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Stress control

A step to improve the finances

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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!

If next payday doesn’t come…

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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, 2008 – 10:27 AM

The value of reconciling your check accounts

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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, 2008 – 07:01 AM

Report: Does hypermiling work for a Toyota Sienna?

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In a word: Yes.

Last night on the way home from work, I heard on the news that the price of oil had jumped another $10 a barrel, and that gas prices are expected to reach $5 a gallon by July 4. Even though I was down only a quarter-tank of gas, I figured I’d better stop by Costco to top off at a price we’ll likely never see again.

At $3.939 a gallon, Costco’s gas had jumped since SDXB filled up five hours earlier. The lines stretched to the street; 25 other drivers had conceived the fill-up idea before I did.

My car took 4.6 gallons. That amount had carried it 118.8 miles, for an average 25.8 miles per gallon.

Not bad, for a lumbering minivan whose year 2000 EPA estimate was 18 mpg in town-a figure we know to have erred on the high side. The gummint’s revised estimate is now 16 in the city and 22 on the highway, for a combined 19 mpg. Since about half the 118.8 driving miles took place on the surface streets, we might take the EPA’s combined mpg as what we could expect. So, using a very basic seven frugal driving techniques gleaned from the hypermiling set, I managed to squeeze an extra 6.8 miles per gallon out of the old tank without much practice or expertise.

Next steps:

  • Check tire pressure; inflate to maximum
  • Use lowest recommended weight oil for next oil change
  • Change air filter

Frugal driving = stress relief

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It ought to drive you bats to dork around with your driving habits, which have served you just fine over lo! these past 45 years, in penny-pinching resolve to save a gallon of gas here and a gallon of gas there. Focusing on every mile per hour and wondering whether the tattooed fright behind you will brandish his Uzi if you slow his blast-off from the red light should leave you grinding your teeth. It’s only common sense, right?

No. Paradoxically, the truth is quite the contrary. For the past week or ten days, I’ve been trying out hypermiling techniques, just to see if $4.00 can be stretched to cover a little more of my 38-mile round-trip commute. One issue the hypermiling advice has brought to my attention is that what I call “assertive” driving is actually…well, it’s true: aggressive driving. Also, it’s possible that flying down the freeway in the pod that habitually moves 10 or 15 mph over the limit could, maybe, be called “speeding.”

Since I’ve taken to following just a few steps to save gas, the hated drive has mysteriously become a lot less hateful. The stress of wending my way across the surface streets and then competing (yes, competing) with other wired-up drivers across 18 miles of freeways has gone away. If it doesn’t matter whether you get there first and it doesn’t matter whether you get across the city at 65 or 75 miles an hour, then suddenly it doesn’t matter whether someone cuts you off! It doesn’t matter whether slower traffic wanders right in front of you. And it doesn’t matter that you can’t see around the truck ahead of you, because seeing around it wouldn’t make you go any faster.

Removing all these frustrations that used to matter, at one psychological level or another, causes driving to morph from mildly annoying to fairly relaxing.

Now, here’s the weird part: Not only does frugal driving relieve stress, it gets you there just as fast as jerking around and racing down the road will! In fact, it may get you there faster.

First time I tried a couple of hypermiling techniques, I noticed I got all the way out to campus in about 20 minutes. Fluke. Gotta be a fluke: it was coming up on Memorial Day weekend. All the moron drivers must have knocked off a day early and gone on vacation. Next trip: 20 minutes flat. Next day: think I actually got there in under 20 minutes. But, uhm…this is a 30- to 40-minute drive under the best of circumstances; two hours on a bus.

Why? For one thing, it’s in the interest of hypermiling to stay on the freeway even if traffic is moving slowly, as long as it’s not stop-and-go, because you don’t want to have to accelerate from a standing stop (i.e., you don’t want to stop at intersections). So, instead of dropping onto the surface streets at the earliest sign of a back-up, I’m hanging in there to see what develops. Often freeway traffic will slow to 30 or 40 miles an hour but then after a few minutes go right back up to speed. So I’m making more of my trip at 55 mph, nonstop, than I would if I traveled half the way on the surface streets at 50 mph but stopped at red lights, slowed for a school zone, or got stuck behind a school bus.

