The Weight of Money

In August, I applied for a local position with an education-based company. The interview process went very well and things sounded good for the most part, until it came to the compensation for the position. Oddly, this process got stretched over several weeks and I eventually ended up with an offer for the position for a little more than the first offer, but still less than what I wanted.

Ever since the interview, I’d begun worrying about various details involved with the position. One attempt to meet both my salary needs and the companies budget resulted in a compromise that didn’t thrill me but seemed acceptable. I tentatively accepted, but more time passed, and their needs changed and my concerns grew. Basically, I knew from the near-beginning that this wasn’t really the position for me. However, it seems that I lost the ability to just say no and move on — needing a job and money will do that to a person.

Finally, today I typed out the final decision - no, I won’t take the job. Wow, why did it have to be so difficult to turn down a job? Why was it so difficult to listen to my conscience and admit that red flags are red flags, no matter how I try to arrange them. I had reservations about my last position and it turned out to be a very unpleasant experience. Thankfully, I listed to myself this time and saved myself weeks of stress from wanting to quit. Of course, that means, I still don’t have a job - but I’m okay with that too.

I feel very confident in managing spreadsheet data for my personal finances. I’m also comfortable generating reports and date for my personal business, as well. How come I can feel so comfortable manipulating my personal and business finances, but draw a blank when faced with the financial reporting for a non-profit organization that I serve on?

I’ve been trying to read more and more books on business accounting and reporting and it just isn’t sinking in. We had a retreat this past weekend and I was certain that I would have budget reports compiled and new templates created for future use before the retreat. Each time I sat down with the data, my mind drew a blank. Every time I read something, it made sense but I couldn’t figure out where to start.

Perhaps it has something to do with how hard it is to overcome the status quo - we’ve got almost 8 years of financial data that needs better management and reports for. We have to scrap the current system and start fresh, but that seems so hard to do when you have 8 years of data tied up in the old methods. Honestly, we need a professional adviser/accountant/bookkeeper.

The retreat was successful (even without the reports I wanted to create) and we are at least moving forward with getting these issues worked out. Yes, it’s long over due, but thats what happens when can happen when you’re a volunteer run organization. Luckily, we’ve established a new committee to get these details sorted out. I look forward to those meetings and saying that we need professional help and letting go of the fact that I think I should be able to understand every single financial concept out there.

Of course, I’m going to keep trying the best I can in the meantime to understand this stuff.

I’ve finally made progress on getting life insurance. Recently, I woke up in the middle of the night in a panic because we didn’t have any yet. So, I got some quotes to work with and have selected a company to move forward with. Next up is the application process. To determine our coverage amount, I took several things into consideration. The standard calculations of 7-10 times your current salary seemed too cookie-cutter and unrealistic. Here are the initial numbers I calculated:

Current Debt

• House: $250,000

• Credit Cards: $16,000
• Student Loans: $30,000
• Total: $296,000

Future College Tuition

• Children: 1, 4

• Cost of 4 Years of College: $40,000
• Total: $40,000, $160,000

Annual Income Replacement

• Partner: $40,000

• Myself: $20,000
• Duration: 20 years
• Total: Partner $800,000, Myself $400,000

I ended up with a calculation of more than a million dollars of coverage for the partner. That seemed to be quite high and led me to to reconsider some options. For one, college tuition is highly variable and I already have no intention of paying the full college tuition for my children. Also, I realized that the annual income I was hoping for was to cover expenses that included savings for retirement and college tuition. Seeing that the number seemed too high, I also realized that while I would love to be able to stay home with our children (there is only one now, hopefully two in the next year), I’d probably be better off getting another job and not fully relying on life insurance benefits.

To lower the coverage amount, I reconsidered our actual expenses (both current and future projections). I calculated our annual income needs to see how off the numbers really are (but again, these numbers are just estimated projections and they too could be very off).

Annual Income Needs for the loss of primary income (twenty years):

• Property Taxes: $4,000 ($80,000)
• Food: $8,000 ($160,000)
• Clothing: $3,600 ($72,000)
• Transportation: $6,000 ($120,000)
• Utilities: $6,000 ($120,000)
• Household: $3,600 ($72,000)
• Entertainment: $2,400 ($48,000)
• Other: $12,000 ($240,000)
• Total: $39,600 ($792,000)

This amount is pretty close to the $40,000/annual income I had originally estimated (and I included elevated numbers since everything seems to get more expensive over time). Next I factored in the fact that a loss of primary income prompts a return to work on my part. Lets assume the 4 children scenario and that the loss of primary income comes right after the fourth child is born. I would need the full $40,000 a year until the youngest child enters primary school, about 6 years. At that time, I could assume that I would easily be able to manage a part-time job and would be able to decrease the needed annual income to $27,000. After the youngest child enters high school, about 9 years later, I could move up to a full-time position and reduce the our annual income needs to $10,000. This works out to the following life insurance needs:

• $40,000/year for 6 years: $240,000
• $27,000/year for 9 years: $243,000
• $10,000/year for 4 years: $40,000
• Total need over 20 years: $523,000

Partially considering this scenario and my reluctance to opt for a million dollar policy, I chose $750,000 in coverage for the partner. Going with the scenario above, this would leave $227,000 to pay towards current debt, a sufficient amount assuming our debt decreases by the time a fourth child is born. There is not additions for college expenses because I factored deposits into college savings account in the “other” annual category listed above.

