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Personal Finance

Why are we paying for this?

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So this morning I call The Hartford to find out whether jacking up the deductible on my homeowner’s insurance will save enough to help keep my in the house after retirement. The punch-a-button maze robot answers the phone with “If you are calling regarding property damage from a hurricane, please press 1…”

Is there any question why our homeowner’s insurance is surpassing unaffordable? If I maxed out the deductible at $4,000, it would save me all of $21.50 a month…not worth the risk of having to cut four grand out of retirement funds in the event of a fire or a falling tree. Raising my deductible from $250 to $2,000, as I decided to do, will save $114 a year: a grand $9.50 a month. Who pays for all the repairs insurance companies shell out to people who stubbornly insist in living in the way of hurricanes, tornadoes, wildfires, landslides, and earthquakes? That’s right: you and me, in the form of ever-soaring insurance premiums.

As we scribble, an army of rescuers is searching for more than 2,000 morons who flat refused to obey mandatory evacuation orders. These clever folks—those who can be found—are being ferried out by boat and helicopter. These are the same hardy denizens who graced Internet news videos as they were sitting around a bar getting drunk a couple of days ago. Now they’re whining because they have no air conditioning, water, or toilets.

“The storm was easy,” the New York Times quotes one Brenda Shinette, who at 51 is old enough to have known better. “I feel like I want to pass out, but I can’t tell if it is from too much heat or too little food.”

Is it possible to pass out from a deficiency of I.Q. points?

“Next time they should warn people about this, not the storm itself,” said another bright soul surprised by such details as floods, power outages, water outages, toilet outages, snakes, mosquitoes,roving packs of dogs,and rotting food.

What is it about get the hell out now get out get out get out you will die if you do not get out that you don’t understand?

“I thought we were going to need Noah’s ark,” said one Elizabeth Madson, who at 45 not only is old enough to know better but who has lived on this hugely at-risk island for seven years. “It was horrific. I would not wish that on anybody. . . . Anymore, if they say a hurricane is on its way, I’m leaving two days before.”

Some mules can learn if you whap them upside the head with a two-by-four.

It’s easy to make fun of individual morons. But then we have the corporate morons. How much do you suppose our insurance premiums will rise to cover the losses to the owners of the now-nonexistent Balinese Room, a nightclub built 600 feet into the gulf, and the Flagship, a hotel on a pier extending 1,000 into the gulf?

And how much will our taxes rise to cover the services of hundreds of search-and-rescue workers, to repair and rebuild utility infrastructures, to clean up the flood-deposited muck, to rebuild levees intended to turn back the sea so these fools can move right back in?

The normal elevation of Galveston Island is8.7 feet above sea level. Much of the developed part has been artificially elevated, andit’s sinking.

Whether or not you believe global warming and its consequent flooding, violent storms, and drought are all a figment of the liberal imagination, you have to agree that we as a people should not have to pay for the folly of individuals and corporations that insist on parking themselves in harm’s way. Living at sea level directly in the historic path of huge, massively violent storms comes under the heading of parking yourself in harm’s way. So does living in a trailer in tornado alley; building your house in the middle of a beetle-infested, drought-stricken forest; living in hills covered with chaparral evolved to actually benefit from wildfires; dwelling atop an earthquake fault; and taking up residence on the side of a dormant volcano. The rest of us should not pay for the predictable results.

It’s past time We the People brought a stop to this nonsense.

The federal government should tell insurers not only that they do not have to insure property in high-risk regions, but that they cannot insure it. It should be against the law to insure homes and businesses in places like Galveston Island—or in any other area at high risk of natural disaster.

Whatever tax incentives exist to encourage building in these areas should be eliminated. In fact, federal, local, and state governments should charge exponentially higher taxes to anyone who insists on living in fire, flood, and earthquake zones. And people who require the need of search-and-rescue teams after ignoring officials’ warnings to evacuate should be made to pay the entire cost of the rescue operation that gets them out of trouble. Let the folks who can’t understand why they need to get out of the way of a hurricane the size of the entire state of Texas pay for the cost of rescuing them!

The increasing cost of insurance and property taxes, when combined with the rising cost of food, utilities, and gasoline, very likely will force me out of my paid-off home when I retire. Who’s going to rescue me? Who’s going to rescue any of us who can no longer afford the cost of underwriting other people’s folly?

Photo: Aftermath of 1900 Galveston hurricane
byKeystone View Company

Thank goodness! And . . . gasp!

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Two scary envelopes arrived in the mail today: one from the county tax assessor and one from my financial manager. I figured both would bring bad news.

And yea verily: even though the sale value of my house has dropped $50,000 over the past couple of years, the assessor’s biannual estimate of its value has gone up by $33,000, raising my taxes from the $1,500 I paid when I moved in about four years ago to almost $2,100.

However, this moment of gloom was relieved by a report from the redoubtable Stern and Reimer, who, despite the drumbeat of unnerving economic news, contrived to make my investments earn $2,265 in August.

LOL! Just about enough to pay the taxes!

In fact, I have the tax money in hand, accumulated by dint of a $300-a-month setaside from my paycheck. So I can pay the assessor this year. But next year: ????

The $3,600 annual impound into a savings account is to cover property tax, homeowner’s insurance, and car insurance. It used to cover annual car registration, too, but because my car is now eight years old, I can pay that out of cash flow. If my car were newer, I couldn’t do that.

Now the problem is . . . the combined cost of 2008’s property tax, homeowner’s insurance, and car insurance will come to $3,700.

And three hundred bucks a month is pushing the envelope of what I can afford to set aside. State employees received no merit or COLA increases this year, and will not as long as the economy is in the toilet. In the past, we’ve gone several years at a time with no raises whatsoever. So: they raise our taxes, but they don’t raise our pay.I haven’t retired yet, and already the basic cost of keeping the government from confiscating my home or my car and providing enough coverage to rebuild if the aluminum wiring sets fire to the joint is passing my ability to pay it.

What this demonstrates is what I’ve already begun to suspect: I will not be able to stay in my home in retirement.

If there was any question about that, this tax bill answers it, plain and clear.

The limits of automatic bill-paying

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In this morning’s New York Times, Ron Lieber reconsiders an earlier rave he wrote for “Your Money” about automating every penny you pay out. He notes that some people are wary of allowing business entities access to their checking accounts, largely out of concern over potentially costly errors. Others, he reports, have run into serious problems: one woman, for example, arranged to pay her phone bill on her credit card. Alas, when the expiration date came and went, no one bothered to tell the phone company, which soon sent a surly letter threatening to cut off her service.

While I’m an enthusiastic proponent of automatic bill paying, I do draw some lines. And I draw a wide, bold black line at charging up utilities on a credit card!

If anything happens that the card is canceled — whether to protect you from identity theft or because you decide to close the account — you are the one who gets to call every creditor and change your payment arrangements, a major nuisance, indeed. The potential hassle factor is just too high.

In fact, credit card statements are the only bills I do not have paid by automatic electronic funds transfer. Why? I just can’t bring myself to trust credit-card issuers. Those folks are not our friends. I want to see each statement and check each charge off against my Quicken or Excel records before forking over any cash.

For a long time, I felt that way about the phone company, too. Not so much because Qwest seemed untrustworthy (though a degree of incompetence presented itself, the company never seemed outright treacherous, the way credit-card lenders do), but because I’ve had people hack into my phone number and run up fraudulent toll calls. Here, too, I wanted to check the statement before sending any money.

I do authorize the utility companies, the city water department, and two insurance companies to bill my checking account directly. I did so because, before I switched my accounts to a credit union, the bank where I did business charged a fee when customers had money automatically transferred from the bank’s end but charged nothing when the creditor itself absorbed money out of the customer’s account. Why, I do not understand.

If I had it to do over again, I would go the other way around: retain control of the amount and date of payment, rather than permitting creditors to directly debit the account. This service is free at the credit union, but I didn’t know that when I made the switch. Now I’m too lazy and too busy to mess with changing a half-dozen payment arrangements.

Undoubtedly other issues present themselves. Identity theft? Seems to me you’re as much at risk of that when you send a check to some boiler room as you are when you pay electronically — possibly more so. Service snafus? They’re everywhere. Overdrafts? You need a system and some self-discipline to be sure enough money resides in your account to pay your bills…just as you do when you pay by check or cash.

Automatic bill-paying has many advantages. As with everything in life, we need to apply some common sense.

25 strategies for more affordable living

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The rumination on ways to maximize Social Security income — and even use early start-up payments as an interest-free loan from the government — led me to consider how I might stay in my home after I retire.

The house a little expensive to operate, it’s probably too large for one person, and the neighborhood is a whisper on the iffy side. On the other hand, I like the house quite a lot. It’s paid for, it’s centrally located in a neighborhood adjacent to a park and a very upscale enclave, and so far I’ve seen nothing comparable in a better area that I can begin to afford. Given that Biker Boob, Dave’s Used Car Lot, Marina, and Weed Arboretum, and the nightly presence of cop helicopters amount to the trade-off for an affordable home in a halfway decent central neighborhood, before I decide to move to cheaper housing, maybe I should first consider ways I can invest in my present home tocut operating costs.

