The Dog Ate My Wallet

The Dog Ate My Wallet

Personal Finance in a World of Excuses

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Four Years of Concentrated Debt Payoff, and I am Further from Being Done than When I Started

Yesterday was my 4th anniversary with the Women in Red Racers, the debt payoff board that first got me interested in personal finance. Per the Hallmark site, the traditional gift is fruit or flowers, while the modern gift is appliances. I could use a new stove or dishwasher, if anyone felt so inclined. ;) (Here are my 2nd (post #1365) and 3rd  (post #1959)anniversary posts.)

This is a slightly modified version of my anniversary post from that board. There may be some new information in this post that you weren’t aware of. I promise that there will be more forthcoming when I can speak more freely about the situation.

 

When you look at our debt, 2013 seems almost like a failure. We paid off less than $2,000, after paying off almost $24,500 in year one, $12,775 in year 2, and another $25,000 in year 3. There is a part of me that struggles with this. I look at my student loan balance and at my savings account balance and think, I could be (non-mortgage) debt free with just a few transfers of cash. I could be done with this NOW.

Instead, I don’t think we’re still even on the original 5 year plan. At the current rate of pay down, it will be 2018 or 2019 before my student loan is paid off. That’s another 5 years from now, putting us on a 9 year plan. Ugh.

Do I honestly think it will be that long before the undergraduate student loan is paid off? No. But if 2013 has taught me anything, it is that my emotional need to be debt free cannot take priority over our very real financial need for a strong emergency fund.

2013 was a year. I will give it that. After paying off my graduate loans in December 2012, we decimated savings in order to refinance our house (which I don’t regret). We finally got our foster care license. I received a lay-off notice. Our daughter was placed with us April 30. My last day at work was May 3. I got a very generous severance package and took two months off to bond with my daughter. Then in July, I started a new job and had 4 months of double pay, thanks to the severance, and rebuilt our savings. A week before Thanksgiving, we officially adopted our daughter, paying all legal fees in cash.

We talked about paying off the debt, but decided to save for a down payment for a larger house. We have a condo out of state to sell that we should clear over $50k on, and that combined with our current savings gives us a very nice down payment. The plan was to find a place closer to my new work location, making my commute a little less awful.

But then, a few weeks ago, I learned I would not be staying in this job. (You can read about that over on my YM Off Topic thread.) Because we have a lot of liquid savings, we’re in fine shape for me to take some time finding a new position. As the sole breadwinner for the family, I hate being out of work, but it is so nice to know that I don’t have to jump at the first thing that comes along. And also that, if I turn out to be wrong about what the right next job is (as I was this time), we’re still in decent shape, financially.

C is still in school. He should be done at the end of summer. We’re also considering adopting a 2nd child. We’ll likely move on that process after he is done with school.

We did take on new debt in 2013, which I am not racing. We got new windows on a one year SAC deal. They will be paid off next summer with no interest paid. We have continued our trend of not paying any credit card interest.

So that is 2013 in a nutshell. It was a crazy year. Debt payoff went not so great. Work situation has also been not so great (though I officially won’t lose my current job until Jan 10, so 2104). Life wise, it’s been great. We are so blessed to have our daughter in our lives, and I wouldn’t change that for anything.

So Happy Anniversary, WIR Racers. Thank you for putting up with me through the ups and downs. Thank you for not holding me to artificial timelines. I know I’ve been a little distant this year. I cannot promise that will change, but I want you to know how much I appreciate you being here for me whenever I do have the time. And I promise to stick it out, as long as it takes.

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BHB Blog Swap: A Thanksgiving Memory

Today, I am participating in a blog swap sponsored by Bloggers Helping Bloggers. I am thrilled to present this Thanksgiving memory from The Debt Princess herself.

Thanksgiving, in my childhood years, meant a big family packed tight into a house with lots of food and fun times with cousins I didn’t see very often.

