The Weight of Money

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?

January is a very painful month - we’re short our monthly expenses ($3,000) and I’ve yet to figure out a way around this. Our first step was to seriously cut back on all purchases, most importantly food. This means we’re eating a lot of pantry meals and only buying what we need (milk). But after a couple weeks of doing so, I’m starting to feel hungry and cranky. However, this has also prompted me to really look at what we’ve been spending on food.

I’ve gone back through the numbers from October 2006 (when I started our joint budget) through December 2007. I’ve been feeling like we’ve been devouring most of our money and wanted to know what, if anything, has changed in the past year or so.

Food Buying Characteristics: During this time, we’ve consistently been feeding a family of 3 (two adults, one preteen child). Our eating habits haven’t changed dramatically, ie. no new diet fads were introduced to alter our buying habits. The daughter has been taking a lunch to school with fairly consistent cost over the months as her lunch repertoire is voluntarily limited to the same things every day. There have been some fluctuation due to changing jobs, mostly importantly is that from October 2006 to June 2007, I worked outside the home and ate out for lunch most days. The rest of the time, I typically made a lunch at home about 60% of the time, the partner about 30% of the time. However, lunch purchases are not included in our food budget as they are taken from our personal allowance — this is mostly to be fair to the partner as his lunch choices are often half the price of mine.

Overall increase of spending: Our total spending on food increased 5% from approximately 8% in 2006 to 13% in 2007. Both groceries and dining out increased equally, so I can’t blame it on choosing to eat out more often - which would make this entire analysis so much easier. In order to compare fairly equivalent numbers, I excluded all costco purchases because they do not occur monthly and are not always 100% grocery items. A more diligent person would be willing to separate out the food from non-food costco purchases, but I am not that person. Also, since moving to our new home, I’ve been spending cash earned from small jobs at local farms and meat markets and that money is not included in these numbers (this year it will be!). So, the numbers aren’t perfect, but they are a start.

Monthly Food Spending:

• 10/2006: $582 . . . . $19/day
• 11/2006: $569 . . . . $19/day
• 12/2006: $451 . . . . $15/day
• 01/2007: $421 . . . . $14/day
• 02/2007: $458 . . . . $15/day
• 03/2007: $649 . . . . $22/day
• 04/2007: $617 . . . . $21/day
• 05/2007: $475 . . . . $16/day
• 06/2007: $522 . . . . $17/day
• 07/2007: $491 . . . . $16/day
• 08/2007: $585 . . . . $20/day
• 09/2007: $607 . . . . $20/day
• 10/2007: $542 . . . . $18/day
• 11/2007: $256 . . . . $9/day*
• 12/2007: $587 . . . . $20/day

*November 2007: 90% of November spending were cash transactions.

Spending Review: Looking back, I can see that some of our lowest months were December 2006 through February 2007, probably because I was hyper-aware of our budget at the time and strictly planning our meals and spending. Surprisingly, we spent the least on dining out the last four months in 2007 (excluding December) — but these were some of the highest overall food spending months. The decrease in eating out is mostly out of convenience; moving out to the country really impacts the availability to run out for dinner. Also, the partner’s long commute means no meeting up somewhere else for dinner either.

Another big impact on our increased grocery spending is the increased cost of items in our new area. I’m glad that I have a pricebook to reference when comparing prices, especially when doing “then and now” comparison. I’ve found that many of our weekly staples cost almost 100% more now than they did at the beginning of 2007. I’m not sure that inflation has spiked that fast and blame the store that I shop at most frequently for charging more and recognize that most things in our new county are priced a little higher (which makes no sense when I consider that these are produce items and we live among farmers now — but, grocery stores don’t focