The Weight of Money

I submitted to two different carnivals for this week — Carnival of Debt Reduction and Carnival of Personal Finance.

It’s Just Money is hosting the Carnival of Personal Finance #72 — I submitted the personal assessts post because of the recent mummur over at Make Love, Not Debt.

My Money Forest is hostingthe Carnival of Debt Reduction #59 – I submitted my post on reducing debt by reducing interest rates, which I find crucial for helping us get out of debt because of the $300+ a month we pay in interest could be going toward principal.

Favorite Post:
The Coin Jar’s comments on having another child — I will actually post a much longer response to this post this week.

Other posts I enjoyed:
- Taking Control over Money’s post on bad debt - good breakdown of bad debt and felt like a fresh post on the subject.

- Money Under 30’s radical ways to spend less - I notice that I’m often less likely to spend money because I don’t own a television — I don’t hear about any of the latest new items or know about any blockbuster movies that we just ‘have to see’.

- Mom Advice on using powdered milk — no, not because I’m a big powdered milk advocate but because I love seeing stories where people have taken money saving advice they weren’t sure about.

Out of all the posts I read through, these are the only ones I really found worth reading. I will put the disclaimer that I am a judge-a-book-by-its-cover type of gal and some article titles just didn’t pull in enough click-it mojo to get my attention. I’m starting to wonder, what is teh saturation point for personal finance blogging? When are we all merely repeating the same things over and over again at different times?

I think I’ll be reflecting on this along with some other ethical issues I’ve been considering the past two weeks.

Festival of Frugality is being hosted by Jason at Pragmatic Finance. I really like the creative format that he used to address the many great entries — check it out.

Individual articles I enjoyed:

A Tutorial for the Fast-Food Generation: How to Get Started Cooking at Home for Frugality and Health - food and cooking are a major obstacle to intentional financial living. This is an excellent guide for those feeling overwhelmed by moving more towards cooking and away from prepared foods.

Sock it to Me - this is just because I’ve got a serious thing for socks. My white stocks manage to stay fairly white for a long time — the daughter’s on the other hand — ewww. I don’t understand how she manages to get her socks sooo dirty – on the first wearing too.

Frugal living: credit cards - I enjoy seeing posts reminding people that credit cards are not evil. Many people use the rewards cards successfully and free money is a good thing.

Perhaps I’m wrong in my reaction, but I’m not happy with the recent closing records for the Dow Jones industrial average. Seeing as how I’ve just started contributions to my retirement plan, I’m more interested in seeing lower closings and working up to higher closing over time.

Perhaps I have a poor understanding, most likely the case, of how these closing will affect retirement investments. While I have an optimistic outlook on the life of my investments, current peaks leave me worried that I’m currently buying in at a time that will, of course (in my mind), go down soon. Yes, I know that I will be making continual contributions in funds and that will, in the long run, balance my investments – but still. I’ve just entered into this investment and already am personally forecasting lowered returns in the short term. This is only relevant in terms of emotional security as I continue to struggle to be comfortable my smaller paycheck; if I’m struggling to accept the long term value of the investment, I’m sure it’d be easier if it didn’t feel like I was entering the game near a peak of a downward climb.

Of course to further recognize my lack of overall knowledge – I’ve not yet looked at where the general trend has been the past year or two and realize that record breaking may not be as relevant if the Dow has consistently been in a higher bracket over the past year+. I could look it up, but I’m stealing internet breaks between conference workshops as is.

Over at Make Love, Not Debt, Her posted about their net worth calculation formula. It appears to me that some people have a hard time accepting the fact that they could have household assets totaling $25,000. While I understand the surprise, I wonder if people are taking a more accurate assessment of the resale value of their household items.

Obviously, the quality and quantity of times will be a major factor in assessing the overall value. For Her and Him, perhaps they will choose to estimate high just to reduce the negative value of their net worth – I totally support that because I know how discouraging an excessively negative net worth can be. However, they may just be taking a realistic look at what they own.

