85 courses per year, a huge improvement on 3 +3 + 1. Since the online magazine writing course is now well established and drawing enough students to make every semester, it would mean I’d never have to go into a physical classroom again. And I’d never have to read another barfiferous fresman comp essay again.

Drawback: it wouldn’t improve my financial situation. I’d still have to pinch pennies and often would run unnervingly in the red.

A second strategy is to take a drawdown but continue to teach composition courses.

I compared my last GDU paycheck, in the fall of 2009, with what I’m making now. One regular month’s net pay came to $3,170. Today, my infinitely pared-back, rock-bottom expenses come to $3044 a month. So if I could somehow bring monthly  net income back to where it was in 2009, I could cover my living costs and pay my share of the mortgage. A drawdown of 4% added to Social Security would give me $2,674 a month, a $496 monthly shortfall, or $5,952 a year.

To make up the shortfall, I’d have to teach 3.1 sections a year—much better than three a semester plus one in the summer.

This scheme—start taking a 4% drawdown now (not later) and make up the difference by teaching (but teaching a lot less)—presents some major drawbacks.

1. I would have to teach. And I don’t want to. Nor will I be able to do so for the rest of my life, unless I drop dead soon.
2. I’d have to marshal every penny in savings. It would leave me nothing to buy a new car, and keeping my 12-year-old vehicle running is starting to cost more than I can afford.
3. It would do nothing to improve my penurious  lifestyle. I’m sick of pinching pennies.

If I taught 2 & 2, I’d net an average $3,314 a month. That would at least give a little wriggle room, but it doesn’t erase the problem that I need a newer vehicle.

Another possibility is to earn a rather small amount in another job—something in the real estate industry is what I have in mind—continue to teach while I can, and not take a drawdown.

As we noted the other day, my friend JS says he earns $200,000 a year selling real estate. That’s in the present supposedly peakèd market! Now, he’s been at it for 10 years, he has an MBA, and he’s a very fine marketer. However, a tiny fraction of that, just $30,000, would suffice to support me, if I kept on teaching—not unfeasible given that I’ve managed to reduce teaching to a minimal workload. Let’s assume I netted $15,000 after taxes and expenses:

That’s teaching three sections a semester (one of which is the online magazine writing course, a piece of cake), and nothing in the summer.

The result is more than I earned at the Great Desert University. It would be a bitch of a lot of work, at least until I could develop a business to the point where I could drop the teaching. But it would return my income to its former glory.

There’s a third alternative: take a 4% drawdown, net 15 grand in working in a real estate office, and don’t teach:

This would provide a monthly net of $3,924, significantly more than GDU was paying me. If I continued to keep an iron grip on spending, it would be enough to buy a car, which I’d have to do anyway if I were hauling prospects around to look at real estate.

And finally, a fourth possibility: continue to teach two sections a semester (only one of which would be in the classroom) while taking a drawdown and hustling a net 15 grand in the proposed other endeavor.

In this scenario, I would net $4,564 a month, more than I’ve ever earned in my entire life. It would be a lot of work. However, two sections a semester would be relatively easy, since only one would be a composition course (work for the online course is now minimal, since I have that down to a template).

The disadvantage to pulling down savings now is huge: it could mean I will outlive my savings. Women in my family have lived into their mid-90s…and they were freaking Christian Scientists! They never saw a doctor in their lives. Given decent medical care (assuming I can get it), I might live longer than that. With inflation forcing me to take larger cuts of savings, I certainly could deplete my savings before I die. And that is a real nasty prospect, given what we know of elder care in this country. One needs a large chunk of money at the end of life to avoid dying in hideous squalor, suffering, and  neglect.

The disadvantages of teaching while trying to build a new career are large, too. I figure I’ll have to hang onto two or three sections while I’m getting started, in order to guarantee enough income to pay my bills. But if the real estate plan starts to fly, then I would want to quit teaching. The question is, would teaching in that first year or two or three be such a distraction that I couldn’t make the real estate idea work?

It certainly could be. Even though I’m not putting many hours into it now, even a few hours a week could be quite a hindrance. I may need all my energy and attention to build a new business.

None of the four schemes is ideal. What would have been ideal would have been to have kept my GDU job until I was 70, by which time I would have accrued enough in savings to support me and my son would be in a position either to sell the downtown house, as planned, or at least take on most or all of the mortgage payment.

