Category Archives: Financial

The area of self-reliance dealing with increasing and controlling ones financial resources to both meet immediate needs and long-term objectives.

And I’m back. Almost.

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It’s been a while. I issued a pre-emptive mea culpa a while back in anticipation of some surgery I had coming up and suggested I might not be posting until it was all in the rear-view mirror. Well, it’s all nearly in the rear view mirror now, and I’m trying to gear up to come back.

So, what have I learned over the past couple months? Well, for one, to quote Count Rugen from “The Princess Bride,” “If you haven’t got your health, then you haven’t got anything.” Knowing for the past couple years that this surgery was possible I’ve made a conscious effort to exercise more, eat a little less, and generally be in better health. I’m fortunate in that my health has never been that bad to begin with, but good health with really helps when facing major surgery. The average hospital stay in my state for the type of surgery I had is six days. I was there four. It may be that I was just so ornery they wanted to get rid of me, but I’ll claim a victory for exercise and eating right.

But even then, once out of the hospital I was under significant restrictions on my physical activity. I wasn’t allowed to drive (not a big deal right now, as I seldom go anywhere anyway), lift anything over ten pounds, and had to avoid reaching very far from my body. Just those few restrictions were frustrating. It’s amazing how much of my normal activity violates at least one of those last two restrictions. I’m fortunate enough to have a desk job that I was already doing from home, so I could get back to work only a week after returning home, but so many other things I wanted to do, or felt I should do just weren’t allowed. I’ll admit I’ve felt pretty useless.

So I can only imagine what it’s like to be someone whose health in general places restrictions on their activity. Value what health you have, and do what you can to maintain it, even improve it. It’s difficult to be self-reliant without good health.

On a similar note, I’ve learned that monitoring your health is important, too, for other reasons. Because I’ve known this was coming I was able to be prepared. As a contractor, I’m on a high-deductible insurance plan. But since I knew this surgery was coming I’ve spent the past couple years saving up enough to cover it.

By contrast, during my recovery period my son crashed while mountain biking and ended up in the emergency room. Frankly, that’s something I should have predicted and tried to save up more money for, but I didn’t. I wasn’t quite so prepared for that one. But thanks to this gentle reminder (which could have been much worse), I intend to be next time (knock on wood, spit three times over my shoulder).

Lesson three was the gentle reminder that sometimes we just can’t be self-reliant. I’m grateful for the wonderful medical staff who took such good care of me. I forgive you for waking me up every two hours; it was your job to make sure nothing was going wrong. Aside from than that, you guys totally rocked! Thank you! And thanks to my wife and my two boys at home who picked up the slack for all I couldn’t do. And also for all those who offered their help. As grateful as I am there wasn’t much my family couldn’t handle, I’m glad to have more family and friends gladly standing by to help.

This week I’m scheduled to see my surgeon. If all has gone well, my restrictions will be removed and I can start getting back to normal. I’ll still have to take some things easy and work my way back, but I’ll get there. One of the first things I need to do is get back on track with our self-reliance plans. And hopefully that means more posts in the works.

Asking the right questions

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Nick True at Mapped Out Money often has good budgeting and personal finance advice. This episode looks at the questions we ask ourselves regarding money and suggests maybe we’re asking the wrong things.

I find there’s a lot of value in what he says, especially in comparing yourself to others. My wife and I could drive ourselves crazy if we were to compare our grocery budget to others. We’re vegans, which tends to be more expensive for base ingredients, but we don’t eat out very often, mostly because of the expense. On a strict analysis that doesn’t make sense. If we’re really interested in saving money on food, why shell out for vegan food? Or, if we’re so interested in health, why not go even more expensive and buy everything organic? (That’s not why we’re vegan, but that’s another story for another time.) The answer lies with our values. We do value vegan living, and we also value saving money. This is the balance we’re comfortable with.

At the end of the day, if we don’t live in accordance with our values we’re going to be dissatisfied with whatever other choices we make. Granted, values can–and sometimes should–be changed. If your primary value is to live as large as possible regardless of income, then you’re headed for trouble and either need to to not disregard income so much or decide not to live so large. But on the whole, money needs to serve our needs and not the other way around.

Who is this really for?

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I recently came across an address by Robert D. Hales that shared valuable insights into money and how we perceive it. I thought I’d share some of it here.

