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Personal Finance

Why Do Americans Have Such a Hard Time Living within Their Means?

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Some of the answers to that one are obvious:

  • The best cities in America are bloody expensive to live in.
  • We eat out all the time, which costs about four times as much as cooking your own.
  • Pay does not keep up with inflation.
  • The cost of a car has gone through the roof.
  • Insurance–especially health insurance, but other varieties, too–has become obscenely expensive.
  • Owning a pet became an expensive obsession as pet food manufacturers, veterinarians, trainers, and a host of others in the “pet industry” realized that pet lovers are the biggest cash cow ever to come their way.
  • Entertainment is through the roof: to go to a baseball game, you need to take out a bank loan.

You no doubt can come up with others. But I’d suggest something more subtle is going on. To wit:

We are being nickeled and dimed toward penury with the repeating costs of subscriptions, gadgets, doodads, and hoodoos. Half of Americans live beyond their means, and many don’t even know it. The most effective and possibly the most profitable way to extract money from consumers is to lock them into a monthly payment. And so much the better if you can persuade them to auto-pay those charges on a credit card.

Resisting this trend is well-nigh impossible, because so much of what undergirds a 21st-century lifestyle is paid for on a monthly basis.

Consider:

  • You pretty much need a wireless connection to live in our current culture. I pay $90 a month for the privilege of using the Internet.
  • You need a phone. Still resisting the $50-$150/month cost of a smartphone, I pay a measly $30 ($15 plus that much again in alleged taxes and fees) a month for a land line. But that can’t continue much longer…sooner or later I’m going to be forced to give up and buy into a smartphone plan.
  • You need health insurance. God only knows what that costs younger people. I pay about $230 a month, give or take, for Medicare, Medigap, and Part D.
  • You need transportation. That’ll be $380 a month for a late-model second-hand car.
  • You need car insurance. You need homeowner’s insurance. If you’re not crazy, you have umbrella insurance. If you are crazy, you have health insurance for your dog or cat.
  • And then you have the various monthly dings: electric, gas, water, sewer, trash pickup, and on and on.
  • And the annual gouges: property taxes, state income taxes, federal income taxes, and in some parts of the country even city income taxes.

Have you noticed that of late the pressure to sign up for repeating charges has escalated? For example, if you get your news on the Net, as I do, about a third of your sources are now stashing content behind paywalls. A few, like the Washington Post, will let you read an article if you linked to it from Google, but you get only ONE article. Wanna read something else, you have to pay for it. Others will let you read a limited number of articles per month — three, say, or maybe even ten — and then demand that you sign up for a paid subscription.

For the Post, that’s $195 a year — $16.25 a month, or $4 a month if you’re an Amazon Prime customer. But to get that bargain rate, you have to pay Amazon another $100 a year for its “Prime” come-on. For the Times, it’s $1.88 a week (bare minimum), or $7.52 a month or $97.76 a year.

When people demand my cell phone number these days, I now just frankly say outright, “Sorry, but I can’t afford a cell phone.” That’s more polite, I suppose, than announcing “I wouldn’t give out a cell phone number on a bet,” but it still takes people aback.

Fifty or a hundred bucks a month sounds like small change. But think about it: if  your monthly income is pretty much fully dedicated to buying gasoline, a car, lodging, food, clothing, utilities, insurance, and other necessaries, you don’t have a lot of wiggle room. Small change adds up…

Let’s suppose, for example, that I decide to pay for the Washington Post and the New York Times, both of which are publications of record and pretty much indispensable for anyone who wants to keep up with non-fake news. I keep the New York Review of Books and The Economist, both of which keep me amused and informed in the absence of cable television, movie-going, and very much restaurant-going. I add Forbes — in reality, I would write that off through the business because it would provide a lot of fodder for the profit-making blogsite that you’re reading as we scribble. But for the sake of argument, let’s imagine I run it through my personal books instead. And let us assume I decide to join the herd and sign up for a smartphone. And let’s also imagine I get suckered into buying pet insurance — not a realistic assumption about yours truly, but one that applies to a large number of otherwise sensible pet owners.