I have not taken an accurate estimation of our net worth but I know that it would be in the same ball park as theirs. In fact, it most likely will pass it and possibly even get close to the $50,000 line. Many people want to know, just what people own that adds up to that high amount.

Some inclusions that can swiftly increase the dollar value of items owned:

• household appliances (freezer, stove, washer/dryer, mixer, vacuum, etc)
• high quality furniture (in good condition)
• high quality professional clothes and shoes (consignment)
• art and antique collections
• personal electronics (entertainment systems, computers, printers, stereos)
• music collections
• recreation equipment (kayaks, camping gear, bikes, boat, etc)
• formal dining items (china, stemware, family silver)
• wine collections
• jewelry (purchased and inherited)
• guns
• tools and machinery (woodworking, metal working, general, etc)
• lawn care supplies (lawnmowers, trimmers, tools, lighting, etc)
• art supplies (tools, specialty items, extensive collection)
• plants (orchid collections…)
• books and magazines (hard to find, specialized, good condition)

Our personal calculations/considerations:
The partner owns an impressive (aka overwhelming) number of items – it used to be in a warehouse and now fills a giant workshop equipped with a forklift and pallet shelving. The majority of these are heavy metal items – no, not music, machines and tooling equipment. I’d estimate the current value to be close to $20,000+ considering that we’ve sold $5,000 this year and I doubt that we’ve reduced the quantity of items by more than 10%.

He also has extensive amount of computer equipment that has little value in a piece by piece basis, but would add up to a couple thousand as a lot. There is a wine collection that has been bringing in small, steady stream of money as he sells cases at a time.

The book collection also has value because of the number of rare books and out-of-print items. These mostly focus on the metal working community and one major advantage of this passion of his is that items have very little depreciation.

Me, I own almost nothing. I’ve moved too many times in my life and am far more in tune with simple living to gather items. The only things I could sell would be a high end bike and some camping items. I’d be lucky to reach $500 if I liquidated everything the daughter and I own.

Finally, if you haven’t made the connection, The Weight of Money comes from the mass possessions the partner has and the correlation between weight and money or worth. It is actually far more valuable for us to sell high density and mass items than high priced items

I’ve written about saving money with a telephone call and it is time to do it again; this time I’m calling credit card companies for a reduced interest rate. Tackle your credit card interest rates routinely! It will make a difference.

I’ve called the partner’s credit card companies at least 3 times in the past year. I usually wait a couple months and try again to get a lower rate. With found money on the horizon, we’re planning to pay down debt and want to pay off the higher interest rates first.*

In March I called and got the following results:
Card #1 - 17.24% reduced to 12.49% (variable)
Card #2 - 18.45% reduced to 9.97% (variable)
Card #3 - 17.99% reduced to 13.99% (fixed)
Card #4 - 18.47% was increasing to 23.24% and they refused to budge.

Yesterday the rates were:
Card #1 - 13.24% (variable)
Card #2 - 10.82% (variable)
Card #3 - 13.99% (fixed)
Card #4 - 24.24% (fixed)

Clearly, variable rates tend to vary upwards. I choose to take the variable rates because I have the discipline to call and get it reduced when it starts inching upwards. If you don’t want to take the time to make the call, the slightly higher fixed rate may be your better option.

Today I repeated my calls to two of the cards. I’ve been very frustrated with #4 because they have refused to reduce their rate the last two times I’ve called. I gave them a final chance today and they finally responded.

Today’s results:
Card #3 – 13.99% reduced to 12.99%
Card #4 – 24.24% reduced to 8.74%

As you can see, Card #4 did not want to lose our business. The partner has had most of these cards to 10+ years and has always paid on time and has excellent credit. So, the ultimatum strategy finally worked. However, I feel that the strategy worked because we’ve paid $7000+ toward this card since the beginning of the year. It is actually our lowest balance card and the one with the most aggressive payments.