Knowing that “ideal” will never happen again, I need to figure out how to make a choice among four less than perfect strategies to keep a roof over my head, food on my table, and wheels under my feet.

2102 New Year’s Retrospective & Prospective

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Even before New Year’s Day, over at My Journey to Millions Evan was already reflecting on his level of success for his 2011 financial, lifestyle, and career goals. Meanwhile, JD at Get Rich Slowly was planning for a future in which he expects his income may drop. And the Digerati Life’s proprietor, Silicon Valley Blogger, looks back over a year in which she improved her blogging business, which already was earning enough to substitute for a day job.

Last year my New Year’s resolution was to disconnect from the computer and build a healthier lifestyle.

Well, I failed miserably at that! Not only have I not managed to get away from the computer, I probably spend more time in front of the thing now than I did in 2010. I’m two pounds fatter and my back is freezing up. Several of the roses died of neglect. The pool is getting turquoise and black spots from my having used copper-spiked chlorine tablets to control algae growth, instead of getting off my duff and doing the job right. And my house-cleaning routine still involves letting the place get dirtier and dirtier until it’s so filthy I can’t stand it any more.

However… 

Until quite recently, the S-corporation, of which FaM is one arm, earned about enough to cover its the cost of doing business and not much more. Right now it could buy a new computer and, I hope, a new printer, plus it’s paid an ad rep, a web guru, and a couple of editorial subcontractors. But it hasn’t earned enough to pay its proprietor a salary.

Still, along about mid-2011, Funny about Money began to earn a little money. Individual ad sales are now far outstripping AdSense, and in fact, in some months the site earns more than my teaching pay.  If it increases as much in 2012 as it did last year, I may be able to start drawing a salary from the S-Corp. This would be good, because to get through next summer, I’ll need an extra $1,960 to $$3,960 above & beyond the income from the single summer course the chair has assigned so far.

The biggest lesson I learned in 2011 is that delegating time-consuming tasks and jobs I don’t do well works. Hiring Crystal at Budgeting in the Fun Stuff to wrangle ads for the site is the best thing I’ve ever done in the blog monetizing department. And hiring Jesse at Splyced Ventures to ride herd on the website has saved untold hours of wrestling with software.

One reason I’m earning more is that people who know what they’re doing are now taking on those jobs.

So, my 2012 goal is to delegate more and use the freed-up time to build the copyediting business, to write some e-books, and to improve FaM. I need to bring in a lot more business, enough to support two adults—myself and my business partner, Tina, who is about to be laid off by GDU (again!)—and Tina’s kidlet, until such time as Tina’s fiancé completes his training and gets a decent job. This is what we call “a tall order.”

We now know there are people out there who will pay us $60 an hour without blinking. As it develops, what we have regarded as an astronomical fee is actually well within the ball park, when you’re dealing with businesses and professionals rather than people who think they can get rich quick by self-publishing their memoirs or their cookbooks. So…what we have to do is find those people. That is going to have to be my job, while Tina and another subcontractor handle most of the actual work.

I’m thinking that part of this job also should be farmed out: we need someone who’s good at wrangling social media to build a presence on Twitter, Facebook, and waypoints. I haven’t kept up with the old standards, to say nothing of paying the slightest bit of attention to the new social media that keep popping up like toadstools. If we could delegate the job of tweeting, Facebooking, and all that to someone who’s really good at it, then that leaves me with only the job of joining business groups, giving presentations, sending out press releases, and generally making us visible on a statewide level.

We need to build a newsletter for the Copyeditor’s Desk site; that, too, might be done by a blogger-for-hire. My enthusiasm for coming up with grammar and style tips has been done in by teaching burnout. There are only so many times you can rehash that stuff without starting to gag on it.

The secondary 2012 goal is to improve income from Funny about Money. I’ve downloaded Darren Rowse’s Problogger book to the iPad and intend to study his sections on marketing and monetization.

If FaM can earn a certain threshold—let’s say 10 grand—it may be worth thinking about doing a second blog. It’s occurred to me that all the stuff about teaching and trying to survive on adjunct pay could populate a second site. How exactly to find the time to write two blogs escapes me, but maybe I could farm out some work for FaM and do some actual reporting for the proposed adjunct blog. As a practical matter, two sites each earning upwards of $10,000 a year would pull in all I need to get by, thanks to Social Security. If that happened, I could knock off the teaching and do nothing but blogging and copyediting.