For my coverage, I selected the $400,000 to provide $20,000 per year for twenty years - this is to cover food and child care costs that my partner would incur if I were no longer in our household. Also, the idea is that the partner should be able to cut back his workload some to manage parenting alone. This number may actually be too high, but if there is an instance where both of us pass away, it will cover all of our outstanding bills and provide for the care of our children.

One final note, life insurance should be reassessed with life circumstances changes. Getting more coverage than we currently means we’re paying more than we need to for something we may never use. However, time passes quickly around here and I want to be sure that I don’t have to reconsider life insurance for the next few years. Now, come child 2, 4, or 6 - I will probably need to see if these numbers still make sense for our family - in the meantime, I’ll be comfortable thinking that we’ve got enough coverage for now.

Earlier this year, I established goals for 2007 to help the partner and I work together toward something and help us stretch a little to see what is possible.

We completed our first quarter review in march, totally missed the second quarter review, and are now summing up our third quarter progress.

Goal: Increase Savings for Home Purchase to $20,000 by July 2007. 2007 Plan of action - increase current savings from $300/month to $700/month - this comes at the cost of scaling back our debt reduction. The additional $500/month will come from ebay sales.

Progress: I think we met this goal in terms of sheer numbers, but not through savings deposits of $1,200 a month. The partner did contribute $3,000 from his personal accounts (tool and ebay sales) that would cover the $500/month ebay sales. Also, as the house purcahse got closer, many housing costs arrived before clothing (inspections, surveys, etc) and we just paid for those out of budget instead of out of savings.

Overall, I’d say that we met this goal!

Goal: Reduce Credit Card Debt to $10,000 by December 2007. Plan of action - this will be worked out in quarterly steps with a credit card debt load of $13,000 in March, $12,000 in June, $11,000 in September, and $10,000 in December.

Progress: Our current debt is $16,000, and not on schedule. We added about $3,000 in purchases since March and have not made real progress towards reducing debt as we juggle housing costs/repairs. We should re-focus on this goal throughout the end of the year and perhaps set a minimum goal of making sure our year does not end with more credit card debt than we started with.

Goal: Buy a house in July 2007: The house should have a minimum of 5 acres of land, a house sound enough to live in, preexisting outbuildings, and no restrictions on the construction of structures or the maintenance of livestock.

Progress: We’ve purchased a house with less than one acre of land (as alluded to in march). It is indeed sound enough to live in, has two outbuilding, though too small to do anything more than store a few items, and I’ll be calling today to find out about any possible building restrictions we may have (I expect there to be none).

Goal: Increase retirement investments to 15% of income by December 2007. Plan of action – increase to 5% in April, 10% in August, 15% in December.

Progress: We’ve not made any more progress on this and need to revisit this issue. The partner’s contributions are still at 6%, I believe. And mine are nonexisitant since I no longer work outside the home.

Goal: Increase Passive Income to $200/month. Plan of action - expand internet revenue and investments. Also, build passive income into the purchase of the new home in leasing out property or space.

Progress: In March I re-clarified this to include $200/month of alternative income. I’m am surpassing this goal by nearly 100% through sewing and other small jobs.

Overall: We’re doing good, especially since I didn’t give enough advanced financial consideration into the cost of repairs we’d incur with the new house. We knew these expenses would happen, but I didn’t factor them into our annual goals and our progress toward debt reduction and retirement savings goals have been affected by this.

The habit of setting monthly goals has fallen aside over the summer. Since it helped me stay on track and provided motivation to make improvements (versus just keeping my head above water), I’m going to start up again. September’s are pretty basic to help us get back on track:

1. enter spending/earnings into budget weekly (not monthly)
2. develop savings plan for workshop by 09/30/07
3. list at least 2 items on ebay (no listing fees this month, I think)
4. spend no more than $150 eating out
5. setup monthly family budget meetings to just discuss where we are at
6. update and reassess our quarterly progress towards our 2007 goals.

These six goals seem manageable, hopefully a successful month will help me stretch a little more for next month’s goals.