I haven’t decided if I’m going to call card #1 again or not. I got a good reduction in March and turned down in June or July when I tried again. I will call card #2 if I have the time but I am not going to stress over it right now.

So, next plan of action is to decide what to do about the upcoming found money. I’m thinking that throwing it at the highest rate and then possible transferring the balance to another card with a 0% rate for 6 months and a 3.96% fixed after 6 months. I’ve never done a balance transfer and that’s content for another post.

Important: Make the call! It is not complicated and the worst they can say is No, the best they can do is reduce your interest rate by 64% (see above) or more!

* In response to the higher interest rates/smallest balance debate - we hate to throw away money and that is what we are doing when we carry high interest rates. Many people argue that paying off the smaller balances first adds encouragement and makes peole stay motivated to reduce debt. We don’t need the motivation, we’ve got it, and we’re gonna make every penny count.

Money management is an important family skill and reponsiblity. Previously, I discussed learning to make a buck where we attempted to show the daughter how she could make some money. The lesson did not go as planned but I think that she still learned something from it. Last night provided another opportunity to expand the daughter’s financial knowledge.

The daughter has been envying Heelys – shoes with wheels in the heels – that all the children seem to be wearing. I’ve heard “I want…” too many times in the past two week to count. The daughter realizes that, in our family, gifts only come on holidays and that all the complaining in the world won’t bring the holidays any closer. Also, she knows that she doesn’t always get what she wants as a gift and she should plan to purchase things she really wants. Last night we sat down and wrote up a “Special Purchase Plan” for the Heelys. I wrote the general format and left blanks for her to fill in, sign, and date. It basically stated:

“I want to buy ____________ and it costs $_________.

I can make a special purchase by contributing 50% from my savings account and 50% from my cash on hand.

Current amount in Savings $_________. Current amount in cash $____________. I need to save $__________ more dollars.

I can make up to $5.00 a week doing chores. If I work hard and do well on my chores, it will take me _____ weeks to save up enough money.

I am willing to work hard and save money so I can buy this item. Sign _____________ Date_______”

We went online to check the prices for the shoes. She was a bit surprised to learn that the range in value from $40 - $100 and was interested in looking at the cheaper generic models (yay, she doesn’t require brand name labels). We ended up selecting a pair that cost $60 to use for planning purposes. I explained that she can always spend less or more but it was important to pick a pair, fill in the contract, and get to bed.

She filled in the blanks and signed the commitment to save the money and taped it on the wall by her desk so that she would see it everyday as a reminder of what she is working for. I reminded her of the option of taking additional chores when offered. Many times, in the past, she has opted to skip cash-for-chores in order to read or go out in play.

Hopefully this process will result in an important lesson and a special purchase for the daughter – I’ll let you know in about 10 weeks.

I’m finally getting around to updating my links to other personal finance websites. I have not touched the template since starting my site in June and want to give recognition to the many sites that I enjoy and take the time to read almost every day.

If you’d be interested in exchanging links, please leave a comment and I’ll verify that I do indeed visit your page and that it is worth suggesting to others. I’m sure there are several sites that I will overlook in this update and do want help send traffic to good sites on personal finace.

My apologies if if this update removes your link or if I do not link you. I want to be sure that I’m sending visitors to sites that I would appreciate. Removal of links or failure to support a suggested link is usally due to a lack of consistency of posts or personal finace topics.

Also, I’ve added a Save-O-Meter developed by Clutter to Cash. I hope that they will return to blogging soon.

Tired but Happy recently posted about contributions to their retirement accounts: Annual Retirement Contributions. In talking about their progress she also brought up an interesting concept that I hadn’t considered yet — how each partner’s retirement account affects the family.

Having just started my first post-college job, my first retirement contribution was made this month. I’m saving about 11% of my salary and my employer contributes 5% (they will increase their contribution to 10% next year and I will increase mine to 15%).