All of us are responsible to provide for ourselves and our families in both temporal and spiritual ways. To provide providently, we must practice the principles of provident living: joyfully living within our means, being content with what we have, avoiding excessive debt, and diligently saving and preparing for rainy-day emergencies.

…

How then do we avoid and overcome the patterns of debt and addiction to temporal, worldly things? May I share with you two lessons in provident living that can help each of us. These lessons, along with many other important lessons of my life, were taught to me by my wife and eternal companion. These lessons were learned at two different times in our marriage—both on occasions when I wanted to buy her a special gift.

The first lesson was learned when we were newly married and had very little money. I was in the air force, and we had missed Christmas together. I was on assignment overseas. When I got home, I saw a beautiful dress in a store window and suggested to my wife that if she liked it, we would buy it. Mary went into the dressing room of the store. After a moment the salesclerk came out, brushed by me, and returned the dress to its place in the store window. As we left the store, I asked, “What happened?” She replied, “It was a beautiful dress, but we can’t afford it!” Those words went straight to my heart. I have learned that the three most loving words are “I love you,” and the four most caring words for those we love are “We can’t afford it.”

The second lesson was learned several years later when we were more financially secure. Our wedding anniversary was approaching, and I wanted to buy Mary a fancy coat to show my love and appreciation for our many happy years together. When I asked what she thought of the coat I had in mind, she replied with words that again penetrated my heart and mind. “Where would I wear it?” she asked. (At the time she was a ward Relief Society president [ed. leader of the church’s women’s charity auxiliary] helping to minister to needy families.)

Then she taught me an unforgettable lesson. She looked me in the eyes and sweetly asked, “Are you buying this for me or for you?” In other words, she was asking, “Is the purpose of this gift to show your love for me or to show me that you are a good provider or to prove something to the world?” I pondered her question and realized I was thinking less about her and our family and more about me.

After that we had a serious, life-changing discussion about provident living, and both of us agreed that our money would be better spent in paying down our home mortgage and adding to our children’s education fund.

These two lessons are the essence of provident living. When faced with the choice to buy, consume, or engage in worldly things and activities, we all need to learn to say to one another, “We can’t afford it, even though we want it!” or “We can afford it, but we don’t need it—and we really don’t even want it!”

My wife has often been my backstop on financial issues, questioning the criticality of some of my desired purchases. I may not always have appreciated it at the time, but I do appreciate her keeping me grounded. I’m grateful for the partnership we’ve built through the years around managing our money. I do the bulk of the management and bill-paying, and she the bulk of the household shopping. This works well primarily because we share the same goals and we continually communicate.

Of course you don’t need a significant other to establish and maintain financial discipline. One of the key skills is to learn to distinguish between needs and wants, and when considering wants, understanding the root of that want. Developing the ability to police yourself and say, “I may not want this thing for the right reasons” is invaluable.

The bottom line with money is that either we learn to master it, or our money will become our master–or rather, those to whom we end up owing money. The more control we gain over our finances the greater freedom we will enjoy.

Your money or your life? It’s not that simple

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About a month ago I began discussing an article from Wikihow.com on “4 Ways to Be Self Reliant,” by Trudi Griffin, LPC, MS. The article is more about relationships than what I would consider self-reliance, but she still makes some valid points. Today I want to look at her second point, managing money independently. She breaks money management down into six areas:

  1. Learn how to manage money
  2. Get out of debt
  3. Pay cash instead of using your credit card
  4. Keep cash on hand at all times
  5. Own a home
  6. Live within your means

To begin with Griffin warns against allowing others to manage your money. I agree with her basic premise, that you can lose your independence if you lost control of your money, but that depends on the nature of your relationship with that person. In most marriages one of the two usually assumes responsibility for managing the money. If you are good at communicating, have compatible financial goals, and trust one another it’s actually easier to have one partner take primary responsibility and keep the other informed. Her second concern is more valid: if the primary money manager is unable to continue in that role it may be very difficult for the other partner to step in. Even if you are not the money manager in your relationship, make sure you know how to access everything and are comfortable managing money yourself.

Griffin also encourages everyone to get out of debt, though what she really focuses on is keeping your debt manageable. According to her, your total long-term debt payments (mortgage, auto and school loans, and credit card debt) shouldn’t exceed 36% of your monthly income. If your debt payments exceed this level you should make every effort to get that debt load paid down as quickly as possible.

