Coffee heat rising

2008 Financial Strategies: What worked and what didn’t work

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As the year winds down, this is a good time to take stock of the various events, schemes, and impulses that drive our personal finance strategies, to consider which ones worked and which failed, and to think about how we can use experience to plan next year’s financial direction.

We all had our ups and downs. As we know, it feels like the “downs” took the race. But as I look back over my 2008 personal finance adventures, I see that quite a few ideas and strategies were successful. Like everyone, I took some big hits; some of those were beyond my control, or effectively so.

My Best 2008 Financial Strategies

Bar none, building a second income stream was the smartest move I made this year. At the start of the spring 2008 semester, I agreed to teach two sections of Writing for the Professions, a.k.a. “freshman comp for juniors and seniors.” When, hours before classes were slated to begin, I learned that both sections were double-enrolled and I was actually taking on the equivalent of four sections—the workload of a full-time lecturer—I threatened to walk; backed into a corner, the dean agreed to pay me for four sections.

It was a horrible job, but the pay was as much as I hoped to earn on the side during the entire year. And because the Great Desert University canned all its part-time faculty in the fall semester, the serendipitous overload meant that I made my 2008 side-income goal in spite of the faltering economy.

Starting a side business independent of GDU seems to have been a wise move, too. Between The Copyeditor’s Desk and my own freelance work, I have made an extra $1,000 to $1,200 a month since late last summer. If I’m laid off and so forced to begin taking Social Security now instead of waiting until full retirement age, this will be about as much as I will be allowed to earn. The two income streams—editorial work and Social Security—may (with luck) cover my expenses until I can draw the full amount of Social Security income and forestall having to draw down my sadly depleted savings.

Stashing all my post-tax side income into savings instead of using it to pay down the $23,000 owing on the second mortgage I took out to renovate the Investment House seems to have been a wise move. At the outset, I was uncertain whether I would stay in my own house, given the skyrocketing crime in the depressed apartment complexes across 19th Avenue, the unholy mess across the street from me, and the growing presence of undesirable renters. If I sold, the loan would be paid from the proceeds, and I might be better off with the cash in hand from the side jobs. As the economy began to collapse in earnest and more and more credible-sounding layoff rumors circulated, I was glad I had the 23 grand to double as an emergency fund.

Moving the savings from the side jobs out of stocks and into the money market. As it started to appear likely that I would need the cash to live on, I yanked the side-job money out of Vanguard’s Wellington and Windsor II funds, which were just beginning to stumble, and put it where I figured it would be at least moderately safe. Since then, Vanguard’s funds have followed the rest of the stock market into the tank. At least I managed to hang onto that much of my savings.

Restructuring my monthly budget to put biweekly paychecks into a “pool” account from which contributions are shifted to “piggy-bank” accounts containing enough to cover monthly expenses. This strategy has trumped the wacky disjunct between biweekly pay (which allows the university to keep a chunk of its employees’ pay in its coffers, earning interest on unpaid salaries while the flunkies try to figure out how to stay solvent) and the reality of monthly billing cycles. Over time, it has the effect of accruing part of the two so-called “extra” paychecks (which are not “extra” but simply represent six months’ worth of unpaid salary disbursed out of synch) in the pool, padding the emergency fund a bit.

Continuing to set aside the $200 a month I was saving toward the Investment House Renovation Loan self-escrow account, even after enough was stashed to repay the debt.This effectively doubles my monthly after-tax savings and has restored my savings account to its former, pre-disastrous-expenses glory. That also helps plump up the emergency cushion to fall back on in the event of unemployment.

Taking time to think through how I would survive after a layoff and to build a proposed post-layoff budget. As rumors of impending layoffs intensified, the Bush economy slid into its catastrophic collapse. It became clear I will not be able to use what little remains of my life savings to support myself in retirement; not for a long time, anyway. The prospect that I might soon be out of a salary forced me to figure how I could get by on a fraction of full Social Security—$1,040 a month, as opposed to the $2,094 I would get by waiting until full retirement age—plus whatever I could scrounge by freelancing and taking on part-time teaching jobs at the community colleges.

Although it would be very difficult, it appears possible that I could get by for a year or two without having to sell my home. After that, I can raid savings to return the amount I’ve drawn from Social Security to the government, which will reset my SS payments to the full retirement figure. That should keep me going until the market improves enough to revive my savings. The benefit of this exercise is that I now feel fairly confident that I will survive the recession, come what may.

My Worst 2008 Financial Strategies

Leaving savings in the stock market as it became increasingly evident that the Bush “recession” is no ordinary recession but indeed will probably devolve into a depression. My savings are conservatively invested, about a third in stocks, a third in bonds, and a third in the money market. Bonds, as it developed, provided little or no protection in the crash, and although Vanguard’s Prime Money Market fund has not broken the buck, we’ve seen that losses in the money market can happen.