None of these costs, at first glance, appears to be very much. However:

This figure is exactly the amount of my entire Social Security check! And it doesn’t even count utilities and gasoline.

Obviously, to stay within my budget I cannot have all these things. To have item a, I have to give up item b. So, I can’t read say, both the NYRofB and the Washington Post. I can’t have Amazon Prime and Costco. I can’t have Netflix and Amazon Prime.

As a practical matter, I don’t have Netflix…but I’d like to re-up to Netflix because its choices are better. To get Netflix, I’ll have to drop Amazon Prime, which will mean a lot less shopping on Amazon, because it’s cheaper for me to buy stuff locally than to pay the same or more on Amazon and cover shipping.

These little monthly dings look so piddling that many people don’t realize the little stuff is the reason they can’t stay on budget.

So…what would you give up to get a Smartphone?

Nesting and De-Nesting

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So when Linda pointed out that it’s possible to disconnect the Nest gadget from Google’s spy network…uhm, wireless service, I trotted direct to the Nest’s web page to find out how to do that.

Well, on the page she references, they say it’s possible but decline to explain how. Searches of their site with every set of terms you can possibly dream up yield no result.

But there’s a phone number, a chat line, and an e-mail contact — very un-Googley. I’m going to try to reach them by phone this morning and see if they’ll help me get the thing disconnected from the Web. If so, it will save some money: the AC guys are slated to come over on Monday morning to replace the thing with a clunky box-shaped thermostat.

They claim the Honeywell round ones have been discontinued. Oddly, they’re ALL OVER Amazon. So if I can’t get Nest to disconnect me, then I’ll try to get the AC guy to tell me which model to order from Amazon and then put off his installer until I can extract one from that worthy retailer.

So that’s where we are there.

Still mightily sick, but better than before. Last night I grilled up the first full meal I’ve had in 10 days — literally I have NOT been able to eat anything in that long. But finally along about 6 p.m. I began to feel hungry. Hence: ta DA!!! two lamb chops from a disassembled Costco rack of lamb, rescued from the freezer.

In ten days, the chard had run amok, so I hacked that back, wrapped a wad of it in tinfoil, and cooked that on the grill beside the lamb. Squeezed half of one of those Myer lemons over it, for good measure. So those and some rice with plenty of butter made up a decent dinner.

This morning the fierce cough persists. I’m NOT at the weekly business meeting, as last night I was NOT at choir. It remains to be seen whether I’ll be able to go to the wedding next Saturday. But I think if it hasn’t cleared up by then, a hit of codeine cough medicine should suppress it long enough to sit through a wedding ceremony. One of my son’s best friends’ mother is getting married to her companion of many years. Friend has moved to Wisconsin,  unfortunately, so this will be a rare opportunity to see him and his family.

Meanwhile, yesterday I managed to use some of the hours broken free of the Internet in revamping the bookkeeping system. WonderAccountant groaned about the “messy papers” I inflicted on her this year, poor woman. And it is true I’m so disorganized and SO hate paperwork that I do tend to just dump it all on her.

My favorite Excel workbook had become Robertafied: a phenomenon named after a former secretary who could make a complicated Gordian’s knot out of the simplest task. That woman was amazing! Now, though, I understand that phenomenon is a function of age — she was as old then as I am now, and as easily frustrated by computers I am, too.

As a result, one workbook had something like a dozen spreadsheets in it.

So it occurred to me that really…there’s no reason for WonderAccountant (who does my bookkeeping as well as the fine tax job) to have to plow through any other paperwork than the bank statements. WHY is the beleaguered soul getting all those damn AMEX and Visa statements? What a waste of her time, to say nothing of the crazy-making factor.

