$92 Evaporates without a Plan

I read recently on the Pretend to be Poor blog that the chic pretending to be poor doesn’t budget because “budget” is code for “license to spend,” or something along those lines.

I pshaw’d that as ridiculous.

Yesterday morning I realized that we had $96 left in our weekly budget!  Hoorah!  That doesn’t happen too often.  Our weekly budget resets around Thursday/Friday, and no bills in sight.

It was like this money was burning a hole in my pocket.  Maybe that fake poor woman is on to something afterall.

So I went to Chipotle for lunch (only $8.35 – that’s not bad, right?).  And I stopped at the wine store on my way home, and bought not 1 but 2 bottles ($27).  I usually drink Bota Box wine, but I was feeling fancy, and why buy a box of wine when you can get half as much volume at 150% of the price.

Then I didn’t feel like cooking, and it was cheap burger night at a restaurant.  So we went!  We deserved it, right?  $18.13.

Then on the way home, we picked up a few household things at the grocery store.  $37.56.

And by the end of the day, our $96 surplus shrunk to $4.  And wouldn’t you know it, when I opened the mailbox, there was the quarterly water bill for $89.80.

So this week my budget starts $90 lower than usual.  Yuck.  It didn’t feel like I spent much yesterday, but I blew through $100 in a flash.

This budgeting stuff is not easy, particularly day after day, on a long term basis.  It takes chutzpah!  I didn’t even technically fall off the horse yesterday, but I certainly slipped sideways in the saddle.  The important thing is to take account of things, not avoid the numbers, and do better next time 🙂

 

The State of the Mortgage – June 2016

My husband and I went under agreement on our house two and a half years ago.  We felt like we had hit the jackpot – a beautiful house in great shape, no foreseeable need for any cash outlays, a nice yard, a big driveway (trust me, this is an asset in our area), and walking distance to the grocery store, the wine store, the library, a movie theater, restaurants and bars, the dry cleaner, the track and the elementary school (I believe everything is listed in order of importance!).

The house was listed at $449,000 and we offered $440,000.  The sellers came back at $444,000, and — brilliant negotiators that we are — we took it!

We immediately went about locking in our 30-year fixed rate.  There were rumors that the Fed was about to do all sorts of things, so it was priority #1 to lock in that rate!  We worked with an awesome mortgage guy and locked in at 4.25% with no closing costs.  We put 20% down, and our 2014 projection looked something like this:

We were $355,000 in debt!  That was a shock.  From positive net worth to super negative in a single day.  When I saw the breakout of our first payment, it was a major bummer, to put it mildly.  Only 28% of the payment was going towards the principal – AAAAAAGH!  The screenshots above are from an awesome mortgage calculator website, by the way.  This website was quickly added to my favorites.  I started playing with different extra principal payment scenarios and quickly realized that we could easily shave a number of years off the mortgage term with rather small extra monthly payments.  “OK,” I reasoned with myself, “this isn’t necessarily so bad.  There’s no reason we need to wait until we’re 64 years old to make our final mortgage payments.”

So it went, for the rest of 2014.  We’d make some extra payments here and there, and meanwhile we got married, and also bought a car (with cash, definitely with cash!).  The mortgage was annoying but it wasn’t my primary concern that year.

As the weather started to get colder, my thoughts turned back to the mortgage.  Sure, we had made a few extra payments here and there.  But could we do better?  I started to run more extra payment scenarios.  It was around this time that I started looking at personal finance blogs and listening to podcasts, and taking a more critical look at our spending.

Well, my spending.

My husband really didn’t spend much money.  He’d agonize over a $10 purchase, then leave the store empty handed.  If he found a pair of shoes he liked, I’d suggest buying 2 pairs (or even 3), and he’d go nuts, “Nicole, I don’t even know if I’ll buy this one pair – I’m not buying 2 pairs.  And 3?  No, absolutely not, that’s crazy.”  And the shoes would go unbought.

His big expenses were gas and the gym.  $10/month for Work Out World.  I didn’t even bother checking with him on his upcoming expenses when I’d lay out our weekly and monthly projected expenditures.  I still don’t.

So it was me, all me.  I was the one frittering away our money on Rue La La and who knows what.