That changed in high school thanks to my Contemporary American History class. During this class, we studied the song, Alice’s Restaurant by Arlo Guthrie. The song and history attached to it provided me a link to my father. We spoke about history rarely, it was a favorite topic of my father’s and a dreaded class that I always did poorly in school.

The song, set on Thanksgiving day is a Cincinnati tradition. (If it’s a tradition anywhere else in the US, I don’t know about it so for now, it’s a Cincinnati tradition). Every Thanksgiving at 12 noon, Alice’s Restaurant is played in it’s entirety on the radio. Every Thanksgiving at 12 noon, I would call my father and we would listen to it together.

My father passed away in 2000 and that year, as well as a couple there after where it was just too difficult to listen to the song. Gradually it became easier to do and the tradition returned. The past two years however, I have shared this tradition with my children.

My oldest son is a history buff (something he clearly did not get from me). He also enjoys discussing and debating social injustice, war and music. Alice’s Restaurant fits into everything that he enjoys and now he also enjoys this Thanksgiving tradition.

Thanksgiving has changed since I was a little girl. There’s no longer a house packed full of cousins I rarely see or my father to talk to while we listen to the radio. There is, however the opportunity to continue a tradition with my children who can, hopefully share it with their own someday too.

A Thanksgiving Day tradition that began thanks to a high school history teacher, my father’s love for history and my desire to connect with him.

Jessica Streit is a single-mom, teacher, serial debtor and the owner of the blog, The Debt Princess. She shares her struggles with debt, the lessons she’s learned in her journey towards financial freedom and the many ways she has learned how to live a fabulous life on less.

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The Financial Side of Becoming Parents

In my two previous posts I talked about the costs of adopting our daughter. But those are one-time costs, we now have the full time costs of having a child, so our budget has to change. Now, you might argue, somewhat rightly, that these changes actually took place 6 months ago when our daughter was placed with us. That is both true and untrue, partly because of the nature of being a foster parent.

At that time, we did increase our monthly budget for groceries and eating out. We also started tracking some expenses, like haircuts, new clothes, or shoes, in the miscellaneous category for tracking purposes, but because we could not be certain the placement was going to be permanent, we did not add a specific “kid” category to our budget.

In addition, there are a number of programs out there to help foster parents pay for things for foster children. When we sent Pop Tart to gymnastics camp for a week this summer, we didn’t have to pay for it. One of the local support organization took care of that for us. Once the adoption is final, we will no longer be eligible for those programs.

So what changes have we made? Our grocery budget went up by $150/month. Considering our budget had been at $135/person, that’s a slightly higher increase than we necessarily needed, but it helps account for the “startup” costs of getting school friendly snacks, additional toiletries, etc. Plus, we’re eating at home a bit more often right now due to schedules, anyway.

At the same time, we increased our eating out budget by $50/month, to take into account paying for one more meal. Given that a number of places we like to go do not have kids menus, this really only covers eating out roughly 3 times per month.

We also added two categories. The first is “Kid Expenses” at $230/month. This covers new clothes, after-school care, day camps, etc. This is a best guess amount, and we accept that it may need to be upped as time goes on. But based on current spending, that’s what we have.

We also added a “Family Activities” category at $150/month. This is for things like water park season passes for all of us, membership to the aquarium or zoo, and general whole family outings that we would not likely be taking part in if it weren’t for having Pop Tart in our lives.

Where is this “extra” $580/month coming from? You might remember that at the end of last year and early this year, we paid off my graduate student loans and refinanced our mortgage. Those two things cut our monthly committed expenses by $1,050. Now, some of that money has been committed elsewhere, but it created plenty of room in our budget.

If you listened to the Stacking Benjamins “Live from FinCon” podcast featuring J Money of Budgets Are Sexy, you may have heard him talk about his Baby Cost Tracker and think I am leaving out some important categories.

Because we are adopting a 10 year old, I get to skip the diapers and formula stage. But J Money said his two biggest areas of cost were day care and medical expenses. I mentioned above that after school care is covered in our $230/month “Kid expenses” category and you may be wondering how we can get away with that.

