The Weight of Money

I’ve written about my car many times with a somewhat bittersweet emotional attachment. I thoroughly love my car and had I never moved away from Wisconsin, I would never have a reason to complain about it. It’s one fault is terribly obvious during Maryland summers – it doesn’t have air conditioning. Even when baking in July, I still realize that I am very passionate about my car and our adventurous 9-year relationship.

I’m afraid that relationship has come to an end – all that the fault of an outside party. I was in an accident today that caused significant damage to my poor car. I was driving towards home, almost at the stoplight near my house, when a truck ran into me as he was turning left out of a parking lot. Since the light was red, a large work truck had left a gap so that he could make his turn. He didn’t see me coming along in the left-turn lane. I can say that I was probably fortunate that there was no oncoming traffic and I was able to swerve somewhat when I saw him heading toward me, this probably save me some additional injury and more sever damage to my car, but it was still enough that the car is no longer drivable.

We got out of the way of traffic, called for a police collision report, and exchanged all the necessary information. It wasn’t until I got home (just a mile from the accident) and further contemplated the damage that the impact of this accident struck me. My car is 10 years old and has 155,000+ miles on it. I’m certain the damage exceeds the value of my car and I’m already preparing myself for the fact that the other driver’s insurance company will most likely claim that my car is totaled and just offer me the value of my car (which is only about $2,000). This won’t be enough to fix the car, nor will it be enough to replace it either.

So, right now, I’m taking it easy as my body is starting to show some aches and pains from the impact. And I’m trying to not totally fall into despair over my car. Also, I’m trying to figure out what I need to know to get the maximum value for my car as well, since I’m 95% certain that the insurance company will total it out.

Other posts on the fun of owning your vehicles outright and making decisions based on that.

For some reason, I’m sitting here dreaming about what I’d do if I won the lottery. There is a lot of irony in this situation, mostly due to the fact that I don’t play the lottery but still spend lots of time thinking of what I’d do if I did. A good friend of mine, of sound financial means, plays consistently because he finds that spending $1 to dream about what he’d so with the winnings is worth it. I guess I’m taking the more frugal route and dreaming for free. :)

I spent some time looking over the net at lottery winning stories – these are mostly news stories that love to focus on the many winners that have lost their winnings. The articles would have been much more interesting if they didn’t all refer back to the same handful of people. I appreciate the point they’re trying to make, though, that small lottery winnings ($1 million dollars) doesn’t last long if you’re not prepared and that if you were unhappy before winning, money probably won’t solve your problems.

So, since I spend so much time dreaming about what I’d do, I thought I’d write it out as a handy reference in case it ever does happen. Many of the steps I have in mind coincide with the popular advice given by financial advisers.

1. Re-check the winning numbers. I often misread things and would want to be sure that I was indeed seeing what I thought I was seeing. This may sounds silly, but I can see me getting swept up in the excitement and showing up at the lottery office with a non-winning ticket.
2. Celebrate in silence. Perhaps I’m just overly cautious, but I wouldn’t want to tell anyone. In fact, I’d have to figure out how to not let the daughter know either as I wouldn’t want her to start dreaming up crazy ideas or spreading it to her friends. Also, I’m sure the partner and I would need to take some time to discuss the issue and make sure we’re both on similar pages.
3. Find and visit a lawyer and accountant/adviser. Before doing anything, I’d want to consider all the financial, legal, and tax implications involved. I’d head to these meetings with my “wish lists” already prepared and discuss practical steps and plans.
4. Take suggested actions before claiming the winnings. This includes a lot of things like unlisted numbers, setting up trusts or accounts as needed, and whatever else the accountants/advisers suggest doing in preparation for a sudden influx of money.

Now, my plan of action and my wish lists are two separate things. Since I’ve spent so much time dreaming about winning the lottery, I find it worthwhile to chart out some of those ideas. Plus, I like the idea of having this list already in order before visiting financial professionals so that we can better prepare for how lottery winnings will fit in our current plans. I know that I would want to keep the majority of my simple living practices intact, but I also know a huge influx of cash would have a very big impact on that and recognize that it may have a bigger impact on me than I want. So, my wish list is as follows, not necessarily in prioritized order.

