Coffee heat rising

Dollars and nickels and dimes, oh my!

Seven-thirty in the morning and I’m beat. The pool has been backwashed, the unhappy pool cleaner set in motion (again!), the rug backing Cassie pee’d on in last night’s panic at the vacuum cleaner run through the washer and hung on the line, the regular laundry started, the ironing I haven’t done for the past three weeks set aside (to be ignored a while longer), the dog fed, me fed, the kitchen cleaned up, and the dog walked. Now to sit down to Quicken, figure out what to do with the $600 tax rebate that finally came dragging in, and decide how to handle the red ink in this month’s budget.

I’m beginning to think $1,500 just isn’t enough to cover my monthly costs above and beyond the utility, loan, and insurance payments. It seems like a generous amount: for heaven’s sake, it’s almost a whole paycheck! How can I not live on fifteen hundred bucks???This month, with two more days to go in the budget cycle, I’m $351.28 in the hole. Although I have that much in savings, it’s $1.28 more than I had budgeted to buy some much-needed clothes in this summer’s sales. So…guess I won’t be buying clothes. Again. My wardrobe is rags just now, with exactly no summer dresses or skirts. All I have to wear is Costco jeans, which make me look like a beer barrel on two legs, and I’m out of decent shirts to go with them.

I’ve thought the budget issue had to do with the heavy hits from Anna’s final illness, which added up to over $1,000. But that’s now in the past. This month’s cycle started anew, and I’ve had four unexpected dings:

Leslie’s, clean out pool filter: $87.54

  • Veterinarian: examine Cassie for limp: $95.30
  • Dry cleaner: clean dhurrie rug to remove ointments Anna rubbed into it: $15
  • Vet: X-ray Cassie’s leg after I stepped on her sore foot: $17
  • Apple: new operating system to deal with server migration: $69.82

That comes to $402.66 in extra hits. Though it sounds like a lot, it shouldn’t be enough to put me $350 in the hole. As a practical matter, the $1,500 budget normally has so much play I can buy as much as $300 in clothing or other indulgences without having to dip into savings. What that seems to suggest is instead of being “generous” by about $300 a month, my $1,500 living expenses budget now has only about $102 of play ($402 – $300). A year ago, if I’d had $402 in unplanned expenses, I’d be about a hundred bucks in the hole…not $350.

Evidently inflation in routine costs has increased my day-to-day expenses by somewhere around $300. Costco’s gas was down to $3.99/gallon last week. I paid almost $60 for a fill-up that used to cost about $35, and I’m already almost half-empty. Though I’ve been staying away from the university as much as possible, now that my dean is back in town, I really should show up to work more often. If I drove to campus every day, I would have to fill up at least once a week–possibly more than that. That’s $240 a month, up from $140. Grocery inflation? Doesn’t apply. In fact, my grocery bills have been falling because I’ve quit driving to stores whenever I need one or two things. In this budget cycle I spent $361 on groceries, a relatively modest amount for me, since that is the one area where I do indulge myself. During the same period in 2007, I spent $571 at grocery stores (though some of it went to making food for two large dogs). The hair stylist has jacked up his prices, so that this week’s haircut plus a ten-dollar tip came to $75…and he cut my hair so short I look like one of those eccentric old ladies who gets her hair shaved off so she doesn’t have to comb it.

Wait: there’s a $55 car maintenance bill; that would account for some of the overrun. So that brings extraordinary costs to $450.

Problem is, the extraordinary costs keep rolling in. Yesterday a bill for car registration showed up: $116.34. That comes off the top of next month’s billing cycle. Then Cassie pee’d on the other dhurrie rug last night, adding another spot to the place where she shat, which I never cleaned out adequately. So now that rug has to go to the cleaner. It’s old and was never a fancy, expensive number like the one I had to take to the specialty cleaner after Anna smeared antibiotic ointments all over it. So I’m unloading it on a cheaper dry-cleaning outfit, whose rep says they’ll do the job for $70. That’s $186 out of next month’s budget…before the budget cycle even begins.

This month’s $350 shortfall…where will it come from? I could use the tax rebate to cover it, but really, I wanted to put that into the Renovation Loan payoff fund. If it comes out of savings, then it seriously does mean no clothing purchases until the winter sales. Argh! I desperately need summer clothes. Since I look like a wacky old lady who gets her hair shaved off so she doesn’t have to comb it, I might as well go around in faded, worn-out rags anyway. Won’t make much difference

Uh oh. Waitminit here. Sometime back I entered a note in Quicken to the effect that there’s a surplus in the credit-card budget’s cookie jar. That’s the result of living under budget for several months and not transferring the surplus to pay down loan principal…it created a de facto emergency fund

Am I saved? Could this be true? Let us away to the credit union’s website…
* * *

HOLY mackerel!

