Finance Gets Personal

A few posts ago, I casually mentioned the savings we have in our basement fund, new computer fund and European vacation fund.

I’m not sure how much I’ve talked about this before, so I thought I’d explain before I start looking like a complete hypocrite (wah, it’s so hard to get out of debt while remodeling your house/buying new computers/taking trips to Rome!).

First, we’ve set up a basement fund, since one of my husband’s goals is to finish the basement himself for $3,000-$4,000. We are directing $150 per paycheck to this goal.

The new computer fund is my husband’s personal account (currently, $750 in a Body Shop tin hidden in the bedroom). He’s saving part of his personal allowance/blow money each paycheck, as well as any money he gets for Christmas and his birthday. Normally, this would be something we would work toward together, but since we got his computer as a wedding present (his parents let us choose what we wanted) and my current computer is older than the one he wants to replace, well…
I only mention this fund because we could use it if he lost his job and we were desperate for cash.

The third “special” fund is the European vacation fund (my personal favorite!). For the past two or three years, my husband has secretly been saving part of his allowance/blow money to take the family to Europe for my 30th birthday next year (well, not too secretly - I knew the account existed, but I only knew that he was saving for some special “surprise”). By the time we take the trip (probably Spring 2010), he’ll have $4,000 saved. Now, I know this doesn’t seem like enough to take three people to Europe, which is why we’ve also started working credit card-frequent flier magic, which should completely pay for our flights (more on this newest hypocrisy in an upcoming post). We’re thinking of visiting parts of England, France and Italy for two weeks.

So, those are the “secret” funds! We’re going to continue to contribute to them as long as they don’t get in the way of regularly scheduled programming. And, you can be sure that I’ll be looking for advice on visiting three of the most expensive cities in the world (London, Paris and Rome) on the cheap!

Last week, after news that my husband might get laid off, I prepared an “oh shit” budget.

As in, “oh shit, we lost half our income” budget.

It’s actually not as bad as I thought it would be.

If he gets laid off, we can continue paying our mortgages, car insurance, life insurance, utilities and telephone bills, and also manage to buy groceries and household products (hooray!). However, we will no longer be able to save for retirement (or anything else), pay extra on our debts, go out to eat (though we rarely do that now), buy new clothes, give gifts, pay for before- and after-school care (which we would no longer need), contribute to our health care flexible spending account, subscribe to the newspaper, subscribe to Netflix or have cable and Internet service.

The good news is he’s eligible to receive six months of severance pay and health insurance. He’s also eligible for seven months of unemployment.

So our plan is to cut everything to the bare minimum and live off my income while he looks for a job. If he found a new job after six months, we’d have about $38,000 in savings by then! After six months, his company would stop paying his and my stepson’s health insurance, so we’d use the seventh month of unemployment benefits to cover that cost. Anything longer than seven months would require us to dip into savings to cover their health insurance premiums (I can get health insurance for them through my employer, but we’d be responsible for 100% of the cost).

And if he found a job right away - well, that would be awesome, because we could use his six months of severance pay to pay off the second mortgage!

I’m feeling *much* less panicky.

It also helps that he got an excellent performance review at work last week. His boss even said he’s his most valuable employee! Good news! (Unless the boss gets the axe, of course.)

In other news, I still haven’t heard back from CVS (hello?), I still have my in-laws’ vacuum (getting dusty?) and I’d be done with my taxes if I weren’t waiting on the interest statement from my second mortgage (hurry, before I start procrastinating!).

Well, fate has decided which vacuum we’re going to get.

Thanks to my husband’s employer’s plans to lay off 20% of its workforce, it looks like we’ll be buying a cheap vacuum with our American Express card (for the additional one year warranty) and paying it off immediately.

That’s right - my husband thinks he’s going to get laid off.

And this time, I actually believe him.

Even if he doesn’t, things aren’t looking too sunny. All 401(k) matching has been stopped, raise freezes have been extended by another year and tuition reimbursement has been stopped. And get this - although his company no longer gives matching 401(k) contributions, any profit sharing (which occurs only if they meet specific goals) will be based on the amount of money employees put into their 401(k). What a crock of…

Needless to say, we’re preparing for the worst.