I read one article advocating a 15-year mortgage and then I hopped over to my trusty mortgage calculator website:

I was sold.  From the Very First Payment (as opposed to year and years and years down the line) our monthly principal payment would be waaaaaaay more than the interest payment.  $643 more per month wasn’t chump change, but it also wasn’t really that much.  When I analyzed our spending, we were spending that (and more) each month on all sorts of unnecessary stuff.  Restaurants alone ate up hundreds each month!  It wasn’t uncommon for me to meet up with a girlfriend for an appetizer and 2 glasses of wine and end up plunking down $50.  There was no reason I couldn’t do that sort of thing on the comfort of my own front porch, without negatively impacting my lifestyle.  We had just plunked down $88,000 for the house – time to start taking advantage of the house!

We could do this.  Easily, truth be told.

I called up trusty mortgage guy Keith and said we wanted to make the switch.  “15-year mortgage – that’s a sexy little package.  Sounds good,” Keith said, and by the end of the phone call we were locked in to a 3.125% rate.

Hoorah!  Over the course of one 15 minute phone call, we had evaporated 14 years from our home payments!  This was living!

We were happy enough with the 15-year mortgage.  For a few days.  But then I jumped over to the mortgage calculator website again.  And again, and again.  And I kept analyzing our budget.  What else could we do??

Thus began my quest to put as much money as possible towards the mortgage each month.  Each time we make an extra payment, I think about the time that gets lopped off the back end.

It’s HARD to keep it all in perspective!  I don’t know who the hell these other personal finance bloggers are, getting so much satisfaction out of living on $250 groceries per month and never doubting their ascetic living.  Ack!  I want all kinds of things!  It is a daily struggle not to buy stuff, all sorts of crazy, wonderful, stupid, delicious stuff!  But I try hard to keep the big picture in mind.  It also helps that my husband is such a rock.  I don’t even think he notices that we’ve/I’ve cut spending by a TON over the past year.  His spending is unchanged.

So here’s the “state of the mortgage” in June, 2016.  In the graph below, you can see that we were making some extra payments in 2014, but then the real drop off starts when we started to fine tune our focus.  It’s a struggle.  I can’t even say that it’s getting easier :/

We paid off $50K of mortgage principal in 2015.  Our goal is the same for 2016, although we might not quite hit it because we maxed out our HSA (more on that later).  The graph doesn’t look quite so awesome when I zoom out, but still, it’s so much more encouraging than what would have been, with the 30 year mortgage

I just looked it up.  If we had chosen to stick with the 30-year mortgage course, and forgo extra principal payments, our balance going in to June, 2016 would be $341,704.28.  OMG.  Here’s a graph giving a better idea, showing that we’ve already shaved off nearly 3 years of the 15 year mortgage:

Plenty of folks advocate 30-year mortgages, and put the rest in index funds, earn more than the mortgage interest rate, blahblahblah.  That’s fine for them.  But we are extremely conservative.  Basically, we are financial wusses.  We LOVE the idea of being mortgage-free.  Realistically, we wouldn’t put money that we don’t throw at the mortgage into index funds at this point.  We’d probably spend it on $30 entrees and $14 glasses of Barbera on Thursday, Friday, and Saturday nights.  For us, this course makes more sense.  So we’ve been throwing it at the mortgage and maxing out retirement and HSA accounts.  For now, that’s enough.

One important thing to note is that before we made the mortgage our priority, there wasn’t much money left over each month.  We managed to spend whatever we brought in.  While our income has increased marginally over the past two years, the real change has been setting a mortgage goal each month, and setting a budget each week.  We’re now tracking our money, and making it work for us.

I cannot recommend the 15-year mortgage strongly enough.  And then make extra payments whenever possible!  If we hold steady on the track we’re on — which is never, ever a good thing to assume, but let’s just suppose all things remain constant — we’ll have this puppy paid off in another 5 years.  BOOM.  From a 30-year mortgage to 7 and change in under 2 years.  That’s my kind of personal finance!

Take Care of your Stuff – Car Edition

Folks spend an outrageous amount of money on vehicles.  It’s mind-blowing that a car with a $35,000 price tag doesn’t really raise an eyebrow these days.  Heck, a $35,000 car isn’t even all that fancy.

