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Personal Finance

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.

Is the Layoff Boom about to Fall?

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Out at the Great Desert University, rumors float on the breeze like leaves in the autumn air. We our told that Our Leader will make a momentous announcement on the first day of the fall semester, in a week or so. Nothing anyone hears indicates the contents of this message will please the peons. Some expect to hear of massive layoffs. Others expect a hiring freeze. Still others predict we will be told the satellite campuses are to be deemed “teaching campuses” and the main campus will be the “research institution.” Paranoia rises. The facts support the general angst but confirm none of the dire predictions.

Factoid:

The university’s budget has been slashed to and peeled off the bone.

Factoid:

Our Leader’s elaborate building campaign, which could bankrupt a healthy institution in good times, continues apace.

Factoid:

Caps on class sizes have risen into the stratosphere. Lecturers and instructors — nontenurable faculty who teach four or five sections a semester — groan under obscene courseloads, with ten times more students than anyone could reasonably be expected to teach adequately. Tenure-track and tenured faculty also find themselves facing classrooms filled with more students than they can teach. Faculty are eliminating most or all writing assignments and assessing performance on the basis of a few machine-graded, computerized exams.

Factoid:

HR staff have been seen acting strangely. They refuse to meet your eyes, and at “benefits fairs” their responses to questions make it clear they’ve been told, on pain of dire consequences, to keep their tongues on a tight leash. One of them remarked to a colleague, semiprivately, “Oh…you don’t know what’s happening.”

Factoid:

Administrative staff who do know what’s up have leaked hints that something very grim is slouching toward Bethlehem.

What to Make of It?

Heaven only knows. I hesitate to assume the worst, although knowing that place, anything is possible. If we do indeed face layoffs, I would be high on the list of the expendable. My job is exempt, meaning my contract says I can be canned at any time, for no reason. Although one could argue that our office supports the university’s core mission of research and publication, others could say faculty could get by just fine without us. If the bad news is “only” a hiring freeze (unlikely: the last hiring freeze was not announced from the balcony with trumpets blaring fanfares), my job will still be at risk, since the director of the graduate program whose students staff our office walked with short notice this summer. A hiring freeze will mean he can’t be replaced, which will mean his program will die instantly, which will mean my office will quickly go away because my staff will disappear. In either event, I lose my job.

I’m now eligible to take early Social Security payments, although I would prefer not to. If I collect SS now, the amount will be peanuts. If I wait until I’m 66 (or even 65, when Medicare kicks in), my income will be slightly more generous. I’ll be 65 in 22 months; COBRA will cover me for 18 months, and so if I can hang onto my job for just four more months, I can at least keep myself insured if I’m laid off.

Being averse, as I am, to jumping off the high wire without a safety net, I reconnoitered the resources I could use to survive if I’m canned. Figuring 4% of my retirement savings as a drawdown and subtracting from that the 12 grand that’s going into the Investment House, investment income right now would be $10,254. Because I haven’t yet applied the Renovation Loan payoff fund toward principal but instead have stashed the money in low-risk mutual funds, I have $9,848 in cash that I could live on. The university has to pay me for 175 of my 275 hours of accrued vacation time at my regular pay rate; the figure on my paycheck seems to says that amount is $3,214, a little more than one month’s net pay (I believe they have to pay my gross rate for this, which would come to $5,280). Also, the state pays retiring employees who have accrued 1,000 hours of sick leave a kind of severance bonus in the amount of 50% of their hourly wage per sick-leave hour; for me this would come to $17,160. It’s not paid in one swell foop, however: they dole it out over three years. So, in the first year after severance I would get $5,714. Pretax Social Security, if I started taking it this year, would add $12,228 to the pot.

Amazingly, all these bits and pieces add up to something close to my net pay. Though the bottom line is pretax, few of the figures that go into it are earned income, and so my taxes might be relatively low.

COBRA will inflate my healthcare premiums from $30 to $473 per month, but even that would be affordable for a couple of years. It would be tight, but I might not be forced to move out of my home, especially if I could engineer a steady flowof freelance work.

Thank goodness I saved the Renovation Loan snowflakes to double as an emergency fund, instead of paying them directly to the loan principle!

Matter o’fact, the scenario above isso positive that I wondered what would happen if I delayed collecting Social Security. Could I get by until I can collect full Social Security payments? Well….

Foregoing Social Security for two more years, I’d have to come up with an extra $7,000 to make ends meet, just barely.

But that’s not unreasonable: I could pull it off with a part-time job — maybe greeting shoppers at the WalMart! Here, too, a steady flow of freelance work would do the trick. At The Copyeditor’s Desk we’re hoping to make $1,000 a month per person by the end of the year. If we meet that goal, next year’s $12,000 annual income would just about replace the amount of Social Security I’d get if I started drawing payments now.

So, if they can me, the world is not going to end. I may have to sell my home, but not right away. There will at least be time to see if I can get by, cobbling together a living from four to six different sources. A year or so hence, though, I’ll have to either cut my expenses drastically or find income to replace the one-time vacation pay reimbursement and the three years of sick leave payments. The slightly increased Social Security payments I would have by waiting to collect until I’m 65 will not substitute for those amounts.

I don’t like it. But I’ll survive.

The National Debt: The mortgage meltdown x 10?

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Good grief! Did you hear the Diane Rehm Show on PBS this morning? She talked about the $53 trillion national debt our government has run up. She had the former U.S. Comptroller General, a Wall Street Journal poobah and former member of a Presidential council on economic growth, and a think tank researcher, all of whom agreed that the gigantic national debt, which represents about $440,000 worth of debt for EVERY AMERICAN HOUSEHOLD, poses a huge threat to the economy.