ThoughI contemplatethese ideas in connection with pending retirement, they apply to anyone who’s trying to live frugally, and certainly to families who would like tohave one spouse quit working to stay home with the kids.

Ours is a hot climate. Winter heating bills are negligible, but summer cooling bills will knock you over. Each year they rise higher. Ditto water: though my yard is desert landscaped, July and August still bring $160 bills. These are the largest consistent hits. Other big costs are taxes and insurance, gasoline consumed in driving to safe, upper-middle-class shopping, and repairs & maintenance. So, some strategies to make my home permanently affordable:

Climate Control

  1. Install a programmable thermostat. Set the summertime temperature several degrees higher in the daytime and have it drop to 78 at night.
  2. Build a shade structure over the front entryway to cast shade on the flagstones and concrete. Make this large enough to seriously protect the front of house from summer heat.
  3. Remove the shade structure Richard built in back, which is out of code and sagging, and replace it with a shade structure that will run the entire length of the back wall. Again, make this wide enough to provide real shade.
  4. Replace the two remaining single-paned windows with double-paned low-E windows.
  5. Blow extra insulation into the attic.
  6. Install an attic fan, if this is feasible with blown-in insulation.
  7. Have Bila fir out the west and south walls in the master bedroom, install insulation, and apply new drywall over it.
  8. Remove the dying ash tree and replace it, now, with a tree that will grow big enough to cast shade on the west side of the house by the time I retire.
  9. Get the chimney cleaned. Install one of those heat-recirculating devices in the fireplace, so the fireplace can be used to heat the family room and kitchen during the winter.
  10. Provide the dog with a warm blanket so she can sleep comfortably on the floor during the winter.

Water Conservation

  1. Remove some of the overgrown planting in the front yard. Be sure all drippers and spigots leading to former plants are shut off.
  2. Confer with Matt the Tree Dude Extraordinaire to determine which xeriscapic plants in front are now established well enough to endure drought, and how to cut back on watering.
  3. Remove planting between flagstones in courtyard; replace with river stones. Turn off sprinklers in courtyard or convert them to drippers.
  4. Persuade Gerardo to create wider basins for the citrus trees in back. Deep-water established citrus only once a week in summer.
  5. Get Gerardo to put the potted plants in back on their own valve, or, failing that, get rid of the potted plants.
  6. Get timers for all three hoses and use them! Never leave the water running in the pool or on a plant.

Other Costs of Running the House

  1. Find out the answers to these questions: Do I really need enough insurance to rebuild the house if it burns down? Realistically, what are the chances it will burn down? Given that all the floors are tiled and the washer is in the garage, what are the chances it will ever suffer flood damage? Short of complete destruction, what is the worst that could happen and what would it cost to repair?
  2. With the answers to these questions in hand, reconsider the insurance coverage on the house. Reduce it, if that seems reasonable.
  3. In any event, raise the deductible as high as the Hartford will allow.
  4. Inventory the house’s contents. Estimate value. Insure the house’s contents for no more than what the stuff is really worth.
  5. Purchase a fire-proof, water-resistant safe. Bolt it to the floor in a closet. Place crucial documents and all real valuables inside this safe. Do not insure gew-gaws thatare stored insidethe safe.
  6. Challenge the next tax assessment. Raise hell and put a block under it the next time the county raises taxes.

Costs of living in a waning central city core

  1. At retirement, buy a car that uses less gas, so as to drive to now far-flung middle-class shopping and medical care.
  2. Add security to Arcadia doors, and replace back screen door with security door.
  3. Use train to ride to AJs, central library, museum, and downtown theaters.

Another bullet dodged

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So, once again I’ve escaped the attention of upper management. In the current “reorganization,” eighteen chairs and two deans were demoted, twenty-eight administrative and support staff were laid off; and an unknown number of unannounced layoffs continue to lay waste to the custodial crew.

My dean, thank all the gods on Olympus, remains in place, and so do I.No hiring freeze was announced, so the search for the replacement for the director of the program whose graduate students staff my office continues apace.This means I have a job (probably) at least until the end of my current contract, next June. By then I can retire with no serious harm, although, like Bartleby the Scrivener, I would prefer not.

Whew! I could practically hear that slug whistling through the air past my noggin.

Times are getting bad, possibly worse than most of us realize. La Maya reports that in California her niece, who has been working for the booming prison industry at a very nice salary, just learned her pay would be cut to a little over $6 an hour — minimum wage! Picture trying to live in California, anywhere in California, on that!

If you’ve got a job and you can hang onto it, cling for all you’re worth. This is not a time to make reckless moves.