It may also be that second-guessing the speed of various lanes somehow slows you down. Some mathematically inclined bloggers look at traffic in terms of fluid dynamics and argue that driving slower and keeping a wide space between you and the car in front of you actually forces traffic around you to flow more efficiently. True? Not knowing, I’d hesitate to state, for fear of being erroneous.

Here are the frugal driving techniques I’ve been using:

  • Try to avoid applying the brakes any more than absolutely necessary. Watch the traffic flow ahead and, when red lights start to glow, coast to decelerate. Try to reach traffic stopped at the light as it’s beginning to move, so you don’t have to start up from a dead stop.
  • Accelerate from a stop slowly. It’s a car, not a jackrabbit.
  • When starting from a dead stop, allow the car to idle forward for a second before stepping on the gas.
  • Use the cruise control to maintain speed on the freeway and on steadily moving surface streets, and use it to accelerate and decelerate. Use the “coast” and “acc” functions to slow and speed gently. Try to keep your foot off the gas pedal as much as possible. But n.b.: don’t use cruise control on an uphill grade.
  • When approaching a grade, speed up a little (stay sane about this) to build momentum; then allow the car to slow as it climbs. Use the downhill grade to get back up to your cruising speed before resuming the cruise control.
  • Never drive faster than 60 mph on an urban freeway. Try to keep your speed at around 55 mph. Stay in the slow lane and take it easy.
  • If it looks like you will have to stand for more than 30 seconds (for example, at a long stoplight, in a gas station line, at a railroad crossing), turn off the engine.

Hypermiling includes several other strategies, some of which apparently aren’t very safe. We’ll see soon enough whether the seven techniques above work to improve my Sienna’s 18 mpg performance. I’ll let you know the next time I fill up!

1 Comment left at iWeb site

Value For Your LIfe

Great post!These are some gas saving tips I haven’t seen repeated over and over again elsewhere.I always go easy on the brakes (as a result it also makes my brakes last almost twice as long as average), and we have just gotten into the habit of driving more slowly and have noticed a significant difference.I will defintiely try some of the other hypermiling techniques you mention here!

Tuesday, June 17, 2008 – 09:56 AM

Shaking off the blues

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Of late, I’ve been sliding into the Slough of Despond.

It’s all freaking depressing, what with the dog ailing, hundreds of dollars in vet bills piling up, plagiarizing students (and more recently, a plagiarizing client), barely literate university seniors, the economy, the mess in Iraq, the horror in Burma, the meanness of the Democratic presidential campaign when we so desperately need leaders of good will, the neighbors having fits about a few enterprising burglars, and the general loneliness of onliness.

Time to shake that off!

Here’s the plan: come up with several things I would like and do them. These things have to

  • be within reason;
  • be possible to do in a fairly short time; and
  • create a change, no matter how small, in the routine or the scenery.

So. Here are some things that would brighten my days:

I would like to keep my house cleaner!

  • Start with a real spring housecleaning:
  • Oil the kitchen & bathroom cabinets.
  • Clean & condition the leather furniture.
  • Scrub the dog nests off the walls.
  • Wash the windows.
  • Clean the dust off everything.

I would like my nails to quit splitting.

  • Go to a salon and get a silk wrap or have product applied.

I would like the front yard to look less cluttered.

  • Put Gerardo up to digging out some of the extraneous plants.
  • While he’s at it, persuade him to clip off the frost-killed bougainvillea branches I can’t reach.

I would like to keep my car cleaner—gratis.

  • Use early Sunday a.m. to wash car.
  • Use shop-vac to wet-vacuum areas where coffee has spilled.

I would like to establish a second income stream that will bring in $12,000 to $18,000 a year by the time I retire.

  • Go in with T.M.; frame the proposed business plan.
  • Attend ABPA meetings; schmooze.
  • Figure out how to increase blog traffic; monetize Funny about Money.

Really, there’s nothing we can do about the larger issues around us. We can’t change the damage an incompetent and craven leadership has done to the economy and to our country’s place in the world; we can’t talk sense into any of the candidates who hope to take over that leadership; we can do little or nothing to help the Burmese or make up for the failures of our educational system or get us out of Iraq; we can’t even stop burglars from burgling. Whatever changes make life more tolerable happen on the individual level. Voltaire was right:

Il faut cultiver notre jardin.