First, remember, Pop Tart is 10 and in school all day, so we only have to pay for after school care. We are beyond lucky to have an after school program run by our city that only charges $4.75/hour (can you get a baby sitter that cheap) AND you only pay for the hours you use. Besides the great price, the only pay for the hours you use works well for us because C’s school schedule allows him to pull her out early some days, or not send her to the program at all on Fridays. But if there is an activity they are doing that she wants to stay for, it’s not a big deal. We purchase time in 20 hour blocks and the city just auto-bills us when we are close to running out of time.

Right now, Pop Tart is in the program around 5 hours/week, so we’re paying about $95 every 4 weeks for after school care. And yes, we know exactly how lucky we are.

The other big expense J Money talked about was medical coverage. One of the big differences between his situation and ours is that all of our coverage is through my employer. It will cost me $50 pre-tax/month to add Pop Tart to my insurance coverage. Since I am also changing my number of deductions from 2 to 3 on my W4, I expect that to come out mostly as a wash, but we will see.

And if it was the case that I would have to pay substantially to add Pop Tart to my policy, I could choose not to, and she would still have medical coverage.

One of the benefits of adopting an older child from foster care is that in my state, you qualify for adoption support. I mentioned that in the last post regarding them reimbursing up to $1,500 in our adoption expenses. In addition to this, Pop Tart will continue to be covered via Medicaid until she is 18 and out of high school. I could choose to leave that as her primary coverage, but for my own convenience, I will be adding her to my policy and leaving the Medicaid as secondary coverage. However, it means we won’t have co-pays or be responsible for deductibles for Pop Tart, so our medical expenses will pretty much top out at $50/month pre-tax.

You might also be asking about college savings. We missed 10 years of saving for college. That seems kind of scary. And it is, and it isn’t. First, there’s a good chance Pop Tart will not choose to go to college right away. And I am okay with that. I am not certain I believe in college for 18 year olds to begin with, so if she decided college is not right for her, at least not right away, then C and I will be fine with that.

That does not mean we won’t save for college, or to be able to assist her with getting started in adult life, it just means I am not as paranoid about it as I might otherwise be. But, in addition to the medical coverage, part of adoption assistance is that the state will continue to pay us $400/month until Pop Tart is 18 and out of high school. Since our budget was set to absorb adding a child without a monthly stipend, this money is all bonus. That $400/month will be divided up between saving for college and major travel (like a family trip to Europe).

Adding a child to your family is not inexpensive. I am certain there will be other costs that pop up here and there that are not included in my current budget calculations. But this was something C and I planned for, and something we keep talking about and discussing. Having a child in our lives has brought a million changes, but luckily, one thing it is not changing, is our financial ability to live the life we want and save for the things that are important to us.

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The Financial Side of Our Adoption

Back in March 2013, I wrote about the financial side of our decision to adopt. Now, almost 20 months later, I’m here to write about the financial side of our actual adoption and where we go from here.

Our daughter has been with us for 6 months now, and we will be finalizing the adoption in November. We are very excited.

We are adopting from foster care, having gone through an agency. If you read the previous article, you will know that our agency costs were $5,000. In addition, we have to pay lawyer fees for the adoption. In our case, those are around $1,025. That is a total cost of $6,025 for the adoption.

Our daughter was placed with us right as I was getting laid off from my prior job, and my new one does not have adoption fee reimbursement, so it would seem that the whole amount would be on us. But, it is not.

Because we are adopting an older child, we qualify for adoption assistance. The state will reimburse us up to $1,500 in legal fees and agency fees toward the adoption. That takes our costs down to $4,525.

Now, because we were foster parents, the state sent us a stipend each month toward caring for our daughter and reimbursed some transportation costs for things they asked us to do (like keep her in her old school to finish out the last school year, even though we lived in a different county). We were financially prepared to take on a child and would have kept her in the other school anyway, for continuity purposes, so the money we got from the state for that I consider extra that can be put toward adoption costs.