There’s a surplus, all right. It’s nine hundred and seventy-six bucks! Lordie. I noted that at the beginning of the month and then forgot it, in the flurry over the website, the injured dog, hurting myself (when I fell on the pavement tripping over the dog), running late on a client’s job, and generally being too darn hot and too darn old.

Amazing grace! It’s a miracle. Maybe Lady Karma has decided to quit kicking me in the shins. Or at least, maybe this time She missed.
🙂

A step to improve the finances

Mrs. Micah issued a challenge to readers and bloggers to describe one step, no matter how small, that they are taking to improve their financial situations. As a matter of fact, I’ve come up with something but haven’t had time to blog about it, what with the past week’s technoadventures.

Thanks to a reader’s comment, I figured out how I could pool my biweekly paychecks so as to “pay myself” on a bimonthly basis. This ensures that there always will be enough money in the account that dispenses payments, by EFT, to the utility companies, the Renovation Loan lender, the life insurance provider, and the long-term care insurer, and it allows me to fund the “piggy bank” account for credit-card charges once a month: on the first, rather than on whatever cockamamie date a paycheck arrives.

First, I funded a dormant checking account at the credit union with my state income tax refund of $1340, almost as much as one of my paychecks. I added another couple hundred bucks to bring this bankroll up to the amount of a single paycheck.

July’s first payday happened quite close to the first. I put that check in the newly grubstaked “pool” account. This brought the balance to the amount of one full month’s pay.

From that I funded the “piggy bank” account for the credit-card budget and the account that dispenses automatic payments-not with half of what is needed but in full, for the entire month.

Friday, July 18, was this month’s second payday. The credit union, apprised of my new scheme, automatically transferred the paycheck into the “pool” account. That brought the balance back up to the equivalent of one full month’s pay. On the 31st, I’ll make my regular transfers for savings from the “pool”: to the Renovation Loan repayment fund, to the property tax/homeowner’s insurance/car insurance fund, and to indulgence savings.

In Quicken, I renamed all my credit union accounts so my titles jibe with what the CU calls them at its online site, simplifying the books and cutting the likelihood of making an error.

Next time I’m at the credit union, I’ll arrange to have automatic transfers from the “pool” made on the 1st and the 31st. Ta DAAAA!!! No more fiddling with online transfers.

Everything except paying the credit card bills will be done automatically.

No more fiddling with Quicken and manual transfers. No more worrying about whether enough cash will hit the credit-card “piggy bank” to make the monthly budget. No more hating GDU’s ever-changing bimonthly pay schedule.

Now that’s what I call stress relief!

w00t! 18 grand materializes from the air!

Lordie! Here I’ve been thinking I’d lost about $23,000 in the stock market…. Comes a statement from GDU’s Fidelity retirement plan-the first I’ve seen in a year. It turns out the balance the Fidelity rep gave me over the phone a few weeks ago was wrong. He only gave me the amount in the 401(a) plan. The fund also includes a 403(b) plan, which contains $18,465 more than the amount he said I had.

That means I’ve “only” lost about $4,535 to the bear.

Wow! I’ve never been so pleased with a loss in my life.

3 Comments left on iWeb site:

Mrs. Accountability

That’s wonderful!! Funny how the situation could cause such a paradigm shift

Friday, July 18, 200809:35 AM

Zhu

Wow, that is so cool!

I’m too chicken for stock market… I saved up a bit but I don’t like the idea of potentially losing money. I mean, I wouldn’t mind your kind of loss though

Friday, July 18, 200807:00 PM

Funny about Money

In fact, you lose money in the market and you gain it. Over time, you should make more than you lose, if you’ve diversified and invested carefully.

With mutual funds where you’re simply rolling all gains back into the fund by automatically purchasing new shares with gains or buying new shares each month with savings from your paycheck, when the market goes down you stand to earn MORE money, because you buy shares at deflated prices. As the market comes back up, your existing shares plus the shares you bought in the bargain basement make money.

This is most obvious in your 401(k) or 403(b), where you and your employer are plowing money into the funds every payday. It’s hair-raising to get a statement that shows the plan has lost more than you and your employer combined put into it over the quarter…until you realize the contributions are buying lots of shares at reduced prices. When the market comes back to normal, you feel mighty flush.

If next payday doesn’t come…

Oh, but of COURSE our esteemed elected representatives will pass the state budget before the whole joint has to be shut down, right?