• Secure retirement. The first thing I want covered is retirement – and lets assume this is a serious payout (more than a couple million dollars) and that retirement begins upon collection. There will be a lot of factors that affect this – such as any home purchase decisions or lifestyle changes, but I’d want to be sure that the first thing I do is ensure that this money is going to last. This includes investment planning appropriate to risk levels and return needs. I’m sure a good adviser can provide us with lots of options and scenarios to consider.
• Get the house we want. This one is a little trickier. Lately, most my lottery fantasies involve fixing the house I’m in, but I also realize that if I got a major windfall, that I’d give up on making this house what it isn’t and invest energy and money into a home with more possibility. I’m still love old houses but I’m also concerned about a few health and environmental aspects (such as lead paint) that come with them. The partner and I would have to decide on location and what we really want in a house. If we can find an old farmhouse on a huge plot of land (for farming and animal raising) then we’d probably still go that route. But, I’d also consider having our own house built as well if need be – but I’d retain the look and feel of an old house, including small rooms and functional space. Also, one of my dreams is running a farm bed and breakfast and traditional arts and crafts teaching center.
• Provide cash gifts to family. First, we wouldn’t even tell family about winning the lottery until this was decided with professional help. Would we want to do a equal amount to all family members (we’re talking siblings and parents/grandparents) or would we make this a more variable amount? The partner has two siblings and one living parent; I have a living parent, grandparent and three step-siblings. The biggest challenge for me would be that I would be comfortable providing a one-time gift to one of my siblings that I’m close to, but not the others. However, I don’t think that would go over all that well and I’d probably provide equal gifts to my other two siblings even though I don’t really have any contact with them. I also have a step-mother and I know that I would not provide her with anything, mostly due to residual frustrations over the way my father’s estate was handled when he passed away. I would struggle with gifts to my mother because of her lack of money sense and her overblown sense of entitlement.
• Provide tax-positive donations to charities. This isn’t a given and I’ll honestly say that I would be interested in this for the tax implications. I’m jut not altruistic enough to want to hand out money. The partner and I would have to discuss which organization we’d consider supporting and we wouldn’t consider any outside solicitations for funds. I can see us running into a problem if one of us doesn’t support the organizations that the other picks – we may cancel each other out and not donate anything.
• Clothes and furniture shopping. This feels like such an indulgent thought, but since I constantly struggle to buy new clothes – I’d look forward to getting a new wardrobe of clothes. I don’t imagine I’d be out buying $500 jeans, but I would finally be able to walk into my closet and honestly be happy to find something to wear. I’d also buy furniture because everything we own is a free gift from someone and I’d like to have furniture that I picked out.
• Hire personal staff. This sounds cheesy when I write it out, but I’d be all over hiring someone to clean the house and do laundry. I hate those tasks and would happily dish them out to someone else. Also, if we get the farm thing going, we’d be hiring staff to help with farm duties anyways — and thats not even based on a wealth-position, we’d just need the help getting things done (and our farm would be run as a business too). Additionally, I’ve always wanted a large family (7 kids or so) and would hopefully still continue on that path and would probably hire a care provider as well. But this person would not be a typical nanny, because whats the point of having kids if you don’t want to care for them? Instead, this would just be an extra set of hands to make daily activities easier. But then again, maybe we’d never get around to do any of this.
• Buy new vehicles. Living with old cars has it’s joys, but I’d love that I could use wealth to purchase energy efficient vehicles that would suit our needs. We’d probably still be interested in older vehicles for farm vehicles and maybe even some horse drawn equipment as well.

In all, I still like to think that I have fairly simple wishes. I would give up on improving our current house and would probably sell it “as is” because the work it needs is more than we could ever recover in renting or sale. Being able to buy a farm with a substantial amount of property (100+ acres) would be my biggest goal so that I don’t have to look over at the McMansions going in next door and can provide for our family’s food needs. Sustainability would still be a major factor and we’d be in a position to install alternative energy systems to allow us to live 100% off-grid. The bed and breakfast/traditional arts and craft school would be a wonderful thing. We could then continue working, doing what we love – working with our hands.

So, boston gal posted something about 2.25% interest rates — and it got me wondering at what point does it become worthwhile to refinance the house? What if you’re currently locked into a 3 year no-refinance clause that will cost you about $7,500 to break? I’m sure there is still a point that it becomes worthwhile, though whether or not we could qualify for the rate at which it becomes beneficial is a different story.