We now have two workbooks, one for the bidness and one for personal finance. The business’s workbook has two (count’em, just two!) spreadsheets, one for the checking account and one for the corporate credit card. The personal workbook has six: checking account, emergency savings, medical savings (a holding tank for the flurries of checks one gets from Medigap and Medicare), Fidelity, AMEX, and Visa. Since most stores take American Express, the Visa card doesn’t get much use, so most months she won’t have to fiddle with that.

And I came up with a way to flag tax-related entries, so it will be easy for her to find them come next tax season.

In theory she should be able — and mostly does — upload checking and savings entries direct from the credit union to QuickBooks. However, the CU unobligingly fails to tell you who checks are written to. So to identify those, I have to get into the CU accounts, look them up, download an image of each check, and let her know who received check #12345 and why. If I keep the Excel spreadsheets up to date, though, she doesn’t have to keep track of those entries or put me up to finding them — a glance at the spreadsheet on DropBox will clear up any questions she has.

Personally, I can no longer use QB at all. They’ve SO complicated the workings of the thing that  you now need special training to use it. And in fact, each year one of the several professional development courses she takes to keep her license up to date is how to use the current version of QuickBooks. But since I can’t figure out how to make QB work (and don’t trust it, anyway), I would keep my own records in Excel anyway. Sharing those with her makes it easy for her to get answers to whatever mystifications plague her on any given day.

Welp, the coffee is consumed. Somewhere a Nest employee awaits a call from me, with bated breath. And actual paying work awaits, too. And so, away…

Retirement When You’re Raising Your Grandchildren

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2.5 million seniors nationwide are raising their grandchildren. A fifth of them do so with incomes that fall below the poverty line. Whether your grandkids live with you on a permanent basis, accompanied by their parents, or as a stop-gap measure while their parents get back on their feet, raising young children can affect your retirement plans. Because children are not disposable, you should assume that your grandkids will be with you until they are 18. If you’re wrong, you’ll have extra money. If you’re right, you’ll have the funds you need to help your grandchildren make it to adulthood.

Brush Up on Parenting

It’s been a long time since you’ve parented children, and things have changed. From recommendations about safe sleep positions for babies to expectations about discipline and extracurricular activities, it’s time to brush up on your parenting skills. Consider taking a parenting class, and recognize that no one can know it all—even if they’ve raised children before.

 Balance Work and Childcare

One of the first considerations when you’re raising a grandchild is whether to return to work. Childcare is costly, so look into alternatives, such as a state-funded preschool program or aftercare at the local public school. You may also want to consider alternatives to full-time work, particularly if you’re committed to remaining retired. Consulting, selling items on Ebay, or working part-time for a former employer may work well. If you are married, it might be ideal for one partner to return to work while the other raises the grandkids.

 Look Into State and Federal Funding

A number of state programs assist grandparents raising grandchildren, particularly if they are low income. Your grandchild may be eligible for Medicaid or for Temporary Assistance for Needy Families (TANF). There may be other programs available in your state, such as grants for families whose grandparents keep children out of foster care. Consider contacting your state’s department of child and family services to explore state funding options.

There is also a variety of federal assistance programs that may help grandparents fostering their grandchildren.

 Find Additional Income Streams

In addition to returning to work, working part-time, and exploring state funding, explore other options. A home equity line of credit can give you significant wiggle room. You might also consider selling your home, downsizing to a cheaper car, or renting out a room in your basement.

Another option is a reverse mortgage. If you’re over 62 and own your home, you can tap into your home’s equity to fund expenses, renovate, open a college fund for your grandchild, or pay down debt. You don’t have to repay the loan until you sell your home, offering you significant flexibility for financially assisting your grandchildren.