As a corollary to that, Griffin also advocates paying cash for everything, and to keep cash on hand (and in savings) at all times. This seems primarily to be to keep your credit card debt low, and I somewhat agree with this. If you have difficulty paying off your credit cards, or can’t resist charging more money on them, then by all means you should avoid using those credit cards. But if you have developed financial discipline and never miss making your payments because you’re able to set money aside to make those payments, there may be a way to make your credit cards work for you.

I recently read I Will Teach You To Be Rich, by Ramit Sethi. The man has some good ideas about acquiring, building, and managing wealth–and some ideas I’m less keen on. But one suggestion he makes is to put your regular expenses, as much as possible, on your credit cards and then set that money aside to pay the bill off quickly. If you get the right credit card you can earn travel miles or cash back rewards that amount to free money. I’m disciplined with managing my budget, and so I decided to try it. I haven’t put as much on my card as I could, but already within the past several months I’ve picked up nearly $250 of cash back rewards. It’s free money. But if you’re not so good at managing your credit card debt and paying off your account monthly, it’s best to follow Griffin’s advice and avoid credit cards altogether.

Griffin’s next suggestion is to own a home. I’m not as sure about this one as I once was. Right now interest rates are low, so you may only pay about 50% more than the cost of your house in repaying the loan. Depending on how long you live there, the value of the home may increase well beyond that. Our first house did just that. But you don’t always control how long you live somewhere these days. We had to move when I lost my job ten years ago, and the timing was terrible–the housing market had collapsed and I owed considerably more on that house than I could sell it for.

There’s also the maintenance costs and hassle of a house to consider. So far since moving into our house nine years ago we’ve replaced the roof, replaced the furnace, air conditioner, and water heater, and bought high-efficiency windows. Granted, that last purchase was voluntary, but that was easily an additional 30-40% the cost of the house we had to find within the first six years of buying it. That, on top of a myriad of other maintenance expenses through the years. If you don’t like or can’t afford doing your own maintenance, or if you can’t be sure how long you’ll be staying where you live, a house may not be the best option. Everyone needs to evaluate their priorities themselves in this area.

Last, but by no means least, we should live within our means. That usually means several things that have to happen. First, you need to know (or learn) exactly how much money you spend each month and where it goes. Second, where at all possible, and perhaps not matter what the sacrifice, you need to adjust your spending to where it is less than what you earn. Third, you need to continually monitor your spending and your justifications for spending and see how you measure up against your budget. You need to be willing and able to adjust your spending to remain below your means–and save the difference religiously.

Frankly, learning how to budget and how to stick to that budget is one of the most important skills one can develop for self-reliance. That’s pretty much the key to achieving financial independence and taking care of “future you.” Or perhaps your spouse and children after you’re gone. Usually in life there are only two choices: either your master your money or your money masters you. Money is seldom a kind master, but it can be a real friend when you learn to master it. Mastering your finances is a key step toward true self-reliance.

Refinancing – Crunching the numbers

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Interest rates are really low right now–which is one of the reasons I lost my job at the beginning of the year. But my loss may also be my gain. Mortgage rates are also pretty low right now. I have about 24 years left on a 30 year mortgage, and the fact that I’ll be 74 when that’s paid off doesn’t sit well. Yes, I have other plans to deal with that, but I wouldn’t mind also doing something now. So I set out to find out if rates are low enough that I might actually benefit.

First of all I tried one of those internet loan sites. I didn’t get far before I quit. RocketMortgage wanted every bit of information needed to apply for a loan before I could even find out what terms I could get. I refuse to give out that much information until I know they’re really going to need it. Bye-bye, RocketMortgage. I went back to the brick-n-mortar reliables. Kinda.

My current mortgage servicing company has been after me for a while now to see about refinancing (and adding on a home equity loan if they could talk me into it), so I decided to hear what they had to say. I wasn’t impressed. They could do a 20-year loan that would cost me about $300 more a month.

Then I called the local broker I went with the two previous times. He actually had access to a 20-year loan for a lower rate than most 15-years. The net increase would be about $17 a month. Now THAT could be doable. But…should I? Was I forgetting something? After all, there would be fees, which they would try to get me to build into the loan. Would it be worth it to cut only six years off my loan? Time to crunch the numbers!

Armed with my current rate, number of payments left, and my current principal and interest payments, was able to calculate the total interest over the remaining life of the loan. That came to just under $100,000. I then calculated the total interest I’d pay on the proposed 20-year loan (figuring in financing the refi-fees, which I likely won’t do). That came to just over $56,000. Not a trivial difference! But I’ve heard that it can sometimes work to your advantage to pay extra principal on your loan to get it paid off sooner. I decided to look into that, even though at this point I’m not sure I would really want to take that money from other projects to do so.

I played with several different models. I first tried applying $100 per month toward principal and discarded that option. It barely moved the needle. Increasing the pay-down, I found that if I paid an extra $400 a month toward principal for first 120 months I could get the total outlay on my current loan down to about $23000 more than I’d pay with the 20-year, and pay it off 42 months earlier–in just over 16 years instead of 20. And if I paid $400 a month for 173 months I’d have it paid off entirely–in around 14 years. That would be right before I hit retirement age–good timing!

But wait. Assuming that’s even $400 I have, I’ve also had people tell me it would be better to put that money into an investment that earns higher interest instead, have it build up faster, and use that to pay the mortgage off early. In any case, in my MBA program they taught us that when looking at any project you should compare what they called the “opportunity cost,” or what you might lose with this option over some other bench-mark option, such as a long-term fixed-return investment. You might do well with this option, but what if you did something else with it instead?

My financial advisor usually tosses around 6% as a fairly safe rate of return on long-term investment-i.e. bond funds with little to no risk, so I used that to calculate how much I would have if I invested the same $400 a month for the same length of time. In the 198-month scenario, where I put in $400 a month for 120 months I would have $64,827. In the 173-month scenario, investing $400 a month for 173 months, I’d have $108,648. Compared to my proposed refinance, by paying down my mortgage I’d be losing the additional principle I paid, but also losing the gains I might have realized by investing it. It’s something of a double-whammy.

But wait again. In both those scenarios I would be done making mortgage payments earlier than if I went with the 240-month refinance. Being done sooner would mean I could turn that $1007 monthly payment toward investments. What about the opportunity cost of that money? More quick calculations, and under the 198-month scenario, investing my monthly payments for those 42 fewer months, it would come to $46,943, and in the 173-month scenario, investing for 67 months, it would be $78,527. If we put that back into the picture we end up with a significantly smaller gap from the $241,336 total paid out on the 240-month refinance; about $19,000 to $28,000.

Of course these two scenarios really do depend on the availability of the $400 a month to apply toward principle. The opportunity cost is real, as the only prospect for finding that money would be to take from what I’m currently saving each month to invest. The savings in interest doesn’t keep up with the amount put in to pay down the principle, let alone with the interest earned on investing it.

Bottom line: My 20-year refinance would save me about $40,000 over paying out the rest of my 30-year mortgage, and about $19,000 to $28,000 over money-to-principle scenarios. The value of investing that proposed extra principal payment early on (i.e. over a longer period) is hard to beat, even versus a shorter term but larger amount later. Slow and steady wins the race, but more money up front gets you there even faster.

While the over-all benefits aren’t as high as I had hoped, in this case, the value of refinancing is pretty clear. I save four years and about $40,000, plus I get to take that proposed added principal payment (I still don’t now if I could swing that), and invest it at at least twice the rate of what I pay on my loan. I’d have to say it’s worth it to refinance.

Of course I’m no financial adviser, I haven’t given you all my details here, and I don’t know your circumstances. This isn’t really meant to tell you whether or not you might benefit. This is primarily an exercise to help you evaluate for yourself. Just remember to look at all angles, not just the most immediate. I probably missed something here, too, but I’m going into this much more sure of what I’m doing than if I had simply thought, “Four fewer years is always a good thing, right?”

Experiments in document destruction

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I am hard on paper shredders. I’ve destroyed two of them in the past year. I like to think it’s just because those diamond-cut shredders are flimsy, but I suspect it’s really because I push the limits a little too often. In any case, I recently cleaned out the shed and found I had three boxes full of old financial docs, dating back twenty years. That’s way longer than I need, and is perhaps even becoming a liability. But…I don’t have a shredder.

My wife suggested I look up other ways of destroying documents, so I did. I don’t think a burn-barrel would go over too well these days, but a soak barrel sounded interesting. The idea is to get a bucket of water and dump your documents in there, let them soak, then stir them well to break them up and turn them to pulp. Then you pour the pulp out somewhere and let the water drain/soak/evaporate out of it until it hardens up. You can then pick it up and put it in the garbage, and no one will really be able to get any info out of the mess.