If I’d had a crystal ball, I would have yanked every penny out of the market and stuck it all in laddered CDs. Lacking any such tool, though, I followed conventional wisdom and stayed the course. This, we can now see, was probably a mistake.

Jumping the gun on refinancing the Investment House. M’hijito and I got a much improved interest rate on the mortgage refinance we took out earlier this year for the house the two of us are copurchasing. However, had we waited a few months, we might have landed a 4.5% rate.

Maybe not, too: at this point we’re upside down on that house, and it’s questionable whether the credit union would give us a loan against what the property is now worth.

The problem with the refinance is that to get the 5.3% rate we obtained, we had to take a 30/15 loan. At the time, we figured the market would turn around before 15 years passed; in the event that we had not sold the house by then, we would have no trouble refinancing the remaining principal.

I no longer think that’s true. IMHO, the real estate market will not recover for another eight to ten years. By that, I mean we will not break even on the sale of that house anytime in the next decade. If I’m right about this, we may not be able to sell the house for a profit after 15 years. This will force us to refinance or to take a bath on the sale. And if by then mortgage rates are in the double digits, as they have been historically, we may not be able to negotiate a monthly payment that would be covered by rental income. Thus the 30/15 mortgage terms could lock my son into the house at a time of his life when he’s likely to marry or find better job opportunities in other parts of the country.

I failed to contest the county’s property tax valuation. This resulted in a breathtaking tax increase on a house whose value is less than the county claims. The reasons for my lapse were a) the county’s statement is well-nigh incomprehensible and I had no way of assessing whether it was anything like accurate, nor could I tell what its effect on my taxes were going to be (tax statements arrive several months after the property revaluation statements); and b) the window for protesting lasts only a couple of weeks after the valuation statements are mailed, so that by the time you realize what those statements mean, it’s too late for you to do anything about them. Clearly, I should have protested as a knee-jerk reaction, even though I had no idea what the statement implied.

All in all…

I’m way worse off financially than I was at this time last year, that’s for sure. So, I expect, are most Americans.

On the other hand, so far I still have a job. I’ve managed to salvage some of my savings—enough to pay off the small loan against my house, if push comes to shove. Our little editorial business has a couple of regular clients, and we’re working on landing some more. At this point, every week that passes without a layoff puts me in a better position to survive without a salary.

My plan… 

• …starts with continuing to stash as much as possible into savings.
• That dovetails with cutting back on spending so that I’ll be accustomed to living on less, should I find myself unemployed. As long as I’m still working, savings from the spending cutbacks will go straight to the emergency fund.
• Instead of trading in my 10-year-old vehicle this year, as I would normally do, I’ll drive that car until it falls apart like the minister’s one-hoss shay.
• This spring and summer I’ll continue to try to build Copyeditor’s Desk income; if that doesn’t pan out, in the fall I’ll sign up to teach composition at the community colleges. 
• And finally: Funny about Money is doing surprisingly well, considering that I don’t work very hard at it. The site’s page rank is 4, and its most trafficked post has a page rank of 2. I will try to focus Funny more sharply and develop its readership more broadly, and if it continues to draw readers, I’ll consider monetizing it.

Moments of Fame

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The 158th Festival Frugality is live at the Well Run Dry, whose proprietor leads with a nice discussion of what “frugality” really means. Funny’s post on “real wealth” appears in this week’s round-up, along with a number of posts that suggest Well is not alone in thinking about the meaning of wealth and frugality. I enjoyed Miss M’s rumination on the size of her house (which is larger than the two-bedroom apartment I once found plenty roomy) at M is for Money. Mighty Bargain Hunter shows that he’s a pessimist after my own heart in predicting a decade of bear markets and hard times; he offers some survival tips. And I really liked Jim’s advice, at Blueprint for Financial Prosperity, to refrain from giving people high-maintenance gifts.

This week’s Make It from Scratch Carnival at Stephanie’s Make It from Scratch site. Uh oh! This looks dangerous: TRIPLE CHOCOLATE biscotti, from The Thinking Mother! The photo alone is to die for. Mary at Simply Forties offers an original and very interesting recipe for shrimp and quail baked in a pie. Oh My Aching Debts has a neat and simple idea for making your own dishwasher detergent, plus several other DIY household products. Be sure to visit the carnival for the many other great ideas and recipes presented there!

Read your credit card statement carefully!

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Whoa!

Here we are, just getting our Christmastime bills. What should we notice on our Costco American Express bill but that the closing date has magically advanced from the usual 20th of the month to December 21.