 Scale Back on Expenses

Balancing the financial demands of raising your grandkids is ultimately a simple equation of money in and money out. Some simple strategies for reducing expenses include:

  • Getting rid of cable and watching videos online instead.
  • Cutting down to one car. Services like Uber can take you just about anywhere you need to go.
  • Eating out less, and pre-preparing meals.
  • Finding free entertainment—classes at the community center, walks in the park, free outdoor concerts—instead of costly after-school activities.
  • Buying online whenever possible. Many seniors are reluctant to lean too heavily on technology, but programs such as Amazon’s Subscribe and Save can greatly reduce the money you spend on everyday purchases.

Consult a Lawyer and an Accountant

Taking in your grandchildren may affect your tax bill – sometimes for the better, because you may be eligible for certain tax breaks. As usual with income taxes, it’s complex; you should not fail to talk with an accountant.

Additionally, there are legal issues that you should hash out before certain occasions arise. For example, in my state a child’s parent or legal guardian must sign before the child can get a learner’s permit to drive , for some kinds of medical care, and even to transfer a child to a new school. It’s important to be aware that simply being a child’s grandparent does not give you legal rights. At the very least, you will need a power of attorney. If the parents are putting up their kids with you because of drug problems, alcoholism, imprisonment, or illness, you should be sure you have the authority to OK surgery and dental work, to approve a learner’s permit, and to make decisions about the kids’ education, healthcare, and support. This may entail obtaining legal guardianship or adopting.

PF Notecard #5: Save Early and Often

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advice-on-a-card-1My first job paid $300 a month. Out of that I paid rent, food, clothing, parking, and everything else. Luckily, I didn’t have a car payment — my father had given me a Ford Fairlane for graduation. The thing proved the old jibe about Ford: F-O-R-D stands for Fix Or Repair Daily. But at least it was paid for.

Back in the day, there was no such thing as direct deposit. So as soon as I got my paycheck, I’d walk across the street to the bank and deposit it, in the process putting $10 in a savings account. Those were the days (!) when $10 would buy a nice office dress and $20 a good pair of leather heels. So even though $10 wasn’t 10 or 15 percent of net pay, it wasn’t nothing, either. At the end of the month, there was usually something left over, and I’d move that into savings, too.

So that brings us to item #5 in the personal finance principles that can fit on a notecard.

SAVE EARLY. Start saving the minute you start drawing a paycheck. And set aside a portion of every paycheck in some kind of savings instrument. Preferably more than one of them…

Obviously, as you reach the point where start to earn a living wage, you need to begin saving toward retirement. I’d never heard of retirement when I was working as a receptionist (nor was there any such thing as a 401(k) in those days), but I did want to have something in hand for indulgences and emergencies.

SAVE EARLY also means save a portion of each paycheck before the money hits your checking account. Most employers who direct-deposit your salary can deposit some of it in a savings account and some in a checking account. If you can arrange that, do it. Otherwise, get into your online account with the bank or credit union and arrange a monthly or semi-monthly automatic transfer that will move X percent of your pay to savings every payday.

Another way to SAVE EARLY is to contribute to your employer’s 401(k) or 403(b) retirement plan. A 401(k) is highly desirable if the employer is matching your contributions. If not, you may be better off to set aside a specific amount from each paycheck to deposit in your own Roth IRA and regular brokerage account, since investment options in a company retirement plan may be limited.

Here’s the thing: A 401(k) defers taxes until after you reach retirement age (59½ if you choose of your own free will to take distributions; 70½ when the government forces you to take a required minimum distribution). The theory is that when you retire your taxes will be lower because you’re not earning anything.

R-i-i-g-h-t…

Well, in the first place, you can’t live on Social Security (well…you can, but not well), and so you’ll probably continue to work, even if at much reduced pay. Any such income can easily push you into a higher tax bracket, maybe even into the bracket you occupied before you retired.

In the second place…have you ever heard of taxes going down? Not bloody likely. You will still pay taxes on those withdrawals from the 401(k) — and because the rates may be higher, there’s a good chance you won’t pay any less than you would have, had you paid up-front and deposited the net in a Roth IRA.