Vehicles – just like everything except primary residences – should be bought with cash.  Financing a car is one of those insane, nonsensical things that has become frustratingly commonplace, just like credit card debt and PMI and home equity loans.  Car financing is a terrible financial move.  A car’s value is nearly always lower than its outstanding balance during the life of a payment schedule.  Save up and buy a car you can afford with cash, and then keep it as long as mechanically possible.  If there’s an emergency, and a car needs to be procured right away, no time to save, the budget should be the cash on hand.  Got $500 and need a car?  Then buy a $500 car.  They exist, I promise.  Can’t afford that?  Bike.  Take public transportation.  Carpool.  If you can’t afford to buy a car with cash, you can’t afford a car.

The next step is to take care of your car.  Not just the oil changes – spend time taking care of your car!  It’s one of the most expensive purchases we make, and we should treat it really, really well.

Keep it neat.  Clean it.  Make it smell and look nice.

Take 20 minutes to wash your car on the weekend.  All you need is a hose, a bucket, some suds and a sponge.  Just like that guy in the 80’s movie.  No waiting in line for a $12 car wash and $35 detail necessary.  Remove all the nasty pollen and salt and spot clean the bird crap.  Use Windex on the inside windows to clean off the dog/kid slobber.  Use a wet rag to dust the dashboard.  Stop by the $1.25 car vacuum place on your way past and spend 5 minutes getting rid of the dirt on the floor, and the mats, and get in to the seat cracks.

I find that when my car is clean and clutter-free, it is more pleasurable to drive.  And own!  I’m convinced that when people say they want a new car, when their current car works just fine, what they actually want is clean and neat and nice car.  They’re looking for an “easy fix” attached to very short term satisfaction, followed by 5 years (!) of car payments.  A few months down the road, the new car patina wears off, and if it’s not being cleaned and well-maintained, the dissatisfaction will creep right back in.

When my car stays clean and neat and nice, I focus on its mechanical, instead of superficial, life cycle.  I want to buy as few cars as possible in my lifetime.  When I look back at where the money I earned during my career went, the Car slice of the pie will be a sliver.

Take Care of your Stuff – Clothing Edition

You already have nice clothing.  And shoes.  And beautiful bags.  Lots of stuff that you don’t even wear that often – maybe you’ve never even worn some of it.

Now stop buying new stuff and start taking care of what you’ve already got!

Spend time hand washing what needs to be hand washed.  Dryel the “dry clean only” stuff.  Buy a drying rack.  Watch a movie while you iron.  Hang stuff.  Fold it.  Keep your drawers organized and pleasant.

If your clothing is ready-to-wear when you’re ready to wear it, you won’t run into the “I don’t have anything to wear” blues.

Clean your shoes.  Seriously.  Use a Mr. Clean Magic Eraser to brighten your boat shoes’ sidewalls.  Use a wet paper towel to nudge the pollen or dust or mud off your heel.  Condition your leather shoes.  Replace the soles.

Don’t put your handbag on the ground.  Spot clean it.  Dump it upside down and get rid of all the dust and hair and straw wrappers.  Keep it nice!

You spent a lot of money on the clothes you already have.  You don’t need to spend more money on more clothes and shoes and all the rest.  Take pride in your things.  Spend time keeping them nice.  Your things will last longer, and you will feel less need for new stuff.

15 minutes of ironing makes a huge difference!
15 minutes of ironing makes a huge difference!
How not to store your shirts
How not to store your shirts

Stay out of Stores and Stick with your List

When I started to zero-in on reducing my spending, it was hugely helpful to unsubscribe from all the tons and tons of tempting product and store emails that flooded my inbox.

  • Unsubscribe from all those spammy email advertisements

These advertising emails are siren’s songs, luring your financial health to shatter on the rocks.

Stay the course!  Don’t crash!

I don’t need to know about Pottery Barn’s 20% off sale, or the discount at the Nike outlet, or really anything about Lululemon’s amazing new sweatshirt.  I receive very little spam at this point (J.Crew Factory being one that I can’t bear to cancel – but I have the power to ignore it!).

If you know you are susceptible to the lures of email advertisements – UNSUBSCRIBE WITHOUT PREJUDICE!

It’s similar to a dieting strategy.  Plenty of diets advise that you rid your cupboards of verboten food.  Why keep candy corn in the house when candy corn is delicious and extremely hard to resist?  It’s healthier to keep it away altogether.

