August 2017 Check-in

Everything is chugging along.  The mortgage balance is smaller (we are on track to pay off $60,000 this year).  The 2016 and 2017 Roth IRAs are fully funded and 2018 funds are in the hopper.  Over the past year we’ve taken two week-long vacations and lots of long weekend trips, usually staying with friends and using credit card airline miles.

After our last week-long vacation in June, we decided to try switching to debit cards for a spell.  Again and again, I’ve heard that we spend more with credit cards and let me tell you, it’s absolutely true.  We’ve been putting just enough money in the checking account to cover two weeks at a time.  I hate getting below a $100 balance and so far, it’s only happened once.

Lately I’m struggling internally over whether we should just pay the regular mortgage payment for the next 7.5 years and invest the “surplus” in index funds.  The math makes sense but my heart doesn’t like it.

I Cancelled Amazon Prime

The $99 Amazon Prime annual renewal fee came up and I didn’t feel like paying it.

I really like the show “Catastrophe,” but otherwise I don’t think I’ll miss the video portion too terribly.

I think this will cut down on impulse buys. I looked back at our order history over the past year, and most of the orders have been presents.  I don’t mind cutting back on presents a bit.

I’ve always talked about how great Amazon Prime is.  Living without it for at least a while will be the test.

Total Wastes of Money

The soda stream The break-even point on an $84 soda stream is a lot of frigging soda water.  Another amazing marketing success story!

The Apple Smart Watch Not only are they ugly and expensive, every single person I’ve ever seen wearing one has an iPhone not more than a few inches away.  Talk about redundancy.  Again, marketing – Apple has convinced these people they “need” the watch.

Vitamins.  Except folic acid for the ladies.  Another marketing coup.  Just eat a balanced diet.

Pet clothing.  I’ve bought my fair share of pet clothes before.  What a crazy-stupid thing to buy.  Dogs have hair to keep them warm.

Dyson hair dryer.  A hair dryer for $700 is a thing all because of the dulcet tones of some British dude.

Fit Bit.  Your Fit Bit is stupid.  If you must obsess over yourself, use free  SmartPhone apps.

Roomba.  No one needs to pay $500 for a vacuum.

Diamond rings.  Diamonds are all marketing, ladies.  There is a glut of diamonds, which is carefully controlled by the diamond cartels in order to artificially inflate the price.  Spending $15,000 on a diamond is no kind of insurance policy for a marriage.  Being nice to each other is a much higher level of security, and it is free.

Platinum wedding bands.  Some of the men don’t like to be left out of the wedding spending frenzy, and they feel that because the man’s band is so much less money than the lady’s ring(s), it’s not such a big deal.  Well platinum dulls like crazy, and scratches, and generally looks plain awful after a few months.  I don’t understand why jewelers are so quick to tell you that it is the only metal that doesn’t “lose weight.”  It looks like shit.  Platinum is more marketing genius.  My husband’s wedding band was $20, from Amazon.  4.5-star rated by 335 smart customers.  He gets compliments on it all the time.  It doesn’t make him love me any less.

Books.  Go to the library!

 

 

Redefining “Worth It”

My friends and coworkers love to talk about how certain things are and aren’t “worth it.”

This phrase always makes me roll my eyes.  It’s typically used as a justification to spend more money.

It’s fine to spend more money on things you’ve decided are important.  However, there’s a second part of the equation; not everything can be important!  If you want to spend more on one thing, you consequently need to spend less on a different thing.  Or nothing at all.

Here’s a friend’s recent facebook post:

Wants vs Needs - the twix don't always twain. Or something...
Wants vs Needs – the twix don’t always twain. Or something…

This post generated 36 comments, plus ample sub-comment discussion.  TONS of well-meaning suggestions.  Everything from, “eat less meat” to “raise your own chickens and start a vegetable garden” to “buy a percentage of a cow and a chest freezer” to “eat more chicken thighs and less expensive cuts” to “I saw some folks on TV get 100% of her food from the grocery store dumpster for free” (ok, ok, that was one of my suggestions).

The poster – a lovely woman! – went on to explain that her family’s diet is strictly paleo.  Cutting down on meat was not an option she was willing to consider.  She also nixed dumpster diving.  Snob!

So herein lies the problem:  my girlfriend has declared that an expensive, meat-based diet, made even more expensive with organic, grass-fed ingredients, is “worth it” to her.  It is a priority.  That’s all well and good so long as she can afford it by cutting costs in different areas.  If she can’t afford it, and stick to her family’s budget, it’s no longer “worth it.”  It’s nuts!

Through this post, she’s trying to figure out how to have her cake and eat it too.  It’s like saying, “I only fly first class, and drive luxury cars, and live in a mansion, and eat at the best restaurants” and then complaining that you’re having trouble affording first class.

We can’t declare every single thing we want “worth it.”  It doesn’t work.

Scrolling back through the comments on this post – Costco!  meal planning!  boxed wine!  home-made cleaning supplies! – it strikes me that not one person suggested cutting back in a different area of the family’s spending to accommodate their diet preferences.

I have another girlfriend who gets her hair cut and colored every 8 weeks to the tune of $250 (including tip).  She was unemployed and living off her 401(k) for nearly a year (frankly, this was a choice – there was plenty of temporary, seasonal, and part-time work she could have picked up, had she wanted it).    When she moaned about depleting her 401(k) and I suggested she cut out the salon visits, she was horrified.  Her hair was “worth it.”

Another friend is looking for a way to cut back generally on spending.  I suggested he start bringing lunch to work.  He explained to me that bringing his lunches would only save him a few thousand dollars a year.  He needed to start saving much larger amounts.  The hassle of a brown bag lunch just wasn’t “worth it.”

I think the problem is that my friend group is a high-earning, professionally successful bunch.  We get married later, buy homes later, have kids later – and for a period of several years in our 20’s, we got used to “having it all.”  I certainly got used to it!  I had a great income for a single person with very few expenses.  If I wanted something, I bought it!

But then as I got older, and started planning for the future, and added a mortgage and health costs, and home expenses to the mix, I had to redefine what was “worth it.”

Now when I say things are “worth it,” there’s a new meaning.  Usually I’m justifying that things are worth a sacrifice.  Sometimes a big sacrifice, sometimes one that is hardly noticeable.

Our family’s $30/month Republic Wireless bill; is it an iPhone?  Nope!  But the plan is “worth it” to me.  Socking money away for retirement – worth it!  Trading in cable for Hulu – worth it!  Brown bag lunches – worth it!  $65 hotel rooms on vacation – worth it!

Small adjustments in day-to-day, week-to-week, and month-to-month behaviors which facilitate the Big Picture goals – worth it.

 

Christmas Presents

I’ve decided on a Weapons Theme for the holiday season.

I’m buying the little nieces and nephews little pocket knives, and the older ones folding utility tools.

So far, I bought the two utility knives.  The pocket knives are on order with a generous “friends and family” discount from a store-owning family friend.   I’m considering a digital New York Times subscription for my husband.  A mind weapon?  Sort of?

I start buying Christmas presents in September.  I buy in dribs and drabs as the weekly budget allows.  I add ideas to my Amazon wishlist throughout the year, so I’m never in a “hm, what should I buy?” situation.

Our entire Christmas present spend comes to $600 – $700.  This is an absurd amount because in addition to getting the kiddo presents, there is an adult exchange and group gift that comes to $400.  It’s something that I would rather skip, but my husband feels strongly about our participation.  The man doesn’t ask for much.  So we fork up the money each year.  The other $200 – $300 is gifts for the kids (10 nieces and nephews), my parents, and my sister and brother-in-law.  There’s no required dollar amount tied to these gifts, luckily.

It’s a lot of money.  It’s an annual expense that I count in our list of annual expenses (i.e. car insurance, $1000; home insurance, $1000; life insurance, $1000; property taxes, $4,100) and I budget for it each year.  That amount of money would be very difficult to tackle all at once.  By spreading out the pain, Christmas can be about days off with family, food, and wine.  Gnawing stress about the January credit card bill is  avoided.

May we all be this relaxed at Christmas.

May we all be this relaxed at Christmas.