Isn’t that cute?

If you are one of the retrograde frugalists, like me, who budgets a specific amount per billing cycle for charge card purchases, you might have you carefully waited until the day after your billing cycle customarily closes to go out and rack up a bunch of Christmas presents, planning to pay for them out of your January income. In that event, your gift from American Express would be a big fat finance charge.

Luckily, the last charge I made in the November-December cycle came on the 17th. I was under the weather around the 20th and 21st and so delayed shopping for last-minute presents until the 23rd and 24th.

If I had felt better, I almost certainly would have gone out on the 21st, thinking the billing cycle closed on the 20th. And I would have been screwed, screwed, ge-screwed, because that would have pushed me way over budget. I couldn’t have paid my bill in full this month.

Sumbitch.
Credit card companies are not your friends.
(Just in case you hadn’t noticed that yet…)
😯

Frugal Household Hack: Conserve dish soap

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Dish detergent comes in a soft-sided bottle with a squirt nozzle for a reason: so you’ll use plenty of it and soon have to go out and buy a new bottle. When you tip the bottle into the sink and give it a squeeze (and maybe another and another for good measure), you use several times more of the stuff than necessary. Truth to tell, a little liquid dish detergent goes a very long way. So, it behooves you to conserve dish soap by transferring it into a container that dispenses it more frugally.

For quite a while, I used a cheap glass cruet (a vinegar or oil cruet) purchased at World Market (Cost Plus). This worked fine, except that I was always concerned that I might drop the thing in the sink, breaking it and creating a nice mess to clean up. And also, for reasons unknown in the realm of common sense, dish detergent is laced with wax, the better to clog up your drain and any container that collects a residue around the lid. This is why you’ll often find a gummy layer around the top of a detergent bottle: that goop is built-up wax. This kept collecting inside the cruet’s stopper, so I’d have to take the it apart and wash it out in running hot water every few days.

One day it occurred to me that I could put the stuff in a squirt bottle. The pressure of the squirter would force the liquid through firmly enough to push the wax on through, or so I hoped. And a single squirt should be all that’s needed to clean a frying pan.

Ta DAA! Turns out both of those are so!

dcp_2284I poured a bunch of clear detergent (I favor Ivory but couldn’t get it at the Safeway at the time I first tried this experiment, so used Clorox’s “green” variety) into a heavy-duty spray bottle. Yes, the viscous liquid will move through the squirter. And yes, just one or two squirts is all you need to clean a frying pan or greasy dish. And no! so far, after a couple of months the squirt nozzle has not clogged!

Only drawback is it’s not very pretty. But then neither is a detergent bottle. Keep it under the sink.
🙂

Making less…less

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Is there no end to merchandisers’ ingenuity in dreaming up ways to get us to pay more for less?

We all know that many a 32-ounce container no longer contains 32 ounces, even though we still pay for 32 ounces. But here’s an improvement on that angle: make the stuff inside the container weaker, so you have to use more of it to get the same result.

floatingflowersThe chemicals used to test the acid, chlorine, and alkalinity balance in swimming pool water come in small plastic squeeze bottles. You measure out a certain amount of water and then add a few drops of the dye used to test the concentration of the desired chemical. The two that you check most often are the acid and the chlorine levels. To test the acid level, you add four drops of phenol red to a small vial of pool water; hold it up against a white background and you can easily judge the water’s pH, which ideally should be around 7.6. A test kit, which comes with several testing chemicals and vials, gives you a table that shows you how much acid you need to add, depending on the size of the pool.

Well. Home Depot used to sell phenol red in one-ounce jars. Four drops would stain the test water a deep color, easy to assess.

Last time I went to the Depot to replenish the stuff, suddenly phenol red was available only in 1/2-ounce bottles. Ohhh-kayyyy…. So I bought two, by way of cutting the number of trips to Home Depot. Get it home, drip it into the water, and find the result so pale I can’t even begin to figure out what the pH level might be. It’s almost like looking through plain water.

I already know this is true of the phenol red sold at Leslie’s, which is why I refrain from buying the stuff there. But Leslie’s employees at least have some training in pool maintenance and can answer questions, sometimes even correctly. So next time I’m there I ask if they can sell me some phenol red that works.

Noooo, says the technician. But these great pool dip sticks are better.

Don’t think so, I say. I’ve never been able to get an accurate reading from those things.

Oh but these are soooo much better. Here. Try these.

So I buy the paper dip sticks, which do produce a brighter color but which don’t give you any clue—nay, not ONE CLUE—to how much or how little acid you need to add to balance the pH. Whatever result you get comes about by guess and by God.

Next time I’m in Leslie’s precincts, I complain about this.