And in the third place, when you croak over and your kids inherit your vast wealth, they will have to pay the taxes on the money in tax-deferred your investments. They also will face a required minimum drawdown, starting they minute the inherit the funds. Thus they will inherit only a fraction of the money you worked long and hard to accrue.

Unless your net worth is well over a million dollars, they will not have to pay taxes on non-deferred savings and assets. But they will have to pay the taxes on your deferred savings funds. So if your wish is to leave your kids an estate, they may be better off if you use some other instrument to build retirement savings.

There’s a limit to how much you can put in a Roth IRA. Max it out each year, and then start contributing to a good low-cost mutual fund, such as one at Vanguard or Fidelity. Received wisdom these days: select an index fund, whose goal is to keep pace with the market. Leave the money there and forget about it until you retire.

SAVE OFTEN. You should be setting aside some portion of every paycheck, ideally about 15 percent, and investing it in retirement funds. And then you should put a little more into a bank account for emergencies and indulgences. While I was working, I had two savings accounts: one to cover property taxes, auto and homeowner’s insurance, and emergencies, and another to diddle away on vacations or damnfool things I chose to buy.

And then if anything is left in checking at the end of a pay period, after all the bills are paid, move that amount over to savings, too.

And then do the same with every windfall: every income tax refund, every credit-card rebate, every cash gift of any kind…straight to savings.

Once you’ve accomplished Notecard Item 4, Get Out of Debt, all this is do-able. You’ll be surprised how fast savings accrue when you set things up to move money into savings instruments automatically.

Speaking of Notecard Item 4, here’s another useful SAVE OFTEN trick: once you’ve paid off your car loan, keep on paying that amount to yourself. Stash the equivalent of a car payment in a special savings account, and don’t touch it. In four or five years, you will have accrued enough to buy your next car in cash.

In summary then: First pay off debt. Then put an established amount into savings on a regular basis.

Don’t wanna work Monday

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So I should be, at the very goddamned leastest, posting links to posts advertising my wares on FaceBook (two business pages, several “groups,” and my timeline: a half-dozen separate time-consuming mind-numbing actions), Twitter, Google+, and LinkedIn.

I should be hustling some new business for The Copyeditor’s Desk.

I should be writing new copy for Plain & Simple Press.

I should be writing some sort of personal-finance post for Funny about Money.

I should be trying, once again, to get into Goodreads so as to hustle my wares there, even though that cause appears to be too forlorn to waste more time on.

But y’know what?

Yeah. That’s correct:

i…

don’t…

wanna…

If it looks like work, if it sounds like work, if it smells like work, if it feels like work: I don’t wanna do it.

That’s not to say I’ve totally diddled the day away, so far.

compostThe new cute little composter arrived. It’s “Cute” (the maker’s term) because it really is quite small: maybe a third the size of the one the fake beekeeper destroyed.

At first as I unpacked it from its cardboard box, I was disappointed. Then thought…waaaitaminit here. Let’s not be stoopid about this.

As a practical matter, smaller is probably better. First, it’s a lot more manageable. The old one, when it was full, could be almost impossible to turn, so it took forever and a day to compost stuff — and I had to reach in there and toss stuff by hand. This thing will be easy to roll even if it’s full.

Second, the manufacturer has made two exceptionally smart improvements in the thing’s design. a) The lid and its opening are MUCH larger compared to the overall size of the tub; and b) they’ve developed a hinge held together with a long, sturdy pin. If you remove the pin, you can lift the lid off the tub, making it easy to lift or dump the compost out.

So. I decided I don’t just like the Cute Composter, I downright love it.

The little guy is now in his place by the side of the house, with a pile of leaves, exhausted potting soil from dead plant pots, and kitchen trimmings in his belly.

Yay! We soon will have compost, and this fall we will have a vegetable garden again, for the first time since the memory of Fatlady runneth not to the contrary.