We will have received around $3,400 in stipend and $1,300 in mileage reimbursement by the time we adopt, meaning that $4,525 is covered, with about $175 to spare. (Which all went toward buying us season passes to the water park.)

So, by adopting through foster care, and by being prepared to absorb a child into our budget, our adoption will essentially be free.

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The Small Stuff Matters

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“Don’t sweat the small stuff” has become a mantra for a lot of people. I don’t necessarily disagree with the sentiment, but I’m here today to say that sometimes it helps to pay attention to the little things.

This is a lesson I am learning from being a parent. (Who knew having kids was such an education?) Because our daughter (formerly referred to as SP- small person, henceforth referred to as Pop Tart) comes to us from foster care, and therefore, an unstable earlier life, she has some issues. C and I have chosen a few of the bigger issues to really focus on helping her work through.

Last night, after Pop Tart had fallen asleep, I walked into our room, feeling a little discouraged about the lack of progress on one of the big goals we had been working on. But as I was communicating my disappointment about that, all the little successes we have noticed recently also came to mind. Yes, our progress on this one big issue is slow, to the point of feeling like we have gone backwards, but there are so many other areas, little areas where we haven’t necessarily been focusing our energies, where there is marked improvement.

And in talking to C, listing the small successes gave us both some renewed energy around the big goals. It reminds us that even though we aren’t seeing much movement on the big goal, we are still moving forward, and moving forward consistently.

 

This realization matters in your money goals, too. Sometimes we’re so busy working toward a big goal, like saving enough money for a down payment on a house, that we don’t notice all the little successes we are having at the same time. In our case, we bought both of our first two homes with no money down, but we know that we won’t be able to do that again. Also, we would like to keep our current home as a rental property once we do move. That means we need a lot of liquid cash on hand for a down payment- over six figures for a 20% down payment on some of the less expensive houses in the neighborhoods we’re looking at. (Goal being to reduce my commute from 3 hours a day.) It takes a long time to get that kind of cash saved, and the amount does not seem to be moving up quickly. It gets discouraging.

And yet, when I look at our budget, I realize that we are making good changes, permanent changes that will help us not just save the money for our down payment, but also continue to serve us long term. There were the big things at the end of last year/start of this year, paying off my graduate student loans and refinancing the house. But we also changed our Netflix subscription to get rid of the physical DVDs. It’s not a lot of money, $10/month, but why pay $10/month for something we’re not using. We also just cut our cable TV for a savings of over $100/month.

We have a new budget that takes into account child care expenses. My new job has upped my retirement savings by a few percentage points. We have the money to pay for C to finish out his degree without taking out student loans.

The ticker toward the big goal might be moving slowly, and sometimes it is easy to get discouraged about that. But if you take the time to look at the small changes you have made, it might just remind you that you are on the right path and give you back the energy you need.

Maybe you shouldn’t sweat the small stuff, but don’t forget to take credit for it, either.

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Just Because You Are Paranoid Does Not Mean Someone Is Not Out to Get You

This is what my life has felt like in the last two weeks, but in a good way

Just for the record, I am not paranoid; no one is after me, and I won’t even get to watch the 3rd season of Homeland until it is out on Netflix. That said, this post is about the juxtaposition of perception and reality.

There are days when I feel like I’m a fraud, like I can’t do any of the things I say I can. I feel like I know the words to say but cannot actually follow up on them, and wonder how it is I got to my current position. These days don’t happen all the time, but they also aren’t completely uncommon, especially in a new job.

I’ve only been in my position a little over 3 months and there are times when it is still scary, despite the fact that I think I am doing good work. But I held myself up as experienced with certain types of issues in the interview process (and it was the truth) that sometimes I wonder if I just managed to spin correctly, that I didn’t really learn what I say I learned from those experiences, that I can’t actually translate them into new action. My doubts are always focused on my strengths.

And I know, because I read about these things, that these kinds of thoughts are more common among women than men. So in that sense, you could consider these thoughts “normal”, even if they are not accurate.