 

 

 

Booking.com is Awesome

I have no affiliation with www.booking.com.

That said — what an awesome website.

My husband and I went on a road trip three weeks ago.  San Francisco to Los Angeles in a rented car.  It was such an amazingly beautiful trip, and it ended up being our favorite vacation to date.

Big Sur!
Big Sur!

We were so lucky to meet up with three couples along the way.  Dear friends whom we rarely get to see because they live so far away.  We stayed with friends in Santa Clara, Ventura, and Redondo Beach for 4 nights of our 8-night trip.

For three of the other four nights, we took a risk.  Because we didn’t know exactly where we’d be each day, we decided to make our  hotel bookings each night.

The first night, we brought up the booking.com website around 6PM, after blissfully watching dolphins and whales and pelicans off the coast of Half Moon Bay for an hour.

So many options!  We sorted the options from lowest to highest.  We chose a $70 room with an 8+ rating.  It was a “last minute value deal” with a full price north of $150.  It was a fantastic room, extremely clean, super pleasant owner-operator, and a modest continental breakfast to boot.

The following two nights we got even bolder and booked $65/night rooms.  More success!  Super cute old-school drive-up rooms.  All owner-operated with pride, all clean and quiet, all in great locations.

I’ve also used booking.com in New York City at the last minute with great success.

I don’t know if it was because we didn’t care about name brands, or if we lucked out with our trip timing, or if booking.com is huge in California, or if this is even something I can really recommend trying.  A quick search for a downtown Boston hotel room for tonight is… sobering.  $309 is the cheapest room in downtown Boston on a Tuesday night?  Yikes!

All I know is that during our California trip, www.booking.com was our best money-saving tool.

 

When to Replace a Car

“My car has X miles.  I’m going to get a new car now, while the trade-in value is high, before my current car starts to have major problems.”

Here is what this person is actually saying:

“I want a new car.  My current car is perfectly fine, so I need to come up with a justification for the new car.  I know.  I’ll present the purchase as if it will save me money.”

But it doesn’t sound smart.

It’s sort of like buying and selling single stocks on the market.  Don’t try to outsmart the market.  You’ll go broke.  Just buy an index fund and ride it out.

A paid-off car is almost always less expensive than a new car.  That tipping point is much, much further down the line than people convince themselves it is.  Years and years.

Car payments are the worst.  Why, why, why don’t people talk about being “car poor”?  People talk about being “house poor,” but I suspect many are “house poor” as a trickle-down effect of being “car poor” from a crushing $450/month car payment.  For 60 months.  Ouch.

Our last car purchase two years ago replaced a 1997 Oldsmobile 88.

My husband bought it for $3,000 from a former high school classmate’s mother.  He gave it regular oil changes and replaced the tires a few times.  He stapled the drooping ceiling fabric back to the ceiling, before ripping it out and letting the yellow foam underneath shine through.  The headlights were clouded over with a weird film that refused to be cleaned.  It was a really ugly car.  Even little kids thought it was ugly, they would climb on it, jump on the hood, will it to die.

We don't have many pictures of my husband's old Olds 88.  She wasn't too photogenic.
We don’t have many pictures of my husband’s old Olds 88. She wasn’t too photogenic.

Many mechanics refused to work on the car.  The bottom was super rusty.  I think the last straw was that the bottom of the gas tank rusted through, and gas was leaking.  But when they took out the gas tank, it turned out to be holding other rusted components in place.  (Can you tell I’m not a car person?  Not very technical language here.)  The transmission was also gone.  This was our tipping point.  The car was worth about $1000 in scrap metal.

My husband got endless shit for driving this car for 10 years.  The car was a long-standing joke at his workplace.  Our friends made comments.  Even his family ribbed him.

But you know what?  The whole time he was driving this thing, he had the down payment for our house sitting in his bank account.

It wasn’t that he couldn’t afford a new car.  It wasn’t that he liked driving a jalopy.  He was planning for the Big Picture, and in the Big Picture, a new car can derail things, big time.

 

Is Debt Consolidation Good? (No. No it is not.)

Debt consolidation.

If you have debt, best thing is to get it all on a super low interest rate, right?