That would help life a great deal. 😉

 

 

Planning for Emergency Expenditures

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Sometimes you feel like you can’t win for losin’. You just get to the point where you think you’ve got the finances under control, you figure you can finally cope, and wham! Another annoying little surprise whaps you upside the head.

Just got my first summer paycheck—about $600 net for the first week of teaching. It’s not much, but it’s one heckuva lot better than nothing.

Some time ago I estimated that I’d net about $3600 from the two sections I’m teaching this summer. Six hundred of that would go to help cover the June through August utility bills, which I expected to soar because I made the conscious decision to set the thermostat at a comfortable level now that a tiny bit of income is flowing in over the 115-degree summer. The rest, about three grand, would be folded back into the mid-term survival fund, putting off the date I’ll have to draw down retirement investments by about three months.

Things look a shade better than planned: if the $600 is for one week, as appears to be the case according to the PeopleSoft statement, then the 2½ more paychecks they’ll owe me this summer should net just about $3,000. However, thanks to the new AC unit, the June utility bill did not exceed my regular monthly budget—although it remains to be seen what will happen when the July bill comes in next month. But even one month of not having to pay astronomical power and water bills preserves some of that $600.

So. I’m thinking, wow! What to do with this vast lucre?

Could I (can you imagine?) actually spend it on something I’d like to have or do? I would so much like to take my dear and constant friends, La Maya and La Bethulia, out for a wonderful dinner on the town. But I can barely take myself out to dinner at Taco Bell, much less treat friends to a gourmet feast at the Barrio Cafe. I still need clothes. The Sanitas clogs I bought a year or so ago and wear constantly are about shot—they really need replacing. Six hundred bucks might allow me to do all three of those things!

Well. No.

Harvey the Hayward Pool Cleaner

Harvey’s still not working. That’ll be another $90 for further repairs, bringing the total cost to get him running to about half the cost of a new Hayward pool cleaner.

And then, to frost the cake, the pool system is sucking air from somewhere during its shut-down time. When it comes on after having rested overnight, great bubbles of air belch out of the inlets.

That, my friends, is what we call “not a good sign.” Very possibly…indeed, the operative term is “probably”…there’s a leak in the plumbing somewhere.

Don’t even ask how much that’s going to cost to fix. Just say good-bye to the $600, and then some.

Yes, I do have an emergency fund. As we know, each month we should put a few bucks aside for these little contingencies, and I have the credit union automatically transfer two hundred bucks a month into said fund; anything left at the end of a month also goes into that emergency account. Problem is, the contingencies have been coming hot and heavy, and every one of them has cost a helluva lot more than $200: the dental bills; the car repair; the shingles shot that wasn’t covered by Medigap or Medicare; the doctor’s visit that wasn’t covered by Medigap or Medicare; and on and on. Each cost ran significantly more than the $200 monthly deposit.

This means the emergency fund has steadily been shrinking. There’s only about $1,700 left in there. It may not be enough to cover the cost of pool repairs, if the problem is what I fear it is. That means yet another big bill will have to be paid from mid-term survival savings. Instead of extending the time I can live on the survival fund as summer pay goes into it, that pot may actually shrink because of this month’s adventures. And the extra income earned from working like an animal all summer won’t help.

{moan} Remember that 20-hour day?

Well, I have a strategy, though a half-baked one.

One of the things that’s given to crapping out when I least need yet another unplanned bill (which is just about any time, come to think of it) is Harvey the Hayward Pool Cleaner.

Leslie’s has a perennial “sale” on those things, which is to say that their regular price is about $75 less than you’d pay if you ordered it online. Tax on the retail price would be about $33, leaving one with a small saving if one bought the critter there.

I’m thinking I should buy a new pool cleaner, using survival savings for the purpose (since I’ll have to rob that fund anyway for the upcoming gouges). Then go ahead and get Harvey fixed, too. This would give me two of these gadgets that function.

So, if one of them dies at a moment when I can’t afford a repair bill, it won’t matter. I can attach the other one and let it run until I can afford to get the invalid fixed.

This would give me a little more control over the surprise bills. Not much, of course, but some.

LOL! By that logic, I could control car repair bills by spending 20 grand on a new car and keeping the Dog Chariot as a back-up vehicle. Must hurry out and buy one.