So I tried it. I immediately got it wrong. I started by filling two five gallon buckets with papers. Then I filled them with water.

Do you ever cook spaghetti only to have the noodles all clump together tightly and not want to separate? Paper is much, much worse. I should have separated them more, or better yet filled the bucket with water first, then put the documents in, page by page until it was maybe half full. The first time I went to stir them they all stuck together in a single mass that wouldn’t budge, let alone break up. Even my hand tiller tool, used for breaking up garden soil, wouldn’t work.

It became a battle of wills. I’d go outside once or twice every day, replace any evaporated or soaked-in water, and stir/till each bucket, slowly scraping bits and pieces of paper from the clumps. Over about a week it began to look more promising.

Finally I could wait no longer, and dumped out the two buckets on a tarp I set up and spread the pulp out to dry. That didn’t go quickly, either, as we have very few sunny places in our yard. It probably took another week of drying.

Eventually it dried enough to make an interesting piece of art. My wife joked about using them for floor mats, or table placemats, or finding a way to roll it out thinner and making our own recycled paper. Frankly, I don’t think there’s much worth doing with it other than throwing it away.

I really don’t see much to recommend this particular approach to document destruction. At this rate I’ll have my documents destroyed around about….October. It’s cheap, and it may even be less labor-intensive than sitting there for hours feeding a few pages at a time through a shredder. It’s certainly cheaper than a new shredder. What I really ought to do is get a good document scanner and a good shredder, scan the documents as soon as I get them and shred them on the spot. But I’m a cheapskate, so that probably won’t happen. But I also won’t pay to have the local UPS Store dispose of them for me, either, so who knows. Maybe the pulp-pots will remain in business?

I’ll probably try another batch with an entirely different approach and see how that goes, but at least by the time I’ve done that it should be easier to justify shelling out more for a good, industrial-strength shredder.

COVID Confusion

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I found this in our local monthly/marketing newspaper in a humor piece of things the author learned from social media during the COVID-19 quarantine:

In effort not to get sick we should eat well, but we should not go out to get healthy fresh food when we run out and eat whatever pre-packaged food we have on hand instead. However, we should order out at our local restaurants to help keep them in business. Then it’s okay to go out to pick up the food. Your food might be prepared by someone sick that doesn’t know they are sick, but that’s okay if you pay by credit card and take the food out of the container. However, you should avoid going to the grocery store at all costs because you might get sick.

Joani Taylor, “The Social Media Scandal – What I Learned During Quarantine”, Sandy City Journal

If there is anyone left out there who still believes there’s a perfect response to a pandemic, especially one where the details about the virus aren’t really known…well, they’re probably on social media telling the rest of us what we should be doing. I’ve been fortunate enough to live in a state that took a somewhat moderate approach, while managing to keep the death rate fairly low, but the nags and scolds have been everywhere all the same.

Sure, I get it. People are scared, and fear makes people thrash about desperately in search of some way to feel in control. For many people that means lecturing everyone else. But the rest of us, when faced with conflicting information, reach a point where we just have to decide for ourselves which advice we can keep and what risks we are willing to take. Here are a few of the things I’ve learned (or re-learned) from all of this:

