Archive for the ‘Budgeting’ Category

Spending Triage

J asleep in his snowsuit, which we affectionately nicknamed “The Coma Suit” for its ability  to get him to fall asleep. Probably about 19 months old.

There’s a lot to balance right now, and I let the money slide.

In February, Jason and I overhauled our budget to maximize the amount of money going toward our renovation each month. Suddenly, there are many unexpected expenses cropping up that are needs. These expenses will be ongoing for a couple of months at least. We can’t put the entire renovation on hold, nor can we put on hold the doctors appointments, birthdays, or weddings. And although not financially smart, I downright refuse to put our first weekend away from our kids on hold. That’s a need, right there.

With more sudden ongoing expenses, and me not taking the time to find room in our budget (i.e. spend less in other categories or save less) for the last month or two, we have a small problem.

It’s time to perform Spending Triage.

Spending Triage happens when I realize that we are on the threshold of spending a large amount of money that needs to be spent, but that we weren’t able (or didn’t think) to predict.

Spending Triage is the process of separating wants from needs. Jason and I sit down together and look for places we can cut back. The “gifts” category is one that immediately jumps to mind. If this year needs to be all homemade cards, ornaments, and baked goods instead of our usual calendars, prints, and other gifts, our families and friends aren’t going to love us even slightly less.

Personally, I’m grateful that we need to do this. Sure, having lots of extra money pour into our laps would be super easy and some stress would melt away. But life isn’t always going to be like this, and it’s good to know how to cut back and even save in tight times.

Spending Triage is the process of holding one expense up to another and deciding which is more important.

I’m grateful that we had the forethought to take out a Home Equity Line of Credit, so that we don’t need to put the renovation on hold. I’m grateful for awesome friends who don’t mind hanging out at our home for a potluck. And I’m grateful for all the times before now when we had to hitch up our suspenders and really pinch every penny, because those times make this feel like a walk in park.

It just so happens that this is about the time when we do a big yearly review, so hopefully we’ll be able to do that and a little triage in one fell swoop very soon.

I’m actually looking forward to it: Jason and I always have such great conversations when we are working together to fix a problem. Even though he hates money.

Hmmm…why DOES he hate money?

**********

How do you know if your spending is going crazy? And do you consciously reign it back in?

Advertisements

Dipping Into the Emergency Fund

Family gathered around MacBook

The family gathered around the old MacBook, watching a movie during the Great Plague of November 2011 when we were all sick as dogs.

We bought a new computer this past weekend. This was definitely not a budgeted expense.

The old one worked great, right up until the minute I watered the prone-to-leak plant that was hanging above where it sat. When I returned later and picked it up, water poured out.

It just so happens that I recently started trying to make money again and that computer was my master plan and key, all rolled into one. And our computer was in great shape, and computers aren’t cheap. I was a little distraught for a bit before I remembered that a computer is just a thing.

We used our emergency fund to purchase a replacement. Fortunately, Jason receives a nice discount since he teaches at a local university, so we were able to keep this purchase below $1500. And since the computer will be used extensively to run my business, it is tax deductible to some degree.

Everyone’s circumstances are different and for some, a new computer may not be considered an emergency. I work exclusively on this computer, my volunteer work can be done mostly from home using this computer, Jason needs a computer when he teaches, and we manage our music and photo libraries, as well as our finances, from this computer.

There was no question that this was an acceptable use of our emergency fund.

However, as I was updating our budget spreadsheet last night, I started to wonder why we haven’t created a targeted savings account for computer repairs and replacements? We have savings accounts for the renovation, a new car, Christmas, taxes, and a couple of others. These are all things that don’t happen too often, but we know that when they do we drop quite a bit of money on them. Computers always die one way or another, and I’ve not been without one for almost 20 years, so why has it taken me this long to realize that I need to budget for this expense?

I think this is a great example of how saving and spending money is more of a mental challenge for me than any real exercise in physical discipline. I have to actually pay attention and think when I’m spending money and ask why and how instead of how much. I also think this means I’ve come pretty far from the way I used to behave years ago, spending money without a second thought.

It hurt to spend from our emergency fund. We’ll definitely prioritize replacing that money so that our cushion is, well, cushiony, again.

You can probably guess what account I’ll be opening up at ING today.

***********

How do you budget or plan for irregular large expenses?