Another big lifestyle change that’s been helpful is that I no longer shop.  I rarely go into stores, other than the grocery store, the gas station, the hardware store, and (obviously) the wine store.

  • Be a shopping sniper; identify your target, carefully calibrate and aim, then pull the trigger.  Preferably at a distance.

I don’t browse, I don’t go to the mall after work to decompress, and I don’t care how cute that new boutique down the street looks.  When I determine that I want to buy something specific, I research, then find the best price, reconsider it, then walk away or make a purchase, usually online.

  • I’m telling you to avoid Target, Walmart, and Costco, too.

But what about the big box discount stores?  It’s easy to avoid an expensive boutique, but am I possibly talking about avoiding places that will “save” me money?

Yup.  Stay out of those places, too.  If you do go to Target, because the laundry detergent is so much less expensive than at the grocery store, go in with a list.

Approach the store with a very specific list of the things you will buy.  And then stick to the items on the list!

If you approach Target without a shopping list, you might as well burn $100 when you cross the store’s threshold.  Double that amount for Sam’s Club and BJ’s.  Sure, I didn’t start the day thinking I needed a year’s supply of Lubriderm, and 2 dozen lady razors, and a 500 count bag of Tostitos pizza rolls, and 7 pounds of almonds.  But that’s what I’ll come out with, among other things, if I try to free-style it in these places.

  • Shopping lists are an essential budgeting tool.

At the grocery store, at the hardware store, and when you’re shopping online.  Figure out what you need, write it down, and then stick with your list.

My grocery bill went down 35% once I started planning out meals; listing the exact components I needed to purchase; and then sticking with the list at the store.

Do not make unplanned purchases.  Stick with the list, and make sure the list is well within the budget!

 

 

 

I Don’t Need any more Socks

My sock drawer
My sock drawer

I have a lot of nice socks.  I dedicate an entire drawer to all of ’em.  In fact, last year I went through my socks, because I couldn’t close this drawer, and got rid of a few dozen pairs that I didn’t ever wear.

And yet…

Every time I see a cute pair of socks at a store – or a warm pair of socks, or a high-quality pair of socks, a soft fuzzy pair, or the perfect ankle sock – I stop and touch them and want to buy them.

Why???

I’m equally tempted to buy a pair of $3.99 sale socks as an $18.99 pair of SmartWools.

The craziest thing is that I don’t wear socks all that much.

I usually wear slippers in the house.  My thick socks don’t fit in my shoes comfortably.  Turns out those patterned socks that look so cute on the rack are actually pretty dorky when you wear them, particularly if you’re older than 10.

The times I wear socks:

  • In the winter, in my boots, on the way to and from work.  Once I get to work, I change into my flats, sans socks.
  • When I go for a long walk.
  • When I exercise.
  • When I’m worried about ticks.

It doesn’t make any sense for me to own 50+ pairs of socks.

I think all these socks are the crux of my financial struggles.  I’m gonna use “X” to represent socks in the 1-3 scenario below, but really, X can be any number of things:

  1. I don’t need more x, but;
  2. I’m constantly buying more xbecause
  3. X isn’t all that expensive and buying x makes me happy.

Exactly.  I think?

At least, buying socks makes me happy in the moment I buy socks…  But even while I’m swiping the credit card, I start to question the socks.  And when I look at the socks I bought an hour later as I unload them into that full drawer, all I can think is, why the hell did I buy these socks? 

This kind of instant gratification purchase is poisonous.  And typically not all that gratifying.  It’s easy to think, it’s only socks.  You will not bankrupt yourself over socks.  But the reality is that the “sock-buying mentality” applies to so many more purchases.

It’s only a $12 glass of wine.

It’s only a $25 bottle of conditioner.

It’s only an $80 dinner.

The sock-buying mentality is dangerous and must be squashed like an ant.

I’ve cut down on my ridiculous sock-like purchases over the past several years in lots of ways.  For me, the least painful way to cut back on spending is to recognize absurdity, then question it, then work towards better purchasing decisions going forward.  Once the absurdity is recognized, logic starts to set in.

Examples of sock-buying mentality (i.e. insane and wasteful) purchases:

Why do I have three pairs of slippers?