Right. Well, come July 3rd, we shall see.

While we wait, let’s consider an important question: Are you prepared if your employer can’t pay your next check? Are you prepared for a lay-off? Are you prepared to be canned outright? Not to harp on this issue (well, yes, to harp): emergency fund, emergency fund, EMERGENCY FUND!

There are only two ways to prepare yourself financially for hard times: one is to get out of debt as fast as you can, and the other, IMHO the most important, is to lay in enough money to tide you over a spell of unemployment or disability. I say building an emergency fund is more important than getting out of debt because you have to eat. If you quit paying credit card and student loan bills, all that will happen is your credit will tank and you’ll have nuisance bill collectors nagging you. If you quit paying on your car, it’ll be repossessed, but there’s always the bus, a bike, or Shank’s mare. If you quit paying your rent or mortgage, eventually you’ll be evicted, but it takes a long time to evict someone. But if you can’t buy food, you’ll starve before the landlord or the bank can toss you into the street.

In good times, the strategy should be to build the emergency fund and pay down principal, dividing snowflakes and snowballs between the two goals until you have at least six months’ worth of living expenses stashed in the bank. As the economic clouds roll in, focus on the emergency fund. Make your regular debt payments; quit charging on the cards, so as to avoid running up any more debt; but put all of your spare cash or sidestream income into accumulating enough cash to keep you going through a really bad stretch.

How much should you set aside for the proposed rainy day?

Opinions vary, from three months to a year or more. Personally, I think an emergency fund should cover at least six months of net pay. If you’re out of work, your income tax will drop to zilch, and so you ought not to need six months’ worth of gross pay.

That said, my emergency fund actually represents a year’s net income. In the first place, at my age I don’t have a snowball’s chance of getting a job comparable to the one I’m in. And in the second, it won’t be that long before I can collect full Social Security. I’m eligible for less-than-full SS right now, so if push came to shove, I could start collecting early. In effect, at age 62 Social Security itself becomes a kind of emergency fund for those of us who persist in doddering in to the office. For you younger pups, remember this rule of thumb: a laid-off executive can expect to spend a month searching for a new job for every year of job experience she or he has.

Alternative Emergency Funds

If saving extra cash is difficult or you don’t think you can stash enough before you’re likely to be laid off, here’s a secondary strategy: get check-bouncing protection from your bank or credit union. This is actually a line of credit. If you overdraw your account, the institution lends you the amount of the overdraft, protecting you from bounced check charges. The interest isn’t cheap. However, it’s less than a credit card costs and it could save you in a pinch. I have overdraft protection in the amount of one month’s net income.

Another strategy is to start developing other income streams now, while you’re still employed. If you have a hobby that can be monetized, start monetizing. If you have a skill you can ply as a side job, start finding customers now. If you’re thinking of starting a service business, consider whether you can begin offering the service in a small way, on a moonlight basis. While this income may not support you, it certainly will help, and often such work can be expanded to full-time equivalent when you can devote 40 or 60 hours a week to build it.

If you’re fairly confident you’re going to be laid off, then in addition to starting the job search right now, here are some things you can do to prepare:

  • Apply for credit now, since no one will lend you a dime while you’re unemployed. Get a line of credit at the bank; get another credit card. Don’t use either of these instruments, but have them at the ready in case they’re needed.
  • Pare back your spending. Streamline your budget so that you’re living much as you would if you were out of work. Put the savings into the emergency fund.
  • If you have a freezer, fill it with food.
  • If you don’t have a freezer, lay in extra nonperishable items such as beans, rice, flour, and canned goods. (Remember that whole-wheat flour must be refrigerated — it will go rancid if left for a long period at room temperature.) Clean out your refrigerator’s freezer and organize its contents so you can max out the space. Buy meat and frozen products to fill it up.
  • Plant a garden. Squash and tomatoes grow handsomely and cheaply in the summertime. If you live in a temperate climate, you can grow lettuce, kale, carrots, and beets during the summer. Least expensive strategy: grow from seeds. Learn how to can, preserve, or freeze vegetables and fruits.
  • Keep your gas tank full. At four or five bucks a gallon, it’s a lot better to buy gas while you’re earning than after you’re laid off.
  • Consider how you will get around with minimal use of your car. Know the bus routes, and if your area is safe for bicyclists, get a bike at a yard sale, thrift shop, or sheriff’s sale and fix it up so you can bicycle to nearby destinations.
  • On paper or on disk, prioritize your spending obligations. Write down the things you will need to spend on, in descending order from the most to the least important. Consider how you will cover these expenditures with the emergency funds or side income you already have in place.
  • Find out how to apply for unemployment benefits and food stamps, and see if you will be eligible for other forms of public assistance. Don’t get “proud” about this: you’ve paid for it with your taxes, and you get to use it when you need it.