I’m in my mid-twenties and I know that this will keep me focused for my retirement goals (especially with my planned increases). My partner, on the other hand, is not on the same track and I’m starting to wonder how this will affect us in the long run.

Tired but Happy states, “we’re partners, and so his financial health is my financial health.” This is true and is reflected in my recent discussion of I/we in personal finances. However, where is the partnership when each partner establishes an individually focused retirement plan?

I established my contributions solely considering my later in life position. I want to know that I have provided for myself and that I have ability to retire when I want. What about the partner?

The partner is in his late-thirties and not currently contributing anything to his retirement accounts. He has an older rollover account with a couple thousand dollars but hasn’t made any new contributions. The partner is planning to start contributions this year, but only at about $30-50 a paycheck – this will only total about 2% of his income. Is this going to seriously affect our financial health?

With the “I” mentality, I can see it as a “his” issue and not worry about it. However, when I look at it through the “us” lens, suddenly our financial health feels at risk.

For me, this is something to think about. Read Tired but Happy’s article, there are some wonderful comments that follow up on this issue.

The saga continues on the car. Perhaps I should have seen this coming with my reluctance to make a final decision and with my stated appreciation of my car (I love my car). But we finally had to decide where our priorities were and selling the car was not in line with them.

Primarily, we just don’t feel that now is the time to purchase a new(er) car. Yes, we have a vehicle that is mostly just hobbling along, but our debt and home ownership goals have taken precedent. We’ve decided to keep the partner’s car even though it may fall over and die any day now. When it does, we’ll get rid of it. No more major repairs. We will keep my car as the backup family car. My car can fit all three of us but probably can’t accommodate camping weekends to the scale we’re used to.

But, there is good news in this. My major reservation with keeping my car were the fees I was going to have to pay to get my car tagged and titled in MD again. In trying to figure out how to get out of as many fees as I could, I actually called the MVA — shock! I spoke with a very nice lady who explained that I don’t have to get it inspected (-$68, plus less and repairs that would have been needed) and I am exempt from the excise tax (-$32). The reason for this sudden reduction in cost, 1. my car was previously titled in MD and 2. it will be classified as a gift from my mom — oh so funny how my mom is gifting my car back to me.

So, decision made - my car stays and I’ll refrain from posting about it anymore.

Don’t we all just love found money? I love the money but hate the concequences — figuring out what to do with it. It has been many years since I’ve used the logic that found money is free money to spend. Instead, I agonize over the best use for the money and mourn the lost opportunity to spend it on totally frivioulus items.

The found money I’m talking about is the tax intercept for back child support that will show up next week to the tune of about $5,000.

Option One - Put all into savings: This is the one that I like the best. It feels safe to me and allows me to think that maybe we will be able to buy a house next year. I’m having a hard time thinking that we’re going to be able build our savings up fast enough without contributions like this.

Options Two - Put all toward debt: This seems like the most logical option and what most personal finaces advisors would say. However, does anyone else ever have a hard time throwing large chunks of money at debt? Yes, I want our debt to go away, but I don’t know how to shake the fear that we’ll have less debt but still no money and no house in a year.

Options Three - Put allinto the daughter’s savings: I could start investing in stocks for her, what a wonderful thing. However, that just isn’t going to happen at this time. When we’re no longer in debt, we’ll do this — but for now, it is going somewhere more useful. This option is really just my “ideal world” scenario.

Option Four - Split it up: This seems like it might be the best plan if I can get my mind to accept it. Say, put at least 50% toward debt and then 50% into savings. Or $800 for the daughter (summer camp) and split the remaining…

To make the best decision possible, I honestly need to evaluate our debt situation further and see what a difference this money will make. I must know: 1. how much will a $5,000 payment reduce our monthly payments? 2. If we take the difference between our current payments and the new reduced paymenrts and put it into savings, how long will it take to add up to $5,000. 3. Based on this information, what should our plan of action be?

I will keep everyone posted as I run the numbers some more.