College Savings vs. Retirement

boxer in black hoodie

photo by 3W Giant Mart

My family consists of two adults and two children, ages 35, 34, 4, and 2. Like most people in our stage of life, we tend to worry a bit about retirement and college educations.

Jason and I had a conversation recently where we agreed that saving for college was not one of our top priorities, and won’t be for the foreseeable future. A few weeks later, I had the same conversation with a friend of mine, and it turns out that he and his wife have decided to save little to nothing for their children’s future secondary education as well.

In our situation, there’s a huge home remodel to complete that will likely take most of the next two years, hopefully without taking on much debt.

Because of our 3 major life events in the last 6 years, we’ve saved very little for retirement:

  1. Jason’s bachelor’s degree from a private university
  2. Majorly remodeling a home
  3. Our decision for me to stay home with the children through their little years

That bothers us (not our choices, just not being able to save for retirement. Also a choice, actually).

Once the remodel is finished, I’m hoping that he’ll agree to funnel most of the money we were spending on it into our retirement accounts in order to beef them up.

To provide the equivalent of $45,000/year for 25 years beginning when I turn 65, CNNMoney’s retirement calculator says that we need to have $1.9 million saved ($754,078 in today’s dollars). And that we need to save $6,400/year more than we are right now. I didn’t factor income from Social Security in, since I’m not convinced it will be around in 30 years.

Jason and I talked briefly about how we hope to be able to pay for enough of our children’s post-high school education (college, training, apprenticeship, whatever) that they won’t have a mountain of student loan debt like Jason and I are still trying to dig ourselves out from under. We aren’t planning to add anything to their 529s for at least the next few years. Instead, we’ve decided to add gifts to the children’s secondary education funds onto their wishlists (starting at $10 because, hey, $10 today is $13.66 in 2026, per Tom’s Inflation Calculator) and mention it right along with whatever things they need or want whenever anyone asks us. I won’t be offended at all if nobody decides to contribute, I just hope they aren’t offended that I present the option. People can be funny about money.

Why, oh why, didn’t Dr. Seuss write THAT book??

The college cost calculator at The New York Times spit out the figure $174,646 for one year at a private university in 2026, the year our oldest will graduate from high school. That’s $698,584 for four years. I can’t even fathom that right now. That number doesn’t figure in merit-based awards, which I hope they’ll be receiving if they choose a private university.

$45,000/year isn’t much, even in today’s dollars, for two people who hope to have vibrant lives full of travel to far-flung places, visits with family, and the ability to be generous with our loved ones and the organizations we support.

Jason and I both hope to continue working part time on projects or at jobs we love well past the age of 65, so $45,000 (or less) with that additional income should work.

Deciding to focus on our retirement over our children’s probable future education expenses is the right decision for us, but I know other people in the same situation would make a different decision.

A handful of questions for you…

  1. Do you plan to pay for your kid’s secondary education in full?
  2. Is it in bad taste to include a child’s 529 or other savings account on a wishlist, or to mention it as an option to the gift-giver in conversation?
  3. Which is your priority right now, retirement or college savings? Or neither? Do tell!
  4. Have any great calculators to share? My addiction is only mild and fleeting, I swear.

Thanks for sharing!

The Reluctant Spender

Holding a wad of cash

by 401(k)2012

After an unfortunate series of events wiped out every penny of our emergency savings two years ago, earlier this year Jason and I finally reached a number in our savings that we feel somewhat comfortable with.

It’s not the goal number, but it’s a bit over the minimum we both needed to feel secure.

We’ve said no to dinners out with friends, found free fun alternatives to more expensive activities with our kids, and simply not spent money if we ran out of room in that category for the month. In short, we’ve worked for that savings cushion, and it hasn’t been that easy. 

And by this Friday, we will have spent about a third of that money.

I’m having a hard time with that, and frankly, I’m surprised that I’m having a hard time. Beginning this remodel in earnest has taken a huge weight off of Jason and I. We are more chipper and positive than we’ve been in a long time, and that says a lot, because remodeling is stressful. Knowing we were going to spend this money intellectually was fine. Emotionally, I don’t want to let go of that money!

I think that money represents a series of sacrifices, as well as making me feel more secure.

I have to remind myself that we’ve reserved half of it as an emergency fund that won’t be touched for the remodel (unless something big goes wrong). And the contractor is worth every single penny. 

