The Dog Ate My Wallet

The Dog Ate My Wallet

Personal Finance in a World of Excuses

Article

In Defense of 99 Weeks of Unemployment

There are a lot of people out there who are anti-the current unemployment system. They were especially against the recent constant extending of unemployment benefits. I can understand the reasons why, however, I believe that there are times when the government needs to participate in deficit spending, and this was one of the cases. (Would I have preferred it if the government had been smart enough to save for a rainy day when times were good? Especially since that’s what a lot of talking heads think individuals should have done? …Yes, but that’s a different story.)

 

Our Story: We were one of the families to benefit from the full extended unemployment benefits. Thanks to my husband working for the Census last summer, his benefits extended a full thirteen months. In fact, we just received his last check, after being laid off in May 2009.

Unemployment saved us financially. There’s no other way to say it. Had my husband not gotten unemployment benefits, or even if they had only lasted the initial six months, we would have lost at least one car, and maybe our house. I would have thrown student loans into forbearance, but it wouldn’t have been enough.

At the time he lost his job, we had revolving credit card debt, a monster car payment, our mortgage, and my student loans.

We did the math. We could live on my salary alone if we could pay off the credit cards and the car loan. It would be tight, but we could do it. So, we started with the credit cards- sure they had a lower minimum monthly payment than the car, but they also had a much higher interest rate and no defined end date.

But it was going to take time. When we got the first notice of extension of benefits in November 2009, I remember breathing a sigh of relief. I had a plan for what we could do if the benefits stopped, but it was a scorched earth kind of plan.

It took us through February 2010 to get the credit cards paid off, and then another two months to get the car paid off. So really, it wasn’t until one full year after my husband lost his job that we would have been able to live on my paycheck.

 

Breathing Room: Last summer saw a lot of good things. My husband spent a couple months working with the Census, earning some money and extending his benefits. I finally (2 years after earning my MBA) got a management position and the raise that came with it.

Starting in July 2010, we could have lived comfortably on my salary alone. We were no longer following the unemployment extension news like it was the air we were breathing.

But, the extensions kept coming, and yes, we kept taking the money. We no longer “needed” it, but that’s not to say it didn’t come in handy. We made a new budget plan. This one included paying extra on my student loans to decrease our debt and putting money into savings.

My husband decided to go back to school for his Bachelor’s degree. We made teh decision for him to start part time in the evenings while he was still receiving benefits. Yes, he was still looking for work, but after 18 months and only two interviews, we knew we needed a better plan. Thanks to him still getting benefits, we were able to save enough  to pay for his education out of pocket.

 

The Big Picture: We are the lucky ones. Maybe I should have said that sooner. My job was never in jeopardy. We had the financial understanding to know what we needed to do, and the ability to follow through with it. We had family and friends who understood when we had to change plans.

We were on the brink, but thanks to unemployment, we never went over the edge. There were many people in much worse shape than us, even at our lowest point. And if unemployment was that much of a life saver for us, I can only imagine what it meant to those families.

Date: 28/06/2011 Author: Category: Budgets, Debt, Everyday Finances Bookmark: Permalink
Article