Possible or not, it still seems like a good number to know. Looking at the online calculator comparing 7.35% to 2.25% showed savings of about $600/month and that’d make each month much easier on us – but it’d take more than a year of that type of savings to recoup closing and penalty cost. Hmm, guess I should take the time and learn what that number is and what the out of pocket impact would be.

Edited to add: I did get the part that boston gal’s 2.25% rate was hypothetical mortgage rate — it just got me thinking that I don’t know at what rate it is worthwhile to consider refinancing our house and that is something I think responsible home owners should know.

Every once in a while a feeling or emotion about knocks me over and I want to run and act on it. The most common one is to take every penny we have and pay off our credit cards. Any time a chunk of money comes in, that is exactly what I want to do with it and occasionally I will. But, since we’ve bit into savings a lot lately for various things (car repairs are killing us), there isn’t really much there ship off to reduce our debt. But, I know that there are a few decent sized checks coming out way in the next few months (thanks to taxes mostly and October usually bring child support arrears). The second that money touches my hand, I want to hand it over to our credit card companies.

While everyone loves to talk about how important it is to pay off debt and how interest rates paid on debt is higher than what you’re probably getting in savings, they still seem to miss a major aspect of having savings — stuff happens! And when stuff happens, it sure helps me sleep better knowing that we can pay for it. If I took every dime we had in savings and chopped out our debt, I’d be left with an extra $300 a month and nothing in the bank to cover the next car repair, boiler break down, or more serious emergency. Sure, we could charge most any emergency that comes up, but then we’d be right back in that vicious cycle of debt. Also, at $300 a month, it’d take us almost a year just to put $3,000 back into savings. And of course, that assumes we don’t have somewhere else for that money to go.

Yeah, pay yourself first should always happen, but how do you work that out when what comes in doesn’t covered the required-to-go-out bills (and that doesn’t include things like food and gas)? Do you still throw a few hundred into your emergency fund when you’re not making enough to cover everything else? Doesn’t that emergency fund contribution just get drug out the next month when ends aren’t meeting?

I know I’m rambling a bit, call it the emotional stress of working to get finances back in order when you feel like you’ve done almost all you can to get back on top. We can’t trim anything else from our budget and I’m bringing in as much extra as I can — it just isn’t enough and it leaves me a little flustered and frustrated. Those checks that are coming later this year won’t be making it to our creditors, in fact, they’ll probably be here just in time to get us back to 0 and give us a few more months to get things back in balance. All I can do is hope July gets here with that the raise we’re counting on happens — but thats not sounds financial planning either.

Counting chicks before they hatched is always a dangerous financial plan. I can’t help thinking about the financial crunch the company has been experiencing and worrying that this might be a year were a COL raise may be all thats dished out. I have no reason, other than reasonable planning, to think this might happen, but it worries me just the same. And for planning purposes, it makes more sense to assume that worse case scenario than to hope for a better than average raise due to company concerns about losing valuable employees that are becoming less and less enchanted with their positions (and pay).

While our finances are improving slowly, we’re still struggling. Last month we were only over by $1,000 versus the $3,000 we were over in December and January. So, I’ve decided to take some pretty serious and drastic cuts to help us get back on the right side of $0 a little faster. A friend of mine just worked up a $40 weekly budget for her family and I decided to take that a few steps further — $50 for the entire month’s of groceries.

I went through our entire pantry and freezer stores and inventoried all of our food. I sat down with the list and worked out at least 27 dinners and plans for lunch and breakfast. Spending just $50 on a month’s worth of food is only possible because we have a well stocked kitchen and will only need a few items to fill out our menu. We’ll be lacking our usual fresh produce, but have enough frozen and canned goods to make up for it.

Shopping List:

• 2 gallons milk
• yogurt
• half n half
• 2 lb cheese
• 2 lb ground meat
• sugar
• lettuce
• cucumber
• potatoes
• carrots
• apples
• bananas

Breakfast: Biggest cost saver is that there will be no cold cereal this month.

• oatmeal
• pancakes
• waffles
• eggs
• no cold cereal

Meals: Nothing fancy and all meat portions will be small (as they should be).