Seriously: Do you have a strategy to deal with unexpected costs when the costs exceed the amount you can afford to set aside in your emergency fund?

Image: Hyundai Santa Fe. IFCAR. Public Domain.

AMEX Windfall…Disappointing and Not Disappointing

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The annual rebate from Costco’s American Express arrived late last week. It was only $157, the lowest kickback I’ve ever received from that august credit card company. Compare with last year’s refund of $337, and the $210 they sent in 2009. Pretty pathetic.

Of course, what it says is that in 2010 I cut spending way, way back. The only major purchase I made was for M’hijito’s dryer—since he pays for everything in cash, we charged it on my card and he reimbursed me so I could get the kickback. If it hadn’t been for that purchase, the rebate would have been even less.

In one respect the small check is not so disappointing: it means I succeeded in cutting my budget to unheard-of low levels. Of course, that happened because I had to cut back: I had no money.

Like everyone else, evidently. Spending dropped drastically across the country as more and more Americans fell victim to layoffs, forced “retirements,” furloughs, and pay cuts.  Reports tell us we’ve seen a recent  uptick in consumer spending, with an increase of 4.4 percent in fourth-quarter 2010. That’s good for the economy, I guess. One could speculate about pent-up need, though: at some point along the line people simply have replace cars that crap out and household infrastructure items that break—such as M’hijito’s clothes dryer. As experience tells us, all these things are engineered to break at once. Will people keep on buying after they’ve replaced the things they can’t do without?

Oh well. I could’ve used a larger kickback. On the other hand, a couple of other windfalls blew in: the RASL payment and a couple of new jobs from new and old clients. So, what the heck. I’ve learned to limit spending, and don’t expect to increase it for the sheer joy of seeing a few extra pennies in the annual AMEX rebate.

How about you? Now that you’ve tightened your belt, do you intend to loosen spending if and when times get better, or will you continue to cultivate your new frugal habits?

Annual Windfall Arrives

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The state direct-deposited the $4450 it owes me for this year’s installment on my RASL (retiree unpaid sick-leave). Very nice…but what to do with it?

I’d figured to put $2500 of it in the Roth IRA and invest the rest in the brokerage account. This would plump up my retirement savings by another few thousand bucks. On the other hand…

I’m already in retirement. What we have here is a chunk of post-tax money in an era when income from Social Security and teaching doesn’t cover all my expenses. Right now I’m drawing down post-tax savings at the rate of $1093 a month to ensure that ends will be met, come what may. This left me, at the end of February when utility costs were nil, with a surplus of a grandiose $181, after all the bills were paid and transfers made to the savings accounts that hold funds for taxes, insurance, and extravagances like clothing and shoes.

Since I’m already having to draw down de facto savings (just not out of investment accounts—yet), does it make sense to invest this money only to have to start drawing it back out of the investment accounts in another few months? Just now, my projections show I’ll run out of after-tax savings in September, assuming I use my summer-school pay to cover utility bills and then spend the remainder on trash like a new washer and dryer or a new crown to replace the broken one. Videlicet:

Suppose, though, I were to fold the RASL into the survival fund and do the same with the post-utility bill net summer pay? Let’s imagine, too, that a miracle happens and I get another two courses  next summer, netting three grand after the high-season utilities are paid:

This has a sterling advantage: it allows me to live on post-tax savings, minimizing 2011 and 2012 tax bills while my IRAs and brokerage accounts continue to grow (assuming any growth is left after the Libya unrest settles down—a big assumption, for you can be sure whoever takes control will not be our friends). This year, I do need to roll the pre-tax money out of the defunct whole life policy into the brokerage account; so far only post-tax funds have been withdrawn from that. It’s earning all of 1 percent (at best) at Northwestern, and so needs to be transferred to investment accounts, which have been averaging 5 to 7 percent the past few months. That need grows urgent, as inflation is about to spike, big-time. Living on money in savings will reduce my tax liability for that rollover.

The second strategy will require me to defer the dental crown indefinitely, and also to try to fix the ancient washer or to replace the washer only, not the dryer. I will not be able to use summer earnings to cover those needs, nor could I start stashing summer pay to save toward a new car, which I’ll be needing one of these days. Soon.

Of course, there’s no guarantee that I’ll get two sections to teach in the summer of 2012. But even if that doesn’t happen, I could in theory hang on until the end of July without having to draw down from investment savings.

In theory.