Thankfully, we’d already begun directing our extra debt payments to savings, so counting our emergency fund, European vacation fund, new computer fund and basement finishing fund, we have over $7,000 saved up. And with no debt besides our first and second mortgage, we should be able to live off of my salary if necessary (with mortgage payments at 49% of my monthly take home income, it will be tight, but do-able).

Of course, that will mean no more Netflix, no more newspaper subscription, no more landline, no more clothes, no more gifts, no more cable, etc.

So we’re going to go ahead and start cutting back a little.

I’ll cut our weekend newspaper subscription down to just Sunday (for the coupons), we’ll cancel Netflix, stop our 401(k) contributions and look into getting a cheaper Internet/cable package (or maybe just a slower Internet service with no cable). We’ll also be looking into other ways to cut the budget, like ditching our landline and reducing our discretionary spending to the bare minimum.

So folks, I’m off to watch some free movies online with Netflix…while I still can!

Balancing the checkbook and paying bills used to be so easy.

Well, maybe not easy, but definitely simple and low-tech.

Every time money came out of your account, there was a check associated with it. You simply recorded the check number, payee and amount in your checkbook register. Then, when it was time to pay bills, you grabbed a calculator, book of stamps, your checkbook and your pile of bills. An hour later, you’re done.

Things are so much more advanced now, but I’m not sure it’s gotten easier. Until I switched computers, I used the desktop version of Quicken. It took me hours to set up all my accounts, and I never did get them synced with my online accounts. I stopped saving debit card receipts because the transaction usually cleared before I had a chance to record it, and my free checks no longer have that little carbon copy. I get some bills online through my bank account, and some still come in the mail. I pay most bills online through my bank account, but some are set up as automatic debits, and others I still have to mail in. In short, there are a million little things that could go wrong and make me think I have more or less money than I actually do.

Now, a used PC has replaced my aging Mac. But I don’t intend to purchase another desktop version of Quicken for PC when there are so many online programs that supposedly do the same thing - for free.

Except, they don’t all do the same thing.

First, I tried Mint.com, which is actually a pretty cool site. The problem I had was that you can’t record upcoming transactions. You can get a good idea of the history of your accounts and where your money is going, but have no idea how much money you’ll have left at the end of your next paycheck. Fail.

So, I then set up all my accounts on Quicken Online. It was working pretty well until I discovered that my repeating transactions only show up once in my register. The next scheduled transaction doesn’t show up until the previous one has cleared the bank. This is definitely a problem, because while I write a check to daycare every week, they often cash them once a month. Luckily, I’ve found a tedious way to work around this - list all my transactions as “one time only.”

From what I’ve seen so far, there is no perfect program (especially a free one!) to balance your checkbook and track all your expenses. One of my Twitter friends has recommended I try his site, BudgetPulse. While I haven’t had a chance yet, you might want to check it out. The only downside I know of is that the site doesn’t sync with your accounts online, but this does give you peace of mind if you have security concerns.

How do you balance your “checkbook” these days?

Photo Credit: MmHnCnChBkMt by Hello Turkey Toe, used under Creative Commons licensing.

The phrase “living paycheck to paycheck” gets thrown around a lot, but the truth is, I don’t really understand what it means.

Here are some possible definitions:

1. Not having enough money in savings to survive for a reasonable amount of time without a paycheck (i.e., not having a three-month emergency fund)
2. Spending your entire paycheck (or more) and not saving any money (i.e., not making any financial progress)
3. Commiting so much of your paycheck toward debt-repayment and/or savings that you are dependent on your next paycheck to pay upcoming bills (i.e., me)

I’m inclined toward the first definition, but I’m not sure. What do you think?

(This post was included in the Carnival of Personal Finance, hosted by Lazy Man and Money.)

This is my mattress, and I can’t take it any more.

My husband got it seven years ago when some co-workers donated used furniture to his post-divorce “bachelor pad.” While we’ve I’ve gotten rid of most of his hand-me-downs, we are still sleeping on this thing, which has to be pushing 20 years (my stepson is sleeping on the full-sized mattress I purchased in college).