  • Preparation buys time. We were not as prepared as we wish we’d been, but we still had at least several weeks worth of all essential items. Even though we weren’t sure how long our toilet paper supply would last, we had enough to hang in there until more started appearing. We didn’t need to panic, spend exorbitant amounts of money to secure the essentials, and could put off even shopping for groceries until things calmed down.
  • People don’t want or can’t handle fresh. When we did go shopping we had no trouble finding fresh fruits and vegetables. Do people just not buy the more perishable items in an emergency? It’s not like we were without power. Veggies keep for weeks in the fridge. Or do people just not know how to prepare fruits and vegetables anymore? Not that I’m complaining. We’ve been able to eat healthy while everyone else, from the look of the store shelves, are existing on flour, pasta and beans.
  • Savings are essential. I am one of the fortunate people who can work from home, even if it’s not my preferred way to work. But even I had been furloughed or laid off we would have had savings to get through this.
  • Flexibility and resilience help. When things like this happen we can sit back and complain over every inconvenience or difficulty, or we can relax, take a deep breath (or two or three), and deal with everything one step at a time. This is easier to do if you’re not worried about basic survival.
  • Cut everyone some slack, including yourself. I’ve had to continually remind myself that people are experiencing widely varying levels of stress right now. On the other hand, if there were people whose stress was causing me stress, I’m not obligated to keep absorbing their stress. There are some where I hit the “social media snooze button” so I wouldn’t have to deal with them until things calm down again. For the most part people have been keeping things on an even keel, and when they aren’t I would try to be kind and remember where they’re coming from.
  • Even introverts need people. While introverts across the world have been cheering about this being the moment they were born for, the truth is, introversion does not mean we don’t need anyone else. Introversion/Extroversion is more a matter of where we get our energy from. Extroverts get their energy from being with others. Introverts get theirs from being somewhat isolated and quiet. We can enjoy social interactions, and even get some energy from particularly enjoyable ones, but most drain energy from us, and sooner or later we need to get away and recharge. Being shut up at home hasn’t been particularly difficult for me, but after a couple weeks I found myself reaching out to people much more than I usually do. I miss the depth, breadth and variety of my normal interactions.
  • Focus on what you can do. This crisis quickly revealed where our family is not as prepared as we should be. The problem is that some of that just can’t–and perhaps shouldn’t–be fixed right now. We found we were least prepared in our supplies of paper products, baking supplies, and a few other food categories. And yet if we’ve learned anything about shortages, it’s that running out and stocking up just make things worse for everyone, so we’ve had to resist that urge. Instead, we identified some things we can procure right now, and we’ve focused on that. We have a much better water storage now, and we’re better prepared for the next power outage (and in our area, there will be one). I feel satisfaction and accomplishment at having done something useful, even if I can’t solve all of the problem just yet.
  • Have a plan for the rest. As I said above, there are some preparedness deficiencies we can’t fix yet. But I’ve learned from sad experience that if I don’t have a plan in place for when we get back to normal-enough I’ll likely forget to do anything at all. I can take this time now to at least come up with a plan so that I know the next steps to take once we can take them.
  • It’s difficult to be prepared for everything. I’ve been a homeowner for over twenty years. In this part of the world we have to be on guard against mice. Right before our state went into quarantine we discovered something entirely new: rats. Mice we could have dealt with. Nothing we had worked on rats. And even after some online research and a curbside pickup purchase it took a long time to figure out what would work.

I could probably go on, but I’m hearing too many heads hitting keyboards already, so I’l spare you. This quarantine experience has certainly given us a lot to think about, and a lot of time in which to think about it. Right now the biggest question we should all ask is, “What do I do about it?” What are we going to change as a result of our experiences? Set a goal, make a plan, and get it done.

Controlling your money? or just monitoring it

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I’m a budgeting fanatic. Or at least I have been before, and I am once again. For the previous several years I’ve been more of a monetary monitor until I finally realized what I was doing and decided I had to stop it. I’ll get to that in more detail later. But let’s start from the beginning.

I love to organize things. Not everything, mind you. My desk is a mess, and I’m pretty sure my poor mother despaired of my room ever being clean. But some things were worth organizing and tracking. Like Halloween candy. I always found Halloween to be something of a letdown. It’s fun getting the candy, and it’s fun glutting yourself on all that candy, but then it’s gone, and you realize you never really appreciated what you had.

One year, probably around the time I was eight, I decided to change that. Rather than eat all my Halloween candy I instead ate some, and saved the rest. I actually inventoried my candy, and found places in my room where I could hide small stashes of it–partly because I didn’t want my older brother to find out and eat it, but also because I wasn’t sure if my mom would approve. The goal was to eat only one piece of candy a day, and I mostly stuck to that plan. I’m pretty sure there were some days when I allowed myself “just one more” a time or two, just as I’m also sure there were days I forgot. In any case, I stretched my Halloween haul out past Valentine’s Day.

I wasn’t as good with money. Around that same time period I got a newspaper route–with my mother as a partner, since I wasn’t actually old enough. We’d split the monthly take, and according to our deal, I’d set some aside for tithing and for savings, but the rest was mine to do whatever with. Sometimes I’d see something I wanted to save up for and do so, but most of the time I could have it all spent by the next payday.

Though I changed jobs and increased my income, I continued that pattern pretty much through college. I always made sure I set aside enough for tuition, but I wasn’t overly great at saving for a rainy day.

Then I graduated, got a real job, and moved in with my older brother for a few months. Consciously or not, my brother became my financial mentor. He and his wife were making good money, and were in firm control of it (much to my surprise; my brother could spend money even faster than me when we were younger). He’s the one who taught me to budget.