I’m not a fan of debt consolidation.

Debt Consolidation makes you forget about debt.  It’s a trick.  Back away quickly.

Recently a friend did a massive debt consolidation.  He refinanced his home to a 20 year fixed mortgage with a lower interest rate (great!), and in the process, he rolled in the credit card balance, the outstanding balance on the car loan, and his son’s first year of college (not good, not good at all!).  His overall payments went down by several hundred dollars a month.  So he sees it as a good thing, right?

Well….

Before the debt consolidation, his payments were higher but he was 3 years from a paid-off car (if he did nothing more than keep with the monthly payments).

Now, his car won’t actually be paid off for 20 years.  He won’t even be driving that car for several years as he continues to pay for it.  How long to people drive cars typically, 7-8 years?

Of COURSE the monthly payment went down.  He took a 3 year loan and spreeeeeeeeaaaaaaaad it out over 20 years.

That doesn’t make any sense!  It really, really doesn’t.

Think about it.  Would you ever take out a 20 YEAR CAR LOAN?  If someone suggested that to you you’d tell them to go screw. But that’s what you do when you roll your car loan in with your mortgage.  You take out a 20 year car loan, and you put your house up as the collateral.

And the craziest thing?  He has tricked himself into thinking that he no longer has car payments!  I heard him say that the other day to someone, “we don’t have car payments any more.”

It’s just not true!  Just because he played a shell game and rolled the car loan, the credit card balance, and a year of college into the mortgage… that doesn’t mean those payments went away!  They just got spread way the hell out.

I don’t believe debt consolidation is a good motivator.  I don’t believe that the freed-up cash is put towards paying off debt.  I believe the new situation is evaluated and more times than not, debt consolidation folks go out and get themselves a new debt with that freed-up money.

This is the same phenomenon with pay raises.

People tell themselves that if only they get a pay raise, they will have an easier go at things.  Life will be easier.

But it doesn’t happen, because when we get a raise, we tend to raise our spending level commensurately.  That’s why nearly half of people earning between $100,000 and $149,999 have under $1,000 in their savings accounts and 18 percent having nothing squirreled away.  Nothing!  That’s crazy.

Debt consolidation is a mind-f$%#.  It gives people a false sense of doing right, of being smart.  Like the elliptical machine, or fat-free cookies, or rented solar panels on your roof.  Debt consolidation is a false bargain, and false bargains should be avoided at all costs.

The truth is that getting out of debt sucks.  Lifestyle changes are hard.  Cutting back is hard.  It takes a long time.  But by keeping debts in discrete accounts, there are W’s along the way that are crazy-motivating.

Paid off that $1,000 Macy’s card that’s been sitting around for two years?  That’s a W!

Killed your car payment 2 years early?  W!  No car payments is fantastic!  Have 3 glasses of Bota Box Malbec, you earned it!

So instead of avoiding debt through consolidation, I suggest facing it straight on.  Cut back, think big picture.  Line up your goals and celebrate the W’s along the way.

 

 

 

 

 

 

I’m not gonna Work Hard to Give You My Money

We generally live by the rule that we refuse to work hard to give away our money.

Why should we?

That means:

  • If there’s a line at a coffee shop, we turn around and walk out.
  • If no one acknowledges our presence at a sales counter within about 30 seconds (this seems to happen a lot in coffee shops), we walk.
  • If we sit at a bar and don’t get acknowledged for several minutes (and the bar tender is not serving other customers), we walk.
  • We don’t put our names on waiting lists at restaurants – unless we’re very thirsty and don’t mind waiting with a cocktail 😉
  • We don’t wait in line all night for new products.  We don’t get on waiting lists for new products.
  • If a salesperson is rude, we walk.
  • If I’m at a store and ready to pay, but there’s a crazy-long line (Victoria’s Secret, Anthropologie, Old Navy, Costco, TJ Maxx and Marshall’s come to mind) I put down my would-be purchases and leave.
  • If it takes a contractor too long to call us back, or give us a quote, we call a different contractor.

This saves us a good bit of money, and also generally helps to keep us out of stores.

I want to feel good when I part ways with my money.