Each year I get a sizable check of back child support thanks to the wonderful income tax refund intercept program. Typically it shows up in October or November and I’m always happy to get a deposit of $3,000 - $5,000. This year’s came a bit early and it has caught me off guard. This year isn’t much different from last. Again I’m weighing options such as putting it into savings or paying off debt. Since we’ve got a large purchase also sitting on the horizon, I’ll need to take that into consideration as well.

Money is such a juggling act, at times. There are so many choices we can make, all with varying degrees of financial righteousness and responsibility and (maybe) ridiculousness. There are the simple, knee jerk reactions of paying off debt because $4,000 would make a pretty decent dent in our current debt load - but I don’t make many rash decisions and this will need mulling over.

Last week my mind started to consider the possibilities of use and hopefully we’ll have an actual plan within the next week for what we’re going to do. In the meantime, it gets shipped off the some high interest savings account while we count our chickens. However, warning to those loyal readers - we may end up utilizing it in ways that doesn’t coincide with “practical financial advice”. I’ve got to call some pole building companies this week to discuss our options for getting a shop built and call some foundation companies for getting a slab poured as well. Once we have that information, we should be able to move forward with what we’re going to do.

While our move was pretty seamless, running the budget numbers for August exposed 2 missing credit card payments. I searched through all of the mail we’ve received and those bills had not arrived - looks like we missed updating the addresses for those in time. Sometimes things like this happen and you shouldn’t just sit back and let it slide. The astronomical late fees are the least of your credit worries because late payments can raise the interest rate on your current card and subsequently all of your other credit cards as well.

Having noticed the error, I immediately sent payments through our billpayment service and called the two credit card companies to discuss the problem. Each company listened to the situation and had no problem removing the derogatory entry/late fee and resetting our interest rates. Each company is different, so make the call and don’t be afraid to ask.

After hearing the situation, the first credit card company volunteered to remove the late fee (they had not automatically increase the interest rate) and was very focused on keeping us a happy customer. The second company didn’t offer any assistance but was willing to make the adjustments when I requested it. Be sure to ask about the interest rate, the second company was willing to remove the fee when I mentioned it, but didn’t inform me that my interest rate had increased as well. I knew to ask and they were willing to reset that as well.

Had I not called them, I would have lost about $80.00 in late fees and much more in increased interest rates. Having a perfect payment history is worth keeping - don’t let one little slip-up get passed you. Plus, you can make this call more than once. Last time we moved, we also missed a due date and I made the same call then (I think to one of the same companies too).

Following up on yesterday’s post, and Jonny’s comment, I wanted to add another perspective to our situation. I have to agree with the emotion behind yesterday’s comment, getting a job should be a very easy decision to make. Obviously, finances would be better and I clearly have the ability to do something about it. However, it isn’t that simple for our family.

While working would improve our financial situation, it will negatively impact our family life. We’ve learned that the emotional stability of our family suffers when I’m working. Also, tasks and obligations don’t always get met and we’re under a much heavier burden of stress. The daughter exhibits many more negative behaviors when I’m working, which is caused by the emotional stress I bring home. My partner prefers having the happier, more functional family and has not pressed me to get a job. In fact, every time I start mumbling about finally getting one, he gently reminds me that it isn’t necessarily the best solution for us.

It works out that while a job would relieve financial stress, it will create far more stress than the lack of money does. Now, it’s impossible to ignore that more cash would really help (especially when I run the numbers); however, just because it will help, doesn’t mean that it is necessary. Can we make do with what we have? Yes, though it’s not much fun and it hampers progress towards improved financial position. Luckily, money isn’t everything for us, though I may still find a way to make it work.

I’m still looking at positions and weighing options. There is a lot to factor in and I need to see that there is a light at the end of the tunnel if I take a position. Working increases our monthly expenditures in terms of lunch, after school care, dinning out, transportation, and clothing. I need to know that a position will pay enough to manage those increases, cover enough bills or savings, and be manageable enough to reduce the emotional impact. So far, I’ve not been successful in balancing all of these things but I’m still willing to try to make some ends meet.

Also, my personal sewing business still draws in money. I’m working on more word of mouth advertising since I’ve moved to a whole new county. I have two meetings scheduled for next week that will hopefully bring in some extra business as well. It’s taking a little more work to find work here because it’s a much more rural area and there are more people who still sew for themselves here. However, there are murmurs of interest and I’m pretty patient.

Since the move into our new house, finding time to manage budget items has been difficult. It’s not so much the lack of time, but a lack of motivation and prioritization. When things are not going well, we’re often reluctant to face and deal with those problems. Hiding from problems and letting them slide is so much easier than facing reality and taking action to solve them. Unfortunately, most problems escalate and what would have been solved by just a little attention and dedication in the beginning becomes a giant ordeal when left alone to fester for too long. Luckily, I don’t think we’ve reached that point yet.