The scariest part I heard while I was jockeying my car through 40 minutes of rush-hour traffic was a comparison between some of the elements that have led to the current fiasco and the similar short-sighted behaviors that led to the mortgage crisis. These guys say the crisis likely to come out of the mess created by an untenable national debt will be many tens of timesworse than the mortgage industry meltdown. We are looking at the potential meltdown of the U.S. economy during the next twenty years.

At the very least, government services, including Social Security, Medicare, and many programs that support businesses, agriculture, and the middle class will have to be severely curtailed or even eliminated. “Promises” made by the government to its citizens, said the guests,cannot be fulfilled.

The cause of this fiasco has been lack of competent leadership for the past decade or more, and the misguided policy of cutting taxes while failing to cut spending. Solution offered by at least one of the gentlemen: “grow the economy as fast as we can.” Uh huh. Grow the economy? While we’re in a recession that some of our leaders will not even acknowledge as recession? Gimme a break.

On an individual level, I don’t know what any of us can do about it, except to throw the rascals out of Washington…a dollar late and a day short. The corruption has to stop and the woo-woo “thinking” has to go. It will take one heck of a lot longer than eight years to get this country out of the mess the present leadership has created. It will be amazing if the next presidential administration manages to do anything other than hang onto the helm as the ship runs aground.

What is my plan?

  • Keep my job until I drop in the traces.
  • “Grow” my own economy by fostering a side business.
  • Pay off all debt and don’t run up any new debt.
  • Once the debt is paid, squirrel away every penny I can.
  • Build an emergency plan designed to survive a breakdown of the infrastructure, to include stocks of food,water, and propane.
  • Try to preserve capital in such a way that it can be handed down to the next generation, who will need it.

That’s all I can think of to do. And you? Got any ideas?

A$king and re¢eiving

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“A$k and ye shall re¢eive” is the motto of the American Society of Journalists and Authors, to which I used to belong until I figured out that freelance writing is a losing proposition. ASJA put me on to the fact that publishers don’t pay a fair rate for work done; they pay what they know they can get away with. They bank on the tendency of writers to work in their own little garrets, to cultivate social lives best described as null and void, and to be way too shy to ask other writers how much they earn. Magazine publishers in particular will pay one writer, say, $1.00 a word and another 50¢ or 75¢ for the same kind of work of the same quality. They recognize that some wannabe writers are so anxious to see their bylines in print they not only would work for free, they’d pay the magazine to publish them, and so the magazine plays that for all it’s worth. Which is plenty.

Entertainingly, today I learned that book publishers will do something similar when they outsource editorial work. My young business partner (late one of my research assistants) and I have been proofreading detective novels for a company that publishes nothing but mystery fiction. Because the work is easy and the copy so entertaining it’s hard to believe anyone would pay you to read it, we’ve been accepting the publisher’s offered rate of $12 an hour.

In response to our talking up our new enterprise, The Copyeditor’s Desk,a book packaging company e-mailed me and asked our rates for proofreading. Without thinking about the mystery publisher, I gave her a rate on the very lowest end of what I actually expect to earn: $25 an hour. Proofreading does not rise to the level of rocket science, and so I couldn’t reasonably ask for the amount I try to get by manipulating my copyediting page rate to fit the difficulty of the copy: $60 an hour. But on the other hand, there comes a point where you can’t just give it away. I figured $25 would be a bit rich for her blood.

To my astonishment, she wrote back and said our proposed rate was in the range of what they’ve been paying others.

Whoa! You are paying proofreaders twenty-five bucks an hour? You’re paying more than twice what we’ve been earning reading mystery novels? Are we talkin’ the same people who have the skills you could have expected from a bright high-school graduate a quarter-century ago?

Huh. Wonder what they would have paid if I’d suggested their arcane interior decorating books need a proofreader with a Ph.D. to make them right. . .

So the message is this: Don’t be shy about asking what you think your time is worth. If you don’t get it, maybe it’s for the best: the next client or employer will come up to your standards. And find out, even if it means bald-facedly asking colleagues what they earn, how much others in your trade or profession are earning for similar work.
Ignoran¢e is not bli$$.

New business enterprise gets under way

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Well, the tiny newborn business my friend and I are starting has climbed to its little feet and is toddling around. Yesterday we got our first serious nibble, if you don’t count the client we already had when we began. The contract isn’t landed yet, but we were thrilled to attract a serious expression of interest.

Here’s what we did to get the business under way:

First, we wrote a business plan. We articulated a) what we wanted the business to do; b) how we would deliver on that; and c) how the business would be organized (as a partnership).

Next, we set an earnings goal. Since this is a side business and we both have day jobs, we decided we would each like to be grossing at least $1,000 a month within one year.

Then we established two marketing strategies: 1) join the Arizona Book Publishing Association (ABPA); and 2) create a blog in the enterprise’s name, The Copyeditor’s Desk. The ABPA turns out to be a gold mine: its meetings are frequented not only by publishers likely to need our copyediting, proofreading, and indexing services but also by writers who are either self-publishing or seeking publishers and very much need our services. It remains to be seen whether the blog will bring in much business, but it gets our name out there, and if it develops much readership, it can monetized to contribute a few dollars toward our earnings goal.

Finally, we obtained some business cards, free, off the Internet, and we designed a brochure that we will have printed through her brother-in-law’s Kwik-Kopy outlet.

It’s pretty rudimentary and at first blush doesn’t look very ambitious — until you consider that we both have jobs and she has a family to take care of. We think it will keep us busy, and if we’re lucky it will generate the fairly modest financial goal we’ve set for ourselves. Keeping it simple should at least keep it manageable.

Dollars and nickels and dimes, oh my!

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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.
🙂