Maybe what’s bothering me is how quickly it’s being spent? Feel free to weigh in! And I’d love to hear how you feel when you spend something on a very large but planned expense.

Good Reads: Traveling

We’re moving from family home to family home in a two-state area while the construction is going on. We were home briefly yesterday morning and the floor was shaking during the hammering.

We’ll be home tonight and tomorrow morning, and then away again for a week.

It’s challenging with kids, but we’re into our third week of barely being home and I’m starting to actually enjoy it. I’m taking minimal packing to a whole new level, and with an almost-two year old and a just-turned-four year old, I consider that a big accomplishment.

As long as I keep most of the routine going for the kids, they’re pretty happy, and they’re thrilled to be spending so much time with their three sets of grandparents who live in this two-state area. And when we are with Jason, we make sure to have lots of quality family time with walks, bike rides, playgrounds, snuggling, playing and reading.

Here’s what’s caught my eye on the internet recently.

The Power of Personal Responsibility @getrichslowly: I constantly remind my children that they’re making a choice, and I often say it to myself. Even not choosing is a choice.

Our New Monster Cash Account @budgetsaresexy: This article was a great reminder to set specific goals and parameters in our budgeting process so that we feel comfortable with what we have saved, no matter what that number is.

Children and Money @frugalbabe: Our oldest just turned four and we’ve been trying to decide whether or not to give him an allowance to teach him about money management. We’re leaning towards this $4/month idea.

Making a Grand Entrance @misadventuresinremodeling: I love reading about others’ remodeling projects, especially when they include lots of photos.

The State of Our Health Insurance

doctor and patient

In my home, we all have relatively low-cost, high-quality health insurance, and for that we are very, very grateful. I’m the only one who doesn’t have vision insurance, and we all also have dental insurance. We haven’t had dental or vision for the last 7 months, so we were very happy when it was again offered by Jason’s employer.

Here’s the breakdown: Jason is ensured through his employer, as am I. The cost is approximately $200/month for health, vision, and dental for him, and for health and dental for me. Not bad, right?

However, we were completely spoiled by his previous employer. We paid nothing (!) for Jason’s insurance and, when I was trying to decide whether or not to stay home with our first, they offered to pay for my insurance, completely, in lieu of a raise that year. And that arrangement lasted for a few years before we had to start thinking about insurance for ourselves again.

For the kids, however, we buy insurance through the state. Pennsylvania offers a wonderful program called CHIPS where your payment is calculated according to your income and family size. They’ve always received excellent care, and almost all of the doctors we have wanted to visit were covered. Not to mention that when either child has made even the tiniest threat of a developmental delay, services were mobilized and excellent therapists procured when needed.

I’m curious to see how or if this will change under Obamacare–I can’t imagine much will change.

********

My problem, and it’s a good one to have, is that I’m currently juggling three different health insurance, dental, and vision companies. I can’t keep straight whose is whose, what is covered when, and how much I owe for even the most simple services. I think I need a system for keeping this information together and easily accessible, but I’m stumped.

Also, Jason and I go to one set of doctors, while the kids go to another. I’m having trouble keeping track of all that as well.

Another thing that stumps me? Why don’t the children receive dental insurance cards? I find it strange that I have to keep a member number on a post-it in my wallet.

********

How do you keep track of insurance information? If you have kids, do you try to all go to the same doctors or do you all go to different doctors? I’d love to hear how others keep this information straight! 

Cut and Dry

How is it possible that I again have three weeks worth of unclipped coupons sitting in a neglected pile on my bookshelf? And I didn’t even buy newspapers last week!

I’m considering a switch to buying only the inserts online. It’s about the cost of buying a Sunday paper, but I think it might be more environmentally friendly than buying 4-6 papers every week and immediately throwing most of them in the recycle bin.

I did manage to get to Walgreens today and buy a pack of $3.99 Huggies diapers and a $4.99 Rembrandt whitening kit. I’ve never whitened teeth, and don’t know that I really care, so I may just give it away. I had planned on getting another pack of diapers, but the Walgreens I went to (a new one for me) has a policy of allowing only one transaction per customer. Yuck! I didn’t argue at all, and just smiled and rearranged my puchases and handed the lady some things to put back, but I won’t be shopping at that location again unless Jason is with me and it’s a free or almost-free deal.

If anyone is wondering, it’s the Walgreens on Rt. 8 just up from Etna, across from the vintage Giant Eagle.