Gerardo just blew in and blew out; while he was here, he had the underlings gather up some relatively seed-free dry leaves and deposit them in the little composter. It’s full just now, but I expect those will pack down as they start to degrade and as I sprinkle a little water in there. By planting time this fall, there should be some nice compost for the pots that will hold chard, lettuce, spinach, mâche, and some LGOs.

The writer’s group I belong to puts out an annual anthology. They’ve put out a call for submissions — theme has to do with “celebration.” I have an essay that fits, though it fits in a distant way.

So I diddled away a fair amount of the morning editing and tightening that — their length limit is 3,000 words, and the lash-up runs to a little over 3400 words. Managed to cut it down a bit. Last year they accepted an essay of about 3400 words, but they had a different editor. WTF…we’ll see what happens. Nothing ventured…

My son has wondered if he should throw his $20,000 emergency fund at a refinance of his house, given that this could cut his mortage payment by about 300 much-needed dollars a month. His dad advised him absolutely positively not to do that. When the subject came up yesterday, I seconded his dad’s motion. Discussion ensued; the question was left up in the air.

So I called Wonder-Financial-Advisor today. He thirded the motion. We believe he should hang onto the cash, given the still amazingly low interest rates.

The dad has urged M’hijito to make no move until after his 102-year-old grandmother passes away. The suggestion, never fully articulated, is that money could be forthcoming from the estate. Said dad is in charge of the grandmother’s finances and so should have some idea what he’s talking about.

But the question is: WHAT estate?

The old gal has been living in a nursing home for many years. She’s blind and deaf. By now whatever money she might have accrued must have been absorbed by her care. How could there be anything — ANYTHING — left?

Well, I personally don’t think there is any such thing. But why the ex- would advise my son along those lines not once but several times…hm? It escapes me.

Almost.

The immortal grandmother was the daughter — the only child — of a man who owned a lumber company that served Denver, Colorado. He was a prominent local businessman. When he died of advanced old age in 1977, his funeral was overrun by well-wishers from the business community. A LOT of people showed up.

I don’t know what happened to that business. But if he sold it, dollars to donuts he sold it for a substantial profit.

His background was Amish. As that factoid might lead you to imagine, he lived quietly and conservatively. Not sparsely, but frugally. I suppose it’s not outside the realm of possibility that there was a trust. That could have protected the estate from the clutches of the nursing home’s collection agents.

And if that’s the case, there could be a small amount of money there. It wouldn’t have to be much to solve my son’s financial problems, such as they are.

So I diddled away some more of the day on the Internet, trying to track down the old man and, mostly failing that, trying to find some trace of the business.

Total fail on the latter. Inconclusive on the first. Became bored and so brought that to a halt.

It’s now the middle of the afternoon, and I still do not feel up, in any wise, to working. and so…

Away.

 

 

 

Money Happens!

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SDXB used to say, when I was having an attack of Bag Lady Syndrome, “money happens.” And so it has come to pass…

Unlocked the Fort Knox mailbox this morning to discover a notice from the community college district saying a check they’d sent last year had never been cashed. Would I please sign and return the enclosed form, so they can send me a new one?

It’s $568 and change!

Well, the Mayo has been sending me bills for some $650. Medicare and Medigap so far have remitted only about $340, and it’s been long enough that by now if they were going to pay up, they should have. But you never know…

With Medicare & Medigap reimbursements, you really do never know: I have no idea how much they’re going to pay (most of it, I gather from the mountains of paper they’ve sent, but it’s incomprehensible, so who knows?), no idea how much the Mayo will stand down from, and no idea when any further payments are going to show up.

So I figure what I’ll do is pay the Mayo the amount that has arrived so far, put $310 from the “found money” aside for future reference, and keep the remaining $260 to cover my own bills.

This is good, very good. It’ll pay the $175 for the art class, and then some!