Lemonade from a financial lemon

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Can I Get Rich on a Salary tagged me a while back with a challenge to tell a story of making lemonade from a personal finance lemon. Since iWeb doesn’t do pings or pingbacks, I didn’t notice, and so I have to apologize for running a bit late with this. But…do I have lemons? Let’s raid the tree.

Tartest: is that a word? The tartest lemon I’ve picked to date was when my father disinherited me. He disapproved of my leaving my husband of 20 years, a gentleman I married largely because he exactly fit the description of the kind of man my parents wanted me to marry. While divorce proceedings were under way, my father secretly got together with my soon-to-be-ex and engineered a revision of his will.

The original terms were that when he died, his wife would get the interest from his investments and then, after she was gone, I would get the principal. He had about $100,000.

When I left the marriage, I took almost $100,000 in community property, plus a small amount of alimony and $40,000 of sole and separate property. I had no job. In early 1980s, $240,000 was not a bad grubstake. Relying on what I expected to inherit from my father, I figured I could grow my freelance writing business so that by the time the alimony ran out, in about six years, my earnings plus interest off investments would carry me all the way through retirement. This, it must be admitted, was one of the stupidest ideas to which I have ever subscribed.

Luckily for me, a full-time teaching job came along at a satellite campus of the Great Desert University. It was pure serendipity. Little did I know how broadly God was smiling on me: I had no idea my father had effectively written me out of his will, and, with my pending-ex’s collusion, had done so in a way that I had no chance of breaking the new will. Neither he nor the ex ever told me that he had changed his will.

He died of a stroke at 84. Not until then did I learn that $1,500 a month went to his wife, whom I disliked with some fervor. Her mother had lived to be 103 years old, and so it was reasonable to expect that the widow would live long enough to collect the entire pot and nothing would go to me. By way of delivering one last back-handed slap across the face from beyond the grave, my father made me the executor! This meant I would have to write a $1,500 check every month for the next five and a half years to a woman who had long made a hobby of making me miserable whenever she found an opportunity.

After about five years and six months, the fund would be drawn dry.

Even though I had a reasonably decent job, nontenurable English faculty do not earn much. I was in my late 40s when I started working and contributing to the university’s 403(b) plan, leaving me nowhere near enough time to accumulate a decent retirement fund. Because I had been a society matron most of my adult life, I had few credits toward Social Security; no matter how long I worked, I could never come close to the (modest!) maximum Social Security entititlement. If I was not to spend old age in dire poverty,Ineededthat money.

I called my financial advisor and asked him what to do. He suggested putting it in a short-term corporate bond fund at Vanguard. In the early 80s, the fund was doing quite well, and as investments go, it was conservative enough that no one could say it violated my fiduciary responsibility to the widow. My lawyer revealed that I could pay myself a thousand bucks or so each year as compensation for serving as the estate’s executor, which helped a little.

Each month the fund returned an amount that was about 30% to 50% of the monthly drawdown. Thus although the balance dropped steadily, it did not dwindle to the disappearing point as fast as my father planned.

There was nothing I could do about the will, despite the circumstances in which it was changed. The wife’s daughter was a Superior Court judge, one renowned for making capricious decisions, and so not a lawyer in the county would touch the case. Although several agreed that my ex had committed malpractice by representing my father while we were engaged in divorce proceedings, I could not get any lawyer to represent me.

My father’s widow survived him by about five years, falling short of her mother’s longevity by some fifteen years. When she passed, about $40,000 remained in my father’s estate.

Forty thousand was a heck of a lot better than the nothing my father had in mind. Thanks to some smart investment advice, I managed to retrieve almost half the money.

Meanwhile, the teaching income was not quite enough for me to cover the $840 mortgage payments and have enough to live without running up debt. My plan had evolved so that it had me saving all the after-tax alimony payments toward retirement; in fact, each month I was having to use one or two hundred dollars to make ends meet. Nevertheless, I managed to save about $60,000.

So, when the alimony ran out, I pooled the inheritance and the amount I’d saved from the five years of alimony income and used a chunk of it to pay off the $80,000 mortgage on my house. This left about twenty grand still in savings while it gave me a de facto raise in pay of $640 a month, after I had set aside $240 a month for taxes and insurance.

Just before the bubble started to inflate, my house was worth three times what I’d paid for it; I sold it and bought a more nicely renovated place with a bigger yard and a pool, a good long way away from the noisy intersection and crime zone that had cop helicopters parked over my roof at 11:00 p.m. every Friday and Saturday night, and I paid for the new place in cash.

No matter what anyone says, it’s great to have your house paid off. That ain’t lemonade: it’s fine white wine with overtones of summer citrus.