• chicken, rice, broccoli (2x)
• chicken, corn, green beans, pasta (2x)
• falafel, pita, carrots (1x)
• pork fried rice (2x)
• pork chops, baked potatoes, broccoli (1x)
• chicken fried rice (2x)
• spaghetti, salad (2x)
• steak, baked potatoes, broccoli (1x)
• chicken noodle soup, salad (1x)
• ham and cheese omelets, biscuits (1x)
• chicken, peas, ramen noodles (2x)
• chicken parmeasan, salad (2x)
• chicken burritos (1x)
• tacos (1x)
• bean soup, salad (1x)
• potato soup, salad (1x)
• ham, cheese, broccoli quiche (1x)
• english muffin pizzas (2x)
• leftovers/sandwiches/fend for yourself (~2x)

Lunches: Most meals provide leftovers for lunch.

• leftovers
• sandwiches
• soup
• ravioli
• carrots
• apples
• bananas
• muffins

Desserts: This is the rare treat, not a daily menu item.

• Cake (we need to use leftover icing up)
• peach crisp from canned or frozen peaches

Other items of consideration: we’re feeding a family of three, we make our own bread for each meals, and all of our meat portions are smaller than the typical American serving (ie. serving sizes are appropriately sized). If we make this work, I can make a costco trip next month and re-stock essentials that we’ll be working through this month.

I’m sure I’ve mentioned that I work from home running my own sewing business. The past 6 months have brought about a lot of new avenues for customers and items and I’ve crossed over from being a purely service based business (sewing up what people bring me) to a sewing and manufacturing business. I now have products that I sell locally to individuals and stores. This is a great plus, but it brings more complication to our finances.

Where you’re running a service only business, there isn’t really any outlay of cash up front. So far, I’ve only needed to keep myself stocked with thread and needles to meet my customers needs. Now that I’ve moved into making my own products, I’m constantly searching out the best prices on materials ad need to stock up on raw materials. That makes a month like February somewhat painful because I’ve no money set aside for these purchases and am mostly going on (positive) speculation that I’ll be able to sell everything I buy.

So far, I’ve already placed 4 orders for materials and I doubt that will be slowing down anytime soon. I have a large, upcoming customer order that is proving difficult to fill because it is difficult to get the materials that I need. I wish it were as easy as being able to walk down to the local fabric store and they’d have what I need in stock. But, I’m looking at a lot of specialty items that go for too much retail and too slow through wholesale or co-op orders. It’s frustrating trying to keep expenses down but still have the materials I need in the time that I need them.

On the other hand, it is also very nice to just take a few leaps of faith that turn out positive. I recently purchased enough material to make several bags (when I only really needed to make one) and have already sold them all. I like knowing that within a week of purchasing materials, the cost is already covered a few times over. This will certainly help me out as I continue to get more and more materials ordered, but won’t be quite enough to cover my entire spending for this month. Hopefully things will come in sooner than expected and I can fill the large customer order that should put me back in black, financially speaking; till then, I’ll be seeing a lot of red for a while.

Just got a check in the mail reminding me how much I like the health care FSA. My only complaint is that the partner’s company has such a low cap on it ($1,500). But, I love knowing that we just processed a claim for 70% of our annual allocation when only 10% of our annual allocation has actually been collected so far. It’s nice that I don’t have to wait until the funds have actually accrued to make use of them.

When we set up the daughter’s second round of orthodontic care, we established a monthly payment plan for the next two years. I really didn’t want to add another $150 to our monthly budget, so I made an extra payment in January so that I could reduce the monthly payments to just $50 for the year and make an immediate claim against our FSA. Of course, this totally confused their billing department and it took way more explaining and re-explaining (ie. “you’ll be getting the same amount this year, just one large payment in January will make the monthly payments smaller”, rinse, repeat) than it should have. I expect our medical bills will exceed this years allocation, so we’re holding off until the middle of the year when we expect to see another decent size medical bill to use the remaining funds.

We also finally put in a claim for last years FSA as well, which we had limited to only several hundred since we weren’t sure we would use the full amount. I like that the claim was simple because we had one payment larger than our 2007 allocation and I didn’t need to add up all the smaller copays and fees. I wish I could say that this chunk of change will help us in our current fight to get back on top of a $3,000 deficit. While the orthodontic treatment was part of that overage in December, the reimbursement won’t go very far in correct the imbalance.