Three pairs of slippers is dumb.
Three pairs of slippers is dumb.

Why do I have 2 white bathrobes?  Bathrobes ain’t cheap.

One for winter, one for summer? Should I also get fall and spring bathrobes?
One for winter, one for summer? Should I also get fall and spring bathrobes?

And why – why, why, WHY- do I have so. many. glasses?  Why does every liquid need a specially shaped glass?  And why do I own ALL OF THEM?  It’s absurd.  We acquired these glasses over the years, and a large number of them were gifts or acquired for free.  But still — why haven’t I questioned owning all these glasses until now?  If confronted with a super cute set of glasses at a store, would I consider buying them, despite my gross glass excess?  Will these glasses be my legacy?  Or can I do much, much better…

I suspect the excess illustrated here is pretty typical.  And it’s the sort of crap that makes us broke.
I’m working towards recognizing things that I do not need to purchase.  Over the past year and a half, I’ve cut back on “ridiculous spending” a hell’ve a lot.  But I’ve still got a ways to go.

The fancy glasses - for the liquor and such.
The fancy glasses – for the liquor and such.  My husband doesn’t drink more than a beer a month.  So these are pretty much all for me.  These glasses actually create work for me.  I dust them once a week.  They are, quite literally, dust collectors.
The glasses in the dining room hutch that we don't use, but you know, we have the space for them.
The glasses in the dining room hutch that we don’t use, but you know, we have the space for them, and they’re such nice glasses.  Williams Sonoma.  That makes them better, right?  Some are also from my mother.  Although they were free (she too struggles with excess glassware), why did I take them?
Beautiful glasses given to me by a dear friend. I cycle one into the bar every time I break a current wine glass...
Beautiful glasses boxed in the attic that get cycled into the bar when I break a glass… just in case.  Obviously.
Back up champagne glasses, in case we are toasting with a lot of people.
Back up champagne glasses.  What if we are toasting with a lot of people!  We’ll need these, for sure.
I cycle the mugs, see? These are the off-season mugs that I use during the winter seasons. Makes perfect sense.
I cycle the mugs, see? These are the off-season mugs that I use during the winter. Makes perfect sense… right?

 

 

 

 

 

 

 

 

According to many, I don’t need to be on a budget.

My husband and I don’t have kids.  We don’t have school debts (we paid them off).  We don’t have credit card debt.  We don’t have car loans.  We don’t have PMI.  We have a 15-year fixed mortgage.

For some reason, it bugs people when I say “no” to things because they’re “not in the budget this week/month.”  Even the word “budget” seems to make people squirm.  Why is that?

“You can afford it,” is a constant refrain from my coworkers.  “You have the money.  It’s not like you don’t have the money.  You’ve got to live, Nicole.”

Yes, we have the money to eat out more, or go to Vegas to see a Britney Spears concert.  But if we spend the money on that type of thing, on a regular basis, we wouldn’t have the money for long.

Our priorities are:

  • Paying off the mortgage.
  • Saving for a comfortable retirement.

Therefore we dedicate significant chunks of money each month towards those goals.

With the remaining money, we have a vacation fund and then the rest goes towards discretionary spending.  The “discretionary spending” is all inclusive; groceries, gas for the cars, utilities, gifts, household purchases, etc.  The “discretionary spending” budget does not leave a whole hell of a lot of room for actual discretionary spending.

I hear a lot purchase justification along the lines of:

“X was expensive, but I work hard and I deserve it.”

Giiiirl, if you want to treat yourself, do it within your budget.  Budget for X.  If it’s outside your weekly budget, it’s counterproductive, you’re punishing yourself.

We do not believe in “good debt.” We spend less than we make.  We live well according to… us.

The hard part is opening facebook and seeing someone’s beautiful kitchen, or pretty jacket, or perfect fancy dessert at the downtown restaurant.

Really, the hard part is being confident in what we are doing, and cutting out the comparisons.

No, we shouldn’t renovate our kitchen for $50,000 just because according to HGTV*, “granite and stainless” is every American’s birth-rite.

No, I do not need to spend $240 at the salon.

No, I do not need a $500 vacuum cleaner.

No, my cat does not need chemotherapy.  I love her very much, and I’ve given her a good life.  If cancer comes a’knocking, we will tearfully have her put to sleep.