Besides the fact that sleeping on someone else’s used mattress is gross, it’s stained, it sags and it’s uncomfortable. We’ve been talking about replacing it for six years, but there’s always been something else that seemed more financially pressing (lately, getting out of debt).

Our get-out-of-debt schedule, $1000 IRS payment and house painting expenses don’t leave any money in the budget for it any time soon. I guess we could buy one for ourselves for Christmas, but I don’t know if I can wait that long (and what a bummer gift)!

I’m not sure if I’m being a spoiled brat, but I just can’t help thinking, “We’re making over $100,000 a year, and I’m sleeping on THIS!?!”

But, I think I have an idea that won’t interfere with our other plans…Garage Sale!

Now, I’m not expecting Sleep Number-type proceeds, but anything we make can go to the mattress fund. I’ve never had a garage sale, so I’m not sure what to expect. But I think we have enough stuff to make at least a couple hundred bucks.

Anyone want to buy a used mattress?

Now, I may be trying to get out of debt, but I’m not crazy. If I get $20 for my birthday, I’m going to spend it, not put it toward my debt.

But what to spend it on? If I keep the cash in my wallet with no clear plan, I’ll end up blowing it all on McDonald’s and clearance-rack clothing that I’ll never actually wear. And since our tight getting-out-of-debt budget leaves little money for things like new shoes, makeup and entertainment, I have limitless ideas of how to spend the money.

Instead of blowing my birthday money on impulse purchases, this year I made a list of things I want and ordered them from most to least important in Ta-Da Lists (www.tadalists.com). Here’s my current prioritized list:

1. Emergency fire escape ladders for the upstairs bedrooms
2. 2 pairs of jeans for stepson to replace the ones he ripped
3. Clinique foundation (wait ’til Bonus Time beginning March 9)
4. Baseball opening day tickets
5. More long-sleeve casual shirts
6. New Pumas
7. Train ride into the city to see the Bodies exhibit with family
8. Black patent round-toe pumps
9. New Victoria’s Secret IPEX bra
10. Develop pictures for photo album
11. Swiss Gear Zurich Upright Suitcase
12. 4″ Satin Nickel Standard House Numbers from Restoration Hardware
13. Michael Kors Jet Set watch
14. Banana Republic enamel heart necklace
15. Set of 6 satin nickel wallplates from Target.com
16. Fiona Apple Tidal sheet music

I purchased items 1-3 with my birthday money, and plan to use the list in the future when I extra money to spend.

While I feel like I had a frugal Valentine’s Day and birthday season, I estimate that we spend about $3,500 per year on gifts. That’s almost $300 per month! ($140 if you don’t count Christmas, which we pay for out of one of our two extra paychecks) This includes gifts, dining out on special occasions, birthday parties, holiday expenses, cards, etc.

I’m not really sure how it got so out of control, or if it is really all that unusual. I try to stick to the following gift limits based on the receipient’s relationship to me:

Birthdays:
$70 Child
$60 Spouse
$30 Parent
$20 Other Relatives and Friends (no party, no present - unless it’s a nephew/niece)
$10-$15 Child’s Friends (no party, no present)

Christmas:
$350 Spouse, $50 Spouse’s Stocking (yes, I realize that’s a lot, but we don’t get much throughout the year)
$300 Child, $30 Child’s Stocking (kids get presents from everyone!)
$50 Parent
$20 Sibling or Niece/Nephew

Weddings:
$50 Good Friends/Relatives
$25 Everyone Else
$30-$35 Shower Gift
$20 Bachelorette/Bachelor Gift

Other Stuff:
$30-$35 Baby Shower Gift
$30 Mother’s/Father’s Day Gift
$170 Child’s Birthday Party/Cake
$25 Anniversary Gift for Spouse
$100 Anniversary Dinner/Entertainment
$130 Hotel for Anniversary
$50 4th of July Entertainment (i.e., Fireworks)
$100 Christmas Entertainment (i.e., Symphony)