Back in June, I discussed quitting my job, a difficult and unpopular idea for most readers. The idea of signing on a house on day and leaving your job the next isn’t all that logical. But, for mostly emotional health reasons, I made that leap with personal faith that I’d figure out how to make it work. Now it’s time to face the reality of how I’m making it work, or not.

First, I’ll be honest and upfront - I have not tried to solve the jobless situation and the more it worries me, the more I stick my head in the sand and ignore it. Obviously, this isn’t the solution to the financial stress this decision has cause. Hopefully looking at the number will light a new fire to take care of things.

Because of of our budgeting methods (YNAB), we didn’t feel the loss of income until August. We had a loss of almost $2,000/month in income, leaving us with an earned income almost $3,000 - a pretty serious reduction of funds. The move adjusted certain expenses as well: Housing increased $300/month, Gasoline: increased $250/month, Utilities: decreased $220/month, personal spending has been mostly eliminated, everything else remained fairly constant.

Even though the numbers are pushing back against this decision, we’ve still been able to make ends meet. So far, for the year, here is how we’ve done staying within budget:

• Jan: under $90.28
• Feb: over $812.23
• Mar: over $355.90
• Apr: over $507.50
• May: over $646.96
• Jun: over $533.29
• Jul: over $310.71
• Aug: over $73.95

This actually shows that we’ve been improving in the past two months of staying within budget. It’s important to note that because we do zero-balance budgeting, anything over budget means we spent more than we had to spend. Because we spend last month’s income during the current month, there is always extra in the bank to cover these overages (though it is a bad habit). Of course, that means that we start out the next month short, a snowball effect of overages that takes a lot of work to correct.

We’ve been doing account transfers, mostly from the partner’s personal account to our joint account to add more available funds. These are mostly ebay funds that we’re just accumulating in his paypal account. I’m very happy to see that money enter the budget because it was something I had tried to count on earlier this year.

My personal business expenses took quite a chunk out of August’s budget, so much so that I decided to pull out cash from my personal savings to cover for it. At times it seems like a cash shuffling game, but it is helping us stay on track even without my previous income. The partner also received a raise in July which has helped ease the loss of my income.

Some issues we’re still facing: limited cash for emergencies, constant repairs being justified, and a honest need to get a workshop built asap, The workshop would will kill our cash reserves, something we’re not comfortable doing.

Other numbers for us to keep in mind:

Joint Savings: $6,500
Personal Savings: $5,000
Credit Card Debt: $16,000 (arg, it went up $3,000 in July)
Child Support Tax Intercept: $4,000 (this probably won’t be released until Oct/Nov)

Honestly, I still need to get a job. I’ve been offered one and have tried, unsuccessfully, to turn it down so far. However, seeing how hard it will be for us to take care of debt and house repairs - I think I need to rethink that decision. Also, I’ve been making more through my business, but mostly it’s just enough to cover all of our farmers/butcher market needs. I either need to get serious about making this work or find a job — right now, finding a job seems like a better option except that I’ve moved to the land of low-wage workers. I discussed getting a job with the partner and putting all but $200/month toward debt reduction. Perhaps, instead, we could deplete savings to eliminate debt and then use income from a job to rebuild savings. Options, options, options.

Welcome to the country, please wipe your feet and leave your plastic at home. One of the biggest cultural shocks of our new home is the move back into a mostly cash-based economy. Everywhere I go, paper tender is the preferred method of payment and often times is the only acceptable form of payment.

For the past five years or so I’ve completely moved away from using any cash at all and now I’m a fish out of water. My spending has actually been reduced in several categories because I don’t carry enough cash on hand. Other times I’m having to beg cash from the partner, which comes from his personal accounts, to pay for an item. Things have to change and I need to figure out a way to finally manage and control cash spending.

The main reason I stopped carrying cash is because I managed it poorly. If I had the money, I’d spend it without thing, “oh it’s already out of my account, therefore it’s already gone, spend away!” Now that cash is requited, I must find a system that works.

I started using all my income (sewing and babysitting) for groceries at local farm stands and butcher shop, but when the daughter needs cash for school or some other cash-necessary expense comes up, I hand it over and it doesn’t get tracked properly in our budget.

I’ve considered using the envelope method and maybe that would work. I’ve taken to carrying a purse (my previous barrier to this method was not having anywhere to carry envelopes) and it seems like the easiest system. However, I’ve got to work on my personal self discipline to make it work. Right now, if I’m starving for lunch and have the cash, I’ll walk over to the little sandwich shop and get lunch. Time to make some changes.