I’ve been practicing spending less for the past year and a half.  I’m improving.  And I get a kick out of recognizing consumer absurdities (i.e. $240 salon visits, etc.).  I enjoy discussing personal finance, and how people choose to allocate their money.  I’m genuinely surprised by how often I’m encouraged to spend as much as I make, and more.

*As a side note, I love HGTV, but cutting it out of my life was one of the best things I’ve ever done.  Same goes for those damn Housewives, although I still relish the recaps.

The Bargain is a Poor Man’s Scapegoat

J.Crew Factory is having a 50% off Summer Styles sale.  How do I know?  I get several emails from J.Crew Factory each week.  This week I clicked the link and found two really great shirts for my husband.  My thought train went something like this:

  • 50% off – that’s a bargain. 
  • He already has a t-shirt with a crab, but I’m from Maine.  He should really have a lobster t-shirt.
  • We’re going to Bar Harbor next weekend for our anniversary.  He can wear these in Bar Harbor… and they can be an anniversary gift!
  • I love him and he deserves nice things.
  • He’ll love the Hawaiian shirt because it’s along the lines of something Kramer would wear.
  • It’s only $45.  It’s not much.  Especially for an anniversary gift.  We have the money.

The justifications for the purchase were so obvious.  My husband’s life would be better with these shirts.  Right?

But then I hesitated.  I didn’t need to spend $45 on two shirts.  So I had to think myself down:

  • J.Crew Factory sends me a 50% off email every few weeks.  50% off is practically their baseline price.  It’s not actually a bargain.
  • My husband asked me last year to stop buying him t-shirts.  He’s out of drawer space.  It’s not as if I had planned to buy him a new t-shirt when I got up this morning.
  • Fine.  He doesn’t need a lobster t-shirt.  Just the Hawaiian shirt.
  • We are $60 over this week’s budget.  That’s not terrible.  If I just bought the Hawaiian shirt, it would only be less than $100 over the budget.
  • $100 over this week’s budget is too much.  He doesn’t need the shirt.  He has lots of nice shirts.
  • One night in our Bar Harbor hotel doesn’t cost much more than this shirt. This doesn’t really make sense.
  • I still want to buy those shirts.  Or at least the one.  But I know I’ll be mad at myself if I do.  So I won’t.
  • Grrrr.  [as I closed the website]

That’s the anatomy of my “no.”  Some “no-s” are easier than others.  This was a tough one.  Particularly when I got an email from J.Crew Factory a few days later, Re: Oops, you forgot something (Get it Before it’s Gone) with the shirts pictured in the email’s body.

Thanks a lot, J.Crew Factory.  A reminder and a threat.

Plenty of personal finance/early retirement bloggers preach “buy nothing,” etc. etc.  But it’s not that easy.  It’s emotional.  I have a similar conversation with myself before most purchase considerations.  Some things are an easier “No” than others.  It’s difficult to think Big Picture when the immediate path to satisfaction is right there.

“Bargains” are an excuse to spend money that doesn’t need to be spent.  “Bargains” will lead me to the poor house.  One year I had a RueLaLa membership.  At the end of the year, my RueLaLa purchases totaled $1,500+, most of it gifts, or sheets that sure didn’t feel like “hotel quality,” or green suede boots I didn’t really like.  I needed to stop RueLaLa-ing my paycheck into thin air, stat.  I blocked the gorgeous RueLaLa emails and began my effort to make more conscious purchases going forward.

When I plan to buy a specific item, of course I look for the best deal.  Often on Craig’s List.  Sometimes I hold off until a good deal crosses my path.  To think of random spending on a sale as getting a “bargain” is treading in dangerous territory.  When I spend money that I would not otherwise have spent, it’s the opposite of a bargain.

So, no new shirts, no spending money in the [false] name of saving money, and no “anniversary present” excuse.

The trip is our gift to each other.  Not having these shirts will not affect our vacation.  When we bike on the Acadia carriage trails, I won’t think, “he would look so much better if he was wearing that Hawaiian shirt, ” and in a year I will not look at pictures of our trip and think, “if only he was wearing a lobster shirt.”

I believe this type of small decision adds up.

Sitting happily in Bah Ha-bah without a lobster shirt.
Sitting happily in Bah Ha-bah without a lobster shirt.