Balance Transfers – Learn how do to the math

The best advice I can give about credit cards is not to carry a balance – pay it off every month, and then you never pay interest. But I know for some people, that’s not an option, at least for now. They’re already overloaded with credit card debt, and they’re just trying to find a way out of the mess.
Credit card companies know this, too, and they are more than happy to prey on your emotions when it comes to managing your debt. Trust me, they wouldn’t offer 0% balance transfers for 10 months (or whatever) if they didn’t make money off of it.
The best thing you can do to protect yourself from this is to learn to do the math (or learn to have excel do it for you).
Here’s an example from someone I know:
She has a current balance of $4,500 on a card that’s 0% APR through the end of November, and then will be set to 11.9% in December. She got a 0% APR balance transfer offer from another company that would charge a 4% transfer fee, but would keep her APR at 0% until October 2012. This seemed like a pretty good idea- she would have a 0% APR for 10 months longer, and instead of having to pay 11.9% APR, she would just have to pay a small 4% transfer fee.
Believe it or not, this NOT a good deal.
Assume she can make regular monthly payments, but won’t be able to pay the card off until Sept 2012 regardless (the last month she’d have 0% APR on the new card).
Since there is 15 months between now and then (starting with the July payment) she would need to pay $300/month, plus any interest or fees in order to get the card paid off.
If she balance transfers the whole amount, she pays a $180 balance transfer fee on top of the $4,500 she owes for a total of $4,680 in payments. This is the same whether she pays the card off two days after she transfers the balance or takes it out to the full term.
If she leaves the money on the card where it is now, she has 5 months (July-Nov) of interest free payments. That gives her a balance of $3,000 when the 11.9% APR kicks in.
Now here’s the important thing to remember- the balance transfer fee is 4% of the total balance, straight up, here and now. The interest rate of the card is the ANNUAL interest rate. It’s not 11.9% right now, its 1/12 of 11.9% each month (in this case, roughly 1% per month), and because its charged every month, its charged on the balance you have at the start of that month, not on the total you owed.
To figure out what her payments for the next 10 months would be, we use the Payment function (=pmt) in Excel. The rate is 11.9%/12, the nper (number of periods) is 10, and the pv (present value) is -3,000. This lets us know that to have it all paid off in the next 10 months, she would need to make monthly payments of $316.60. That means she will have paid $1,500 before interest, and then $3166 after interest started being charged, for a total of $4,666 dollars
So, for doing nothing, she actually “saves” $14 over doing the balance transfer, even if she doesn’t pay it all off until Sept 2012. If she is able to make any kind of extra payment at any point, she will pay less.
Balance transfers can be useful. I’m not saying they aren’t. But learn how to do the math. Make sure that you really are getting good deal.
Date: 23/06/2011 Author: Category: Uncategorized Bookmark: Permalink
Article

Creating Your Budget

A little over two months ago, when I started this blog, I talked about how a budget wasn’t the first thing you needed. Instead, I said the first thing you had to do was to start tracking all of your expenses.
Then, in late May I talked about how a budget was not the second thing you needed. Instead, I said, you needed to know your money goals. A couple days later I talked about the difference between cash flow and budget, and that I thought doing your cash flow was more important, from a right here, right now, let’s not get overdrawn perspective.
Would you believe that it’s finally time to talk about creating a budget?
If you’ve been following along, you should have the following three things necessary for creating your budget:
2 months of money tracking – everything that’s come in and gone out
Your goals – short and long term, with a basic idea of how much money you need for each
Cash flow for the next month – make sure money is going to be in the account when you need it to be.
So how do you start?
Look at your two months worth of budget tracking and start dividing your spending up in to categories that make sense for you.
My categories are:
Student Loans
Current College Costs
Bills (mortgage, cable, etc)
Car (gas, new tires, etc)
Credit Cards
Groceries
Medical
Eating Out
Allowances
Pets
House
Misc
Savings
Income
My categories have come about after years of refining. They are not the same as they were last year, and may be different next year, so please don’t feel confined by them. I don’t.
You need categories that work for you. If you have kids, you might want a kids category. Some people divide their groceries out between food and household items (toilet paper, cleaning supplies, etc). I don’t. In fact, my grocery budget also includes dog food. My “Pets” category is for vet appointments or toys/treats that aren’t part of our regular spending.
Some people may include their mortgage in the “House” category, but for me that’s for home repairs (fixing the furnace or hot water heater) and buying new items for the house (new dishes or overhead lights).
The important thing is to find categories that work for you, and assign your spending to that category.
Once you have everything divided out by category, you can figure out how much you spend on each per month.
Add up everything you spend, and then all your income. Is there money left over?
Now look at where you’re spending your money. Does it line up with your goals? If it doesn’t, or if you’re spending more than you make or just barely squeezing by, its time to look at what category you can cuts costs from.
How much have you spent in Misc? or on Eating Out? Do you have an Entertainment category? What did you spend on that?
These are some of the quickest/easiest places to cut spending, but don’t cut it down to 0. As I’ve mentioned before, your chances of sticking long term to a budget that doesn’t give you any wiggle room are pretty low.
Other places you can look to cut- do you need that really expensive cell phone/data plan? Can your cable be cut?
Does a lot of food go to waste at your house? Do you shop sales or use coupons? A lot of people (and I’m not talking about the extreme couponers from the TLC show, but regular people) are really able to cut their grocery budgets down by smart shopping. (I do caution about shopping all over town, though. Make sure that the extra gas usage/wear and tear on your car aren’t negating the grocery savings.)
THIS IS THE HARD PART. You have to be honest with yourself. Don’t try to do it all at once. Take baby steps. And be prepared to come back and tweak your budget next month, and maybe the month after that, and to revisit anytime something changes.
Creating your first budget is the hardest part, but the work isn’t done.
Date: 21/06/2011 Author: Category: Budgets, Getting Started Bookmark: Permalink
Article