This week, in my regular meeting with my boss, he gave me some feedback based on my first quarter on the job from the team I have been working with (the management oversight team, not my staff). Their biggest concern was that I seemed too confident. They worried that I did not fully understand what I was talking about, that I was afraid to ask for help, or that perhaps I did not know enough to know when to ask for help. They were afraid that I might think I could stop learning and understanding the process.

It seems like an exact replica of my own fears and doubts. Except it was not. You see, they have no concerns about my skills when it comes to Lean or Continuous Process Improvement (my strengths, and the reason I was hired into this position), their concerns all focus around one process the team I am leading is doing- a process I have never said was a strength, one where I admitted from the beginning that I had no experience with.

And this throws me off, because I don’t feel like I have ever held myself up as knowing more about this process than I do. I talk with my staff, the ones doing the work, all the time and ask them a ton of questions. When I present information to the group about this process, the information has been vetted and confirmed by my staff, people who are experts in what they do. I have confidence in what they tell me, so I have confidence in what I present to the group.

I did speech and debate in both high school and college. I have learned to be a confident presenter and speaker. Even when I am very nervous, I have the training not to appear so. I always thought that was a good thing- and to most people it seems to be. It is only this small group of people who are nervous, and they are nervous about only one thing.

After my boss presented the feedback to me, I had two questions for him. (And I would suggest to everyone who gets feedback to ask questions afterwards, even if it’s not immediate, send an email for follow up the next day. But ask questions to make sure you understand what was presented to you.)

My first question: Does this concern they are expressing extend to both of the processes my team is working on (and I am overseeing) or just one?

My second question: I have been brought in to lead a Shared Services team. Right now, we only have two processes, but the plan is to expand that, possibly as soon as two months down the road. I am expected to become an expert in every process my team takes on?

I’ll be honest, I knew (or at least hoped I knew) the answers to both of these questions before I asked them. My point in asking them was to clarify that the feedback was coming from the perspective I thought it was, and also to give my boss a view of the feedback from my perspective.

The answers, for those of you who are wondering, is that the fear is only around one of the processes we are doing, and that no, I am not expected to become an expert in all the processes we take on. I need to be able to lead diverse teams, but I don’t necessarily need to be able to do the work of all the teams.

The process that there is fear around is the most personal to the members of the management oversight team. The other process they have no concerns about, even though I have as little experience with it as I do the first. They have fewer concerns about it because few of them have ever taken part in that process themselves, whereas being the worker bees on the first process is likely what got them to their management level positions.

They are, for the most part, subject matter experts on the first process, and have handed it over to me, an admitted non-expert (and not just that, no real experience with it what so ever before this job), and they are having doubts and fears. Which is completely expected.

So how do I respond to this feedback? Do I shoe less confidence in myself, in my team, and the information I am presenting? No, because I have confidence in all of those things.

I think for me, the answer is going to be to make more visible to the team my ongoing learning- what classes I am taking to understand the work, the training I am getting with my team, etc. I am a fast learner, and I really have been given a number of great opportunities to learn about this process, but maybe they aren’t seeing everything that has been provided.

This is a process their careers have been built on. Mine has not. Nothing is going to change that, no matter how much I learn. The fear they are experiencing is a normal part of change. And the need for change management alongside continuous process improvement is one of the things I held myself up as experience in. It is one of the things I am good at.

And so I know, from a customer perspective (and they are my customers) there is only one thing that will truly alleviate their fear- success.

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Trappings of Wealth

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My friend Jana used to have a feature called “Money Tune Tuesday” that I loved. This post is inspired by that series, by Kim at Eyes on the Dollar’s recent post Does a Million Dollars Make You Rich and  the fact that Pentatonix (who I’ve been obsessed with since the Sing-Off) yesterday released the video of their cover of Royals (by Lorde).

http://youtu.be/E9XQ2MdNgKY

One of my favorite parts of this song is the list of the trappings of the wealthy- jet planes, islands, tigers on gold leashes, but also ball gowns, blood stains and trashed hotel rooms. And I think that’s an interesting thought experiment- what to me, are the trappings of success?