I just ran across a few comments on other sites implying an unfairness with how tax incentives are divided among those with and those without children. It seems the childless commenter isn’t too keen on the fact that there are several tax breaks that “reward” people for having children. Well, it’s true, my deductions and tax credits are greater because I have a child — is it enough to get rich on, not at all. In fact, I’d be much better off financially if I didn’t have children. But, I guess these comments get to me when you consider the long term financial health of our country — if people do not have children, then we won’t have an employment or income base for our economy.

I guess this is partial incentive to look up the financial implications for those countries facing negative growth and how they are dealing with the reality that having less kids means they country has less money. Of course, my plate is pretty full and I doubt I’ll get around to that anytime soon. Instead, I’m be happy that there are some financial relief for people who are reproducing and will keep quite about all the other complaints of support that should but don’t happen.

A few days after posting our food related spending, Blogging Away Debt posted a new strategy to reduce grocery spending. Thanks to several money saving tips shared in the comments, they’re working on a master list to share with others, read the details and share you own tip. I’ve read lots and lots of ways to save on food, but will be interested in seeing suggestions offered by fellow bloggers.

Some tips, like supplementing fresh milk with powdered milk may be just a little too frugal for some — however, we’re really appreciating how it is extending our $4/gallon milk purchases. Also, having dry milk on hand means NEVER having to run to the store just for recipe that calls for milk. Just last week the partner was almost out the door to get milk when I trapped him in the kitchen and whipped up a batch of powdered milk in seconds — that saved us $3 for the gallon of gas he would have used just to get the $4/gallon of milk back home and we were able to eat at least 45 minutes earlier than we would have if we had to wait on the milk run.

I’ve not been drowning myself in all the news reports on current market rates, the effects of the sub-prime market, and all these tangled terms which just haven’t held my interest long enough to really invest in them. I don’t worry or contemplate market decisions because the only investing I’m doing is in personal retirement account and I’m committed to the long haul and have more pressing things than to worry about how the portfolio is doing.

But, even without diving into these topics, it still leaves me a bit confused when I read some of the doom and gloom posts of whats to come this year for anyone who cares about their finances. One side seems to still be focused on the housing market, which I spend absolutely no time worrying about now that we finally got our house. The other touches on inflation and such and again, I’m feeling just too lost to even figure out where speculators coming from or heading towards.

Am I missing something major? When it comes to housing, I have a house that we bought at a mostly fair market price and could probably still sell it, with lots of patience, for what we bought it for — well, I’m pretty sure. But, really, that doesn’t matter because we’re not looking to sell it, make a profit from it, or even see it’s value rise at this time. While this isn’t the long-haul of retirement, it is a long-term commitment and not just a chess move in our financial gamebook. If this is the case, what impact if any does all the rambling about the housing market and sub-prime market have to do with us?

In terms of the subprime market, while our credit was not the best of the best, it was good enough to avoid a subprime mortgage. We did look at loan products that offered a variety of options to work with us to get the loan value we wanted and we have an interest only portion on our mortgage. We concluded that it came down to an issue of commitment and follow through – we could have the mortgage company force us to pay principal+interest or we could choose to hold ourselves accountable for adding on the principal payment each month. Since we knew we really needed the extra cash for the first 6 months, we went with the interest only option with the commitment that within 6 months we’d be paying more than just interest and within a year we’d at least be making the principal+interest payment that would have been required without the interest-only option. We are doing just as we said we would and paying more than just interest.

Now, inflation can be a pretty big issue when our budget is already so tight. But, it this really something that is going to hit us hard? We’re already paying more due to a cost of living increase associated with moving to the country (which makes no sense). However, we’re taking lots of steps to reduce this impact on our budget and those steps will also reduce overall impact of inflation. We’re actively reducing consumption and will be growing the majority of our food come spring. Also, we’re moving more and more into a barter heavy community where many needs can be met without shipping out the checkbook.

Perhaps inflation would impact the purchase of a ‘new’ car, but I don’t see John Doe upping the price of his used automobile in response to market changes — instead, it seems that the big ticket items we’ll be buying this year will stay fairly static in price. The building of our workshop is the biggest exception to this because every part of it is directly affected by current market rates for things like lumber, fuel, and materials. But, we’ll hopefully be building our social network enough to trim the costs considerably where we can.

So, all in all, I don’t see where all this doom and gloom commentary actually has an impact on our middle class family. Am I missing something major?