When its time to spend…

Once you get in to the habit of saving money, spending can be hard, especially spending large sums of money, even if you’re spending it on exactly what it was saved for.
Am I making sense?
We paid for the hubby’s summer school courses this last week- on the bank card. It was almost as much as a mortgage payment, and we’ll be spending even more in September. It kind of freaks me out, even though we budgeted the money for this. It would probably freak me out less if it was going on the credit card, as I’m more used to that. But his school charges a convenience fee for using a credit card (but not an electronic check), so straight out of the account it comes.
Date: 16/06/2011 Author: Category: Uncategorized Bookmark: Permalink
Article

Having fun without spending money

I forgot to post last night as I was too busy playing Rock Band and watching old television shows via Netflix with my family.
Its the best type of quality time: in the comfort of home, home made dinner (arroz con pollo), the ability to pause, puppies curled up in your lap, and FREE.

Date: 15/06/2011 Author: Category: Uncategorized Bookmark: Permalink
Article

Why you should have little pockets of savings

Does a broken mail box count as an emergency? I mean, not being able to get my mail seems like a pretty big deal to me.
This last week has been filled with little things, and the reason we have not just an emergency fund, but a small amount of savings set aside for the little things that come up.
First, the Xbox 360 broke. It is $20 less to repair than to buy a “new” one. Considering we have the oldest generation, we decided to upgrade for the slightly larger cost. So, a couple hundred dropped there.
Then, the hubby’s keyboard had a letter stop working. Replacing it costs only $10 and doesn’t really mess with the budget one way or the other, but there it is.
And, as I mentioned at the start, our mailbox broke. The piece of metal that allowed you to easily open it broke off, making it sharp, difficult, and slightly dangerous to open. I’ve been leaving the door slightly ajar after getting the mail to make it easier for our mail delivery person. That means that we also needed a new mailbox- and given the amount of mail theft that’s been going on in our neighborhood lately, we got a more expensive locking mailbox for around $45.
I guess things really do come in threes.
Date: 09/06/2011 Author: Category: Uncategorized Bookmark: Permalink
Article

Budgets Put You in Control

The point of budgeting is not to save every single penny or even to pay off debt, though those are both options. The point of budgeting is to give yourself control- control over where you spend your money.
Placing yourself on a budget does not mean that you can never buy brand name again, or even that you have to clip coupons and only shop the sales. It means that you have determined your priorities and made a conscious decision about how you spend your money.
For example, we choose to spend more money on our electric bill than we need to, because we’re part of the green energy program. We could save a few dollars a month if we needed to, but we don’t, and this a place where we believe our money is doing good.
Along the same lines, we use B99 bio-diesel in our car. That means we’ve been paying over $4/gallon for well over a year. Recently, we’ve been paying $5.25/gallon. We could save money and make our lives more convenient by being willing to use regular diesel, or even B20 or B5 bio-diesel. But we don’t.
We build this extra expense in to our budget and we cut dollars in other areas, ones that aren’t as important to us.
Date: 07/06/2011 Author: Category: Budgets, Getting Started Bookmark: Permalink
Article