Well, says the tech, you know…you don’t have to stop at four drops.

Say what?

Sure! Watch this!

He dumps six or seven drops into the vial. It pinks right up to a readable color.

You can add a fair amount more than the instructions say without interfering with the read-out.

Uh huh. Why didn’t your guy tell me that when I came in and asked about it, instead of selling me these useless test strips?

Because you didn’t ask?

Kewl. You have to know the right question to ask before you can ask it, don’t you.

You see what’s happened here: not only is the manufacturer distributing its chemical in smaller bottles, the better to charge consumers more, but the product itself has been diluted so that you have to use almost twice as much to make it work!

Rip-off artists in action.

Decluttered and recluttered

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PF bloggers hither, thither, and yon offer as a current gem of instant wisdom that when you buy a new clothing item, you should rid your closet of one, too.
😀

Did them one better today, I did. Actually, I did ’em 6.14 better.

This is the time of year when I like to make a run on Talbot’s, one of the very few clothing stores that sells pants that fit around my capacious rear end without leaving six extra inches of fabric around the waist. Talbot’s actually has two major sales each year, one after Christmas and one in the dog days of the summer. The summer sale, however is N.A., because their buyers’ taste in warm-weather togs is incomprehensible: runs to polka-dots and pastels. But their fall and winter clothes are always classic, handsomely tailored, well made, and fully worth whatever price you pay for them.

Because Talbot’s has moved out of the central city, the choice for the likes of moi was to journey to Scottsdale or to the far northwest valley. Decided to head to the north and west, because SDXB agreed to meet me at the nearby fancy grocery store for a cuppa. After leaving him, I dropped by Chico’s and B’Gauze before hitting Talbot’s (all in the same strip shopping center). Found nothing en route.

Talbot’s was having a 40% sale off already marked-down merchandise, plus an additional 40% off the cheapest item you purchased (“cheap” is a relative term in a joint like this). So, this brought the prices down to almost within reason. w00t! I got TWO blouses, TWO pairs of pants (one washable wool, one washable velour) that look like they were tailored for my bizarre figure, two knit pullovers, and a nifty knit vest: SEVEN highly serviceable and reasonably good-looking items. The bill was bracing, but only about half as bracing as it would have been had I purchased the stuff at presale prices.

Well, my New Year’s resolution is to start looking less like a slob and more like a normal human being.

I’ve fallen into the habit of wearing dungarees to the office…and just about anyplace else I happen to wander. This is partly because our office is isolated and inhabited solely by graduate students, and so there’s really no need to wear anything other than blue jeans, and partly because of my general depression: there’s no one in my life to care what I look like, so why should I care?

Gotta quit that.

All my jeans and easy-wash no-iron tops have resided in the master bedroom closet. Dressier clothing has been stashed in the closet of a bedroom that serves as the TV room, with the result that when I’m racing to get out the door, I grab whatever comes to hand from my bedroom closet: generally unironed jeans and a top that grows shabbier with each laundering. Occasionally I show up on campus in my decrepit gardening shoes, having forgotten to change to newer Danskos, a circumstance that I suppose ought to embarrass me.

So this afternoon when I staggered in the door bearing the weighty haul of the afternoon’s hunt, I went straight to work: dragged every piece of clothing out of the bedroom closet and threw out every stitch that was tired, ugly, or didn’t fit. Then I headed for the TV room and emptied that closet, too: tossed out another mound of old, dusty, tired, unsightly, and ill-fitting costumes from that cache. Then I transferred the jeans, the gardening clothes, and the swimming coverups to the TV room closet and filed the grown-up clothes in the bedroom closet!

And resolved that henceforth the jeans will be worn only around the house and maybe to Costco or the grocery store. Socially acceptable outfits will be worn to the university, to meetings, and to upscale malls where shopgirls won’t wait on you if you look like you’re one of the Clampitts.

I kept track of the ejected stuff: four pairs of jeans, three pairs of better slacks, two knit tops, eleven better tops, eight dresses or skirt/top separates, one sweatshirt, three better skirts, eight miscellaneous items, one sweater, and one pair of shoes, for a total of 43 items. Figuring according to the late successful yard-sale prices, that’s a potential $344 worth of resale clothing: about $20 more than I paid for today’s finds.

Hm. Should I try to yard-sale all this junk? Craig’s List, maybe? Naaahhhh…. Come Monday, off it all goes to St. Vincent de Paul.

But consider that: 43 is to 7 as 6.14 is to 1. (I think.) For every one new item I dragged into the house, I’m dragging more than six off to the charity. The used-clothing value of the outgoing stuff exceeds the retail price of the spiffy new loot.
Decluttering on steroids!