Then I got married, and to borrow a colloquialism, “excrement became concrete.” I married a gem of a wife who had lived in the former Soviet Union, which is the more recent equivalent of having lived through the Great Depression. Twenty years, three kids, and several pets later we are still amazed we were able to live on what we had then. I’m pretty sure we spend more on groceries in a week now than we spent in a month back then.

As time passed our income increased, but we managed to keep our expenses from increasing to meet it. Then I lost my job in the Great Recession of 2009-2011. We tightened our belts and cut back on the budget, and were able to make it for two years before I found another job that came close to matching our previous income. We had to relocate to another state, but everything looked fine once again.

But about that point something went wrong–or perhaps a number of things all went wrong. The area we moved to was more expensive than we thought. The house we bought needed some work. Part of my income (residuals from a business venture I had to leave behind) was unpredictable. The kids started getting expensively older. I had grown weary during my prolonged unemployment of worrying about money. I don’t know; one or all of these played a hand it it. The bottom line is I stopped paying close attention to money.

I was still tracking it. I still had my budgeting tools. But so long as we had money left over at the end of the month I was okay with it. I didn’t worry too much beyond that.

A few years ago that began to change. I think my kids were the main catalyst. My oldest, a daughter, was about to graduate from high school and wanted to go to an art school in Canada. I didn’t want to be the one to crush her dreams, so I told her if she would focus on getting good enough at art to get accepted, I would worry about paying for it. I had another son who took tennis lessons, and another who discovered competitive mountain biking. We were covering it all, but I could see the time was rapidly approaching when we wouldn’t be able to keep up.

It was about then I realized that tracking our expenses wasn’t cutting it. It was about the same as standing on the corner of a busy intersection counting how many car crashes occurred. I knew where our money was going, but I was doing nothing to determine whether that was the best use of it, let alone trying to slow the spending. Something had to change.

First step was to start paring down our budget. Little extravagances had been creeping in year after year, along with quiet increases in the cost of living. I got as brutal as I could be and found a couple hundred dollars a month that we didn’t need to spend. We made the kids start getting jobs to cover some of their fun on their own.

But I still wasn’t using my budget correctly. I was still only keeping track of where the money was going. Finally, around six months ago, I decided my tools weren’t cutting it any more. I started looking around for something better.

Enter my older brother, again.

He told me about an online tool he used, one that he paid a small monthly fee for. Double red flag! In spite of my career in IT (or perhaps because of it) I don’t really trust “the cloud”, and definitely didn’t like trusting my financial information to it. And I didn’t like the idea of paying a monthly fee, however small, for something I could do for myself for free. But my brother recommended it, the first month was free, and Quicken was going to force me to a subscription plan as well soon. I decided to try it.

The tool was called You Need a Budget, or YNAB. And I didn’t really “get” it. Yeah, it was similar in approach to an old spreadsheet I’d built once, but as the end of the free trial rolled around I didn’t really see the benefit, other than it was easy to use. And about that same time I learned my job of eight years was going away at the end of the year. Subscription software? No way.

But I gave it one more month, partly because my brother would get a free month if I did (and I was already sponging off him for several streaming services), and because something told me that, even if I wasn’t “getting” YNAB, there was still something there to be gotten. I kept going. The monthly fee wasn’t that big, and even cheaper if you signed up a year at a time. And I could still cancel it.

The year and my job ended, and then suddenly I had landed a new job–with a nice jump in salary. And over those two months I’d learned some more things about YNAB that made a huge difference. I changed my way of thinking about money, and found that YNAB along with some other strategies (also from my brother, come to think of it), was giving me what I had been missing before: control. I was no longer a passive observer, dutifully noting the flow of money toward bills. I was making conscious decisions about each and every dollar, and was finding that more and more of them were going into savings and into investing.

When we first moved and I got started in my new job I swore to myself that I would carefully control my budget so that the residual I was making from my former business would always be “extra money.” Everything I needed to be spend would be paid for from my regular income. In hindsight I’m not sure I ever achieved that goal, except perhaps a month here and there during the subsequent eight years.

I’m pleased and relieved to say I’ve finally accomplished that goal. And just in time, too, as my business is in budgetary freeze right now because of the Coronavirus. It’s getting by, staying afloat, but there are no residuals coming right now, and there probably won’t be for several more months yet. I realize I’ve been quite fortunate that my new job hasn’t been impacted, and I’m very grateful for that. But I’m also very glad to have my budget back under control again.