To be clear, I know very well that being “rich” isn’t all about money. I also know that I’d rather have a few million in my retirement savings than a house worth a few million. I am not thinking here about the practical or realistic side of being rich. But instead, what about the fantasy? What do we imagine rich people who don’t have to worry about earning their own money or retirement plans (think the Hilton, Gates, or Rockefeller families) have? Which of those things would we want for ourselves (besides not having to worry about whether or not social security will still exist)?

I know that for many of us working toward the practical, the fantasy is hard to come up with. I think of things and immediately toss them out on the theory of “I would never need that.” But setting aside need, setting aside what I would really do, going, in some ways, back to my childhood to what I thought being rich meant.

Here are my fantasy trappings of wealth:

  • A house with an indoor pool and a hedge maze
  • Live in staff (butler, cook, groundskeeper)
  • Flying first class (even in my fantasies, I can’t bring myself to a private jet)
  • Traveling when/where I want
  • Custom made clothing
  • Building a lifesize version of Stonehenge
  • And hiring my favorite musicians to play my parties

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What are your fantasy trappings of wealth?

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Peer to Peer Lending – 2013 Annual Prosper Report

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Do you ever have the thought ”I could do X and my spouse would never know”? When it’s about buying yourself a piece of candy at the grocery store, it’s probably not a big deal. We’re at a point right now where I could throw $1,000-2,000 into our Prosper account and C would have no idea. I’m not going to do that, because that’s not the kind of relationship we have, but after doing the research for this year’s update on how our Prosper investments are doing, it sure is tempting.

Year

Account Total

Overall Rate of Return

1 Year Rate of Return

2 Year Rate of Return

2011

$135.00

(10.7%)

2012

$172.50

(9.5%)

27.8%

2013

$226.00

(7.6%)

31.0%

67.4%

As the overall rate of return shows, we’re still down based on the amount of money we originally invested. But that is because in 2009/2010, we pulled about 85% of the money we had invested in Prosper out. Not because the returns were bad (though they were), but because that is when C was laid off. We pulled the money out of Prosper in order to pay off our own debt. It was the right financial decision for us, but it did actualize our losses.

What has my attention now is not the overall picture but the year over year returns. Last year, we were up 27.8%. This year, we are up 31%. Our 2 year rate of return is 67.4%.

This number seems a little too good to be true. And maybe it is.

Year

Charge Offs

Paid in Full

Active Loans

2011

26

28

3

2012

26

28

5

2013

26

29

6

Please note that since I started tracking our Prosper progress for the blog, we have had very few active loans. The first 54 loans (the 26 charge off and 28 paid in fulls) were purchased during our first year investing with Prosper, from April 2007 to March 2008, before the site went dark for about 18 months while going through the accreditation process. We have made only 7 loans since then, meaning that my sample size is very small- very small.

This means my average rate of return over the last 2 years is not typical. It apparently also means that either I have gotten very good at reading the Prosper profiles and determining risk based on my yearly analysis, or that I have gotten lucky (this is the bigger likelihood).

Still, there’s good news here. We have not had a single charge off in the last two years. I actually thought we were going to have one, as, when I looked yesterday, one of my active loans was over 30 days late. However, when I logged in today for all of my numbers, that account had been brought current.

Those six loans are a mix of 3 and 5 year loans, with one or two scheduled to be paid off every year from 2014-2018.

Original Loan Amount

Interest Rate

Amount Paid

Prosper Credit Rating

$75

15.2%

$0

B

$30

30.77%

$10.08

HR

$45

30.77%

$23.05

HR

$40

17.45%

$18.92

B

$60

20.99%

$43.48

C

$25

26.75%

$32.56

D

Total

$275

22.07%

$128.09

(Please don’t try to make the numbers add up to the $226 active total. Remember that the money that has been paid off has been reinvested into new loans, and that one loan was paid in full in the last year.)