How not to eat out

Eating out is often one of the biggest budget killers, one of the places we spend our money without even thinking about it. If you’ve been tracking your spending, add up how much you’ve spent to eat out in the last month. Our budget is $150/month, though we grossly went over that in May (for various budgeted reasons).
We used to spend $400/month on eating out, though, so our normal $150 a month was a pretty major cut back.

How did we do it?
It turned out to be a couple simple things, actually. When we cooked, we cooked enough for two meals, so that on nights when we were tired and didn’t feel like cooking, there were leftovers at home. They were quicker, easier, tastier, and cheaper than eating out. Its really kind of nice.
We also decided to keep our pantry stocked with simple staples that we can make a quick meal from any time, and that we really like. For us this means rice (we love our rice cooker), cream of mushroom soup, pasta, and tomato sauce or paste. You can spice either of these up with a protein, but you don’t have to. Either way, its a quick and easy meal without going out.

Date: 02/06/2011 Author: Category: Uncategorized Bookmark: Permalink
Article

Budget vs Cash Flow

This came up in conversation with a friend who’s  very good at budgeting, is totally on top of her savings, etc – cash flow is different than a budget. And it really is pretty important that you track them both. In the sense of not getting overdrawn, cash flow is more important that a budget.
A budget is simply a goal- a desired amount that you want to spend on certain activities for the week/month/year- however you budget. Its very good as an overview and for clarifying your goals.
You can (and should) project your cash flow regardless of whether you have a budget or not. Since you’ve been tracking your spending, you should know when you have money coming in, and when bills need to be paid. You should even have a good idea of what those bills run (for the non-set amount ones).
Now, just put it all down. One month, two months, the whole year, if that’s what you want to do.
I use excel and generally do cash flow for two months at a time. I use conditional formatting so that my spreadsheet automatically alerts me if the balance drops below a certain point. Then I can adjust when I pay bills if necessary, or when I make extra payments on a loan. Whatever I need to do- I can make those changes in advance and not panic when the time comes and there’s not enough money in the account.
My friend is planning for her wedding and has a lot of deposits and payments that need to be made, which is upsetting her normal spending patterns. She had a bad month in May, and feels like things will be really tight for June because of the non-standard expenses. After talking about it, she’s decided to cash flow out the next 6 months until the wedding so that she has a better picture of her finances. And just making the decision has helped her feel more in control. 
Date: 31/05/2011 Author: Category: Budgets, Getting Started Bookmark: Permalink
Article

A budget is not the second thing you need

You’ve been tracking your spending now for over a month. Have you recorded all of it? Even the credit card spending? Yes, you need to pay attention to that too. After all, you’re still paying for it. In fact, if you’re carrying a balance on your card, your paying more for it that you otherwise would.
Still, you’re not ready for a budget yet. Now, you need to know your goals- and not just your money goals. We’re talking about all your life goals, because guess what, they pretty much all cost money.
So write down all your goals. If you have a significant other, have them write down all of their goals. Then, get together and prioritize.
However, priority may not go to the most important goal, like retiring early, or being able to send the kids to any college they want. Besides importance, you also need to consider your current ability to meet the goal. Working on something where you never feel like you’re making progress gets pretty discouraging fast.
So when setting your priorities, make sure you give yourself some quick wins, and put an early focus on items you have the most control over.
If you have credit card debt, your first goal might be to stop using the card, then to pay extra on minimums- something where you can see results more quickly.
So keep tracking your spending, and decide on your goals.  Then you’ll finally be ready to create your first personal budget.
Date: 26/05/2011 Author: Category: Budgets, Getting Started, Tracking Bookmark: Permalink
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