It really feels good.

I’ll be reviewing YNAB at some later date, but if you’re already interested and would like to check it out, use this link. If you like it and sign up, I get a free month (worth $7), but don’t do it for that reason. Also, check out their videos on their YouTube channel, so hopefully you’ll “get it” quicker than I did.

Financial records and “continuity planning”

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Most businesses have established (or at least should have) business continuity plans for ensuring the business can continue operating in the event of a localized or general emergency. This is the case with households, too. Emergency evacuation plans and 72-hour (bug-out) kits are essential. But there is another emergency that is far more likely yet far less often planned against: the death of a spouse.

A recent article on Yahoo! Finance brings this home:

A case in point for not making big decisions soon after a spouse’s death is Maureen Saunders. The financial chores following the death of her husband, Hubert, from pancreatic cancer in 2006 at age 65 were crushing enough. Although Saunders, now 58, balanced the checkbook, her husband was the main financial decision-maker, especially when it came to investments. His death left her “in uncharted waters, not only emotionally and spiritually but also financially.”

Saunders had to wrangle with the life insurance company, which didn’t believe she was her husband’s beneficiary. She had a “total meltdown” in the bank when she discovered, after bouncing some checks, that the Social Security Administration had rescinded Hubert’s latest direct-deposit benefit payment. She proved that her husband died after the deadline to be eligible for that month’s payment, but it took weeks for the government to return the money. She did not realize that she would not be eligible for a survivor benefit until she turned 60. “You’re so vulnerable and raw, and there is always another form to fill out,” says Saunders, who lives in St. Petersburg, Fla.

This is an area I can certainly do better on, even though I’ve discussed it before. But our recent mortgage application, relocation, and trying to find stuff after the move has reminded me that there is a great deal of financial information my wife would not know how to find if something were to happen to me. I need to get everything organized, document where to find everything, and then sit down with her and go through it.

On the bright side, we did find out that our efforts to establish credit in my wife’s name have paid off. She’s from another country, having moved here as an adult, and as such did not have a credit history. We started working on that, and during the mortgage application process we found out we were not only successful in establishing credit, her credit score is higher than mine!

Getting organized, however, is essential. Probably the best place to start would be to get her acquainted with the regular bill-paying, and then move toward the bigger, long-term items. We have time, of course, but then everyone does–right up until they don’t.

 

Step Two – Financial baseline

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When starting a new job simultaneous with moving into a new home in a new state there is a certain amount of chaos wrecked on the home finances. There are unexpected expenses in moving out, unexpected expenses in moving in, and extra start-up costs for all the new services, not to mention replacing all those things you threw out before you moved thinking you wouldn’t need them in your new place.

And there’s always the unexpected house repairs for things that the inspector missed.

It suffices to say that for the first month or two you’ll be doing well just keeping track of whether or not you have money, let alone how much and where it needs to go. Chances are your paycheck will fluctuate for awhile, too, as taxes, shared costs on benefits, and other items kick in.

The sooner you can make sense of the chaos the better, of course. Any and all information you can collect will be helpful. Start up a list of all the recurring bills that have come, along with any you are still waiting to come. At the very least you’ll be able to establish what you don’t yet know.

Then as your bills start arriving, start recording the amounts, noting what expenses are one-time start-up costs and what are more likely to be the ongoing amount. Start using this to put together a baseline of what you think your monthly living expenses will be. Then over the next few months start validating your list, adjusting as needed as you get more data. If you’re lucky you’ll have a fairly solid baselin within a month, but expect it to take at least three months for things to really even out.

Obviously if you see problems popping up (ie. more expenses than income) you need to start making adjustments. You may wish to over time anyway, even if your cash flow is positive. For example, our original plan in moving in was to get cell phones and skip getting a land-line this time. But further research quickly showed that IP phones, cable DSL, and other potential money-savers weren’t such bargains after all. And our cell reception at our home is a bit spotty. So now we have a land-line and cell phones.

Even when we just had the cell phones we didn’t use nearly as many minutes as I had expected. Chances are we’re going to pare back our service. It’ll only save us $10-20 a month, but every bit helps. $20 a month toward food storage goes a long way, for example.

Right now we’re not through our first month, so our baseline is still fairly unstable. But I’ll be tightening it up as quickly as I can. It’s driving me nuts to not yet have a reliable budget. I must have ORDER!!!!