None of us is ever fully prepared for an unplanned job loss. Expect to be psychologically stressed and possibly depressed, no matter how carefully you’ve laid plans and stashed emergency money. Knowing how you will feel (it doesn’t take much imagination), think in advance about morale-building activities to fill your suddenly free time. Scheduling a block of time for exercise will help your outlook a great deal, as will volunteering a few hours a week for a charitable cause. Also plan to attend meetings of trade groups or professional groups-join now, especially if you can get your employer to pay the dues. Regular exercise such as walking, running, or work-outs will protect your physical and psychological health, and activities that bring you into contact with people will raise your spirits and build business and job-searching contacts.

1 Comment left on iWeb site:

Anand Dhillon

Keeping an emergency fund is always a good idea. I also advise that people have multiple streams of income so that ifthey do lose their job, it’s not totally the end of the world.They take a lot of work to setup but extra streams can provide much needed financial security.

Thursday, July 3, 200810:27 AM

The value of reconciling your check accounts

Saved from my own stupidity! Whew…

The credit union still sends paper statements, and so I still reconcile my accounts against the monthly statements. This is a function of mental laziness: I’ve never worked up enough energy to figure out how to reconcile against the online records.

But I do keep an eye on my accounts online, and this month I wondered why the CU’s bottom line was SO radically out of whack from Quicken’s. Alarmingly out of whack, one might even say.

Come to find out, I had failed to shred an $840 check I thought I’d voided, but instead had blithely sent it along to Vanguard…and then wrote and sent an identical check to replace it. Oops!

Meanwhile, believing the first check had been atomized, when my next extra-large paycheck arrived I wrote a third check to Vanguard in the same amount. Each of these payments was to transfer money from a second income stream into savings. So, where I thought I’d written checks for $1,680, I actually had arranged to transfer $2,520. This error would plunge my checking account to the bottom of a puddle of red ink the depth of Lake Tahoe!

Luckily, I had not yet mailed the last check. (And luckily, I had not taken Vanguard up on the opportunity to make electronic transfers from my checking account directly into mutual funds.) So, voiding and shredding the third check recovered the error.

If I hadn’t been in the habit of reconciling my bank accounts regularly, I wouldn’t have tumbled to that Senior Moment until it was too late to avert an overdraft.

Catching your own errors is just one good reason to reconcile your accounts at regular intervals. We all make mistakes-and even the bank sometimes enters errors in customers’ accounts (Johnson Bank once credited me for $10,000 deposited for someone else!). It also will allow you to catch fraudulent transactions. Personal finance software such as Quicken or MS Money hugely simplifies this chore, or in the case of the arithmetically challenged (such as moi), makes it possible.

If you don’t use a program to keep track of your funds, you should reconcile your checkbook each month. The steps are as follows:

  • Compare your check register with the statement. In your check register, subtract any charges (checks, ATM withdrawals, automatic payments, bank fees) appearing on the statement that you haven’t already deducted from your balance. Write this figure down.
  • Still in your check register, add any new inflows, such as deposits, automatic paycheck deposits, and interest or dividends. Add these to the amount you got in step 1.
  • Now enter any deposits made after the statement’s ending date. Add these to the total you obtained in step 2. Write this total down.
  • Next, in your register, check off each check that the statement shows as as having cleared the bank. On a separate piece of paper, list the check numbers and check amounts. When your list is complete, add the check amounts to obtain a total.
  • Subtract the total you got in step 4 from the figure you got in step 3. The result should equal your check register balance.

If it doesn’t, the first thing you should do is check all your arithmetic. If that doesn’t reveal the error, then you get to compare each figure in the statement and the check register, very very carefully. Over and over and over again.

Programs like Quicken, as you can see, circumvent a great deal of agony, first by doing the math for you and second by making it relatively easy to spot errors. If you’re reading this blog, you probably already use financial software. But lest you wonder why your mom or your weird cousin Bob has never reconciled a checkbook, ever, and figures the account is out of money when the checks run out, it may be that she or he is math-challenged. There is simply no way I could reconcile my bank accounts manually — it’s flat out of the question. I’ve tried. After I finished tearing out all my hair, I just gave up. If SDXB hadn’t insisted that I try Quicken, I would have no idea what is going on with any of my accounts.