Per this chart, I have $275 invested at a 22.07% interest rate. If you run the numbers only to show what is still owed (so currently invested), you get that I have $146.91 invested at 20.02%.

Given my 2011 analysis, I’ve got a pretty good mix. For us, Bs and HRs have the best combination of risk vs return. Bs have slightly less risk; HRs have slightly higher return, but both came out well.

D’s were among the most risk with the least return on that analysis, but since I have already turned a profit on the one D loan I have, I won’t worry if that one goes into default. C loans had only a slightly better risk profile than Ds, and, in fact, the C loan was the one I thought would end up in collections.

If I keep investing in only 2 new loans a year, I will likely stick with Bs and HRs from here on out. But I have to admit, given the rate of return I’m currently seeing, and where we are financially right now, throwing another thousand or so into Prosper does not seem like a bad idea (at which point I would not guarantee a strict B/HR portfolio mix).

Are any of you invested in Peer to Peer lending? How is it working out for you?

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You Can Only Know What You Know

Do you know about Jackalopes?

Yesterday, our good friend Joe from Stacking Benjamins and The Free Financial Advisor hit a major milestone- 365 days in a row of running. First, I want to congratulate Joe on the accomplishment. Doing any specific activity every day for a year takes dedication and resolve. Joe may go by the moniker “Average Joe”, but average he is not. (I would also like to think I deserve a little credit for inspiring him to do this by my getting up and walking every day at FinCon12, since he started this journey shortly afterwards, but that’s probably not the case. Still- Joe, if you want a walking or jogging partner at FinCon13, let me know.) 

Do you know about Jackalopes?

Do you know about Jackalopes?

Every day for an entire year, Joe got off his couch and went for a run. And like any good blogger, he then wrote a post about it. (Though if he’d been a really smart blogger, he would have turned this into a side income project where he documented his runs every day, too, and then sold it as a book.)

 

But this post isn’t about tenacity or dedication or perseverance. It’s about a small line in Joe’s post about the his best day of running: “Within half a mile a little thing ran across the road in front of me…..a jackrabbit! I’d seen them before, but never up close.”

This line surprised me, and honestly, made me feel a little sad for Joe. You see, unlike most PF bloggers, Joe is actually a little older than me. That means that he went the first 40 years of his life not seeing a jackrabbit, which I find nearly inconceivable and a little sad.

I grew up in eastern Montana. I lived in a neighborhood of a dozen houses, where everyone had at least an acre, situated between a hill and a river. Across the river from us was government land. It wasn’t a wildlife refuge or anything, but people were not allowed to hunt there. I would often wake up to deer and bobcat tracks in our yard. There were snakes and skunks and more jackrabbits than you could count.

Jackrabbits were a fixture of my childhood. So much so that it would never occur to me that someone could make it into adulthood without seeing one up close. And yet, it happens.

Which brings me to the point of this post (I took the scenic route)- You can only know what you know.

Some people grow up with jackrabbits. Others grow up with Sesame Street. (In my hometown, PBS was only available via cable, and we lived too far out of the city limits for the cable company to offer service. We had only 3 channels, and I still probably spent more time watching TV than I should have.) Some people grow up with both but never got on an airplane.

Experiences that we might think are ubiquitous are not. We cannot hold others accountable for knowing what they do not know. And more importantly, we cannot hold ourselves accountable for what we do not know.

Especially as you look at retirement planning, how many times have you thought to yourself “If only I knew then what I know now”? How many times have you made a mistake with your money and learned a harsh lesson from it? So many times, we want to beat ourselves up for not knowing what we didn’t know.

It needs to stop.

Instead of wishing the past were different, we instead need to focus on the present and the future. If you have an idea of what you might not know, then seek out more information. Educate yourself. But, like it or not, humans in general learn by experience, by making mistakes. So make the mistakes and use them to learn for the future.

It may be sad that you did not see your first jackrabbit up close until you were 40, but at least on the day you do see one, you know it’s something special. It makes an impression, and now, you know.

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My Latte Factor® Story

I live in the land of Starbucks, lattes are everywhere.

I live in the land of Starbucks, lattes are everywhere.

I live in the land of Starbucks, lattes are everywhere.

The Latte Factor® is an idea/phrase that came from financial advisor David Bach. I mention this because I think you might not know. Despite having heard the term and seeing the idea both praised and debunked,  I did not know who to attribute it to until I looked it up for this post.

The main idea of the Latte Factor ® is that by giving up your daily latte habit, you could save an extra million for retirement, per year in your 20s. (Due to expected returns, the results decrease as you get older since the money is invested for less time.) This idea has been shredded by so many people and so thoroughly that I’d be surprised if you had heard of the Latte Factor® and not also heard it was bunk.

But I am here to tell you that I believe there is a Latte Factor®, and that it can matter, it can matter quite a bit, just not in the way Back presented it.

As with all things, this is a matter of scale. If what you are worried about is your retirement savings, your daily latte is likely not the problem. For me, the Latte Factor® was not about saving for retirement, it was about making ends meet on a monthly basis. And that’s a much different story.

Back in 2009 I was working a good job, with a great boss. But I had graduated with my MBA a year earlier and had not gotten a post MBA job at that point. Between C and I, we were making about $95k/year. Almost every day, I went to the cafeteria with my co-workers and got a venti, non-fat, no water chai. Many days I also got an asiago bagel, toasted, two cream cheeses and a jelly. Other days I’d hit the vending machine in the afternoon for a Coke (it took cards, so I didn’t even need cash to get my caffeine fix). On average, let’s say I was spending $5/day (and this is being nice to myself) on my chai and junk food habit. In a four work week month, that’s $100.

Let me also be clear that this was not my breakfast. It was not the only food I was eating that day. I ate breakfast at home. I had tea bags and sweetener at my desk. I brought in my lunch and snacks. What I got at the cafeteria was food simply for the sake of eating, not due to hunger. These were dollars spent on empty calories.

But it did not matter. Sure we had debt, but we could make all of our payments. We didn’t really have savings, but we had plenty of room on the credit cards, and we paid more than the minimum each month. We had paid off C’s student loans early, and once every couple of years or so, we would get the credit cards completely paid off. We were good. We were so good that we were considering forgiving a rather large debt C’s mother owed us specifically so that she could afford to move out of our house.

And then, C got laid off. We went from $95k/year to about $55k/year- almost half of our income. Suddenly, we could not afford to forgive the MIL’s debt. Without unemployment, we could not afford our monthly bills. Our car payment alone was $800/month. Our mortgage was over $1600. Those two things ate up close to 3/4 of my monthly take home pay.

And here I was, spending $100/month on food and drink I did not need. And it also suddenly became harder to give up. I ate when I was stressed or bored. At work, I was often bored, and now I was always stressed. Plus, I was the only person in our house who was working. I DESERVED my indulgences.

$100/month was the power bill. It was 1/3 of our grocery bill. Just like we could not afford to have MIL stop paying us back and move out, we could not afford for me to have a daily chai. It was not about having an extra million come retirement, it was about paying our monthly bills, not losing the car or the house. $100 buys a whole lot more in groceries than 20 days’ worth of tea, bagels and cream cheese.

There was a Latte Factor® and it was the difference between making it or not.

The brand of chai used by most coffee places. I can buy it at the grocery store and make it at home.

The brand of chai used by most coffee places. I can buy it at the grocery store and make it at home.

I never saw the Latte Factor® as a retirement savings plan, even if that was the way Bach intended it. For me, it has always been about being mindful, about paying attention to where my money goes and making informed choices.

One of the things C and I were most proud of during our 9 months of not being able to live on my paycheck alone was that between the unemployment and paying attention to our money, we never had to reduce my retirement savings. So maybe it will translate to half a million down the road.