What a mitzvah! The cheapest PCs out there will run Quicken, Money, or downloaded freeware. It’s well worth encouraging the arithmetically puzzled and the computer-bamboozled to learn how to use such a program, even if they never do anything else with a computer.

1 Comment left on iWeb site

Mrs. Accountability

Clicked through from the 156th Carnival of Personal Finance to read about your expensive doggies – hubby and I have one that we love so much, hope nothing expensive ever happens, we’ll go in the poorhouse for him.I agree with your reconciling checking accounts post – I read on a blog not too long ago that the person never did reconciliations, and why they didn’t think it was necessary to do so.I would be a bundle of nerves!The blog writer said they watch their account online regularly, so felt comfortable to not reconcile.I have reconciled my accounts for over 25 years with both paper statements and online statements, and have found enough errors that I would not be comfortable giving up this monthly chore.I read your “Life’s a Killer” story, awesome how you handled your stress situation.I also participated in the 156th CoPF (my 3rd entry) with my free Gas Calculator (MS Excel format).I really like your writing style, adding you to my reader.Nice to meet you!

Monday, June 9, 200807:01 AM

Targeting your emergency savings

J.D. at Get Rich Slowly discusses author Mary Hunt’s idea for the freedom account: an emergency fund in which you subdivide out amounts for specific intermittent expenses, such as car repair, wedding gifts, or expensive clothing purchases like shoes. The way J.D. describes it, you keep the money in a single checking account; then estimate your irregular, intermittent costs and keep a little log showing how much is dedicated to which purpose.

The basic idea is a good one. Trying to keep track of a bunch of different purposes for money accruing in a single account, though, strikes me as a giant pain in the tuchus. Also, even an ING checking account doesn’t earn enough to make it a good place to store money for long-term expenses.

Here’s a slightly different approach to the same goal of targeting your emergency savings:

Establish the categories in which you have intermittent expenses and identify the time intervals in which they occur: totally irregular, yearly, biannual, over several years. Then open separate accounts for these purposes. The length of the interval determines the kind of account you use.

For example, I look to the irregular little surprises that can happen at any time (plumbing or car repairs, vet bills, etc.), annual expenses (car and homeowner’s insurance, property tax, income tax), and long-term expenses (purchase of a new car, about once every ten years; major repairs or renovations on the house, which I hope don’t happen more often than about once every eight or ten years).

For the constant extra gouges, I have a money market account at the credit union. Into it I put $87 per paycheck–down from $200 a month since GDU’s shift to biweekly pay, because of the drop in net income that caused. When I have to cover an expense, I simply transfer the needed amount back to my checking account.

To pay my annual automobile and homeowner’s insurance bill, the annual cost of registering my car, and my annual property tax, I put $300 a month into a separate money market account, also at the credit union. I keep these funds physically separate from the day-to-day emergency funds because I can’t afford to have that money disappear: if I don’t pay my property tax, the house will be confiscated; if I don’t register or insure the car, the state will forbid me to drive it.

For long-term expenses, I use Vanguard funds: the Prime Money Market fund for major house expenses (reroofing, for example) and the Short-term Investment Grade Investment Corporate Bond fund for savings toward my next car. I plan to keep a car for ten years, so if I put even only a thousand bucks a year into that fund, what’s in there after a decade should be enough, combined with the clunk’s trade-in value, to buy another car in cash. Although neither of these is FDIC-insured, they’re both very safe (neither was exposed to subprime mortgage instruments) and they each earn more than I can make in a checking account. AND you can write checks on either of these funds. So it’s easily accessible when I need it.

When savings for specific purposes are collected in separate accounts, to tell how much you have for a given need, all you have to do is look at the bottom line. To my mind that’s a lot easier than trying to keep track of a bunch of separate theoretical subtotals in a spreadsheet.

2 Comments left at iWeb site

hatuman

Some good thoughts.Thanks.It wouldn’t hurt to have more accounts open to help keep track of things.

Monday, May 19, 200807:22 AM

Cordelya

I have a similar thing going on as far as emergency money goes. I have a savings account at ING, and I also have several cash CDs there. I have one CD ($500 for 5 years) to stand as my auto insurance deductible. If I need to pay the deductible, there it is. If I don’t, it earns good interest and I have an incentive to not touch it (early withdrawl loses me 6 months of interest). I have a similar CD that is labeled “New Washing Machine” – our existing machine is rather old and I’d prefer to have money standing by to replace it. I’ll have to get some more CDs set up for car purchases – that’s a perfect candidate for laddering.

By the by, I choose cash CDs over money market specifically because of the withdrawl penalties – it’s that extra incentive I need to keep me out of them!

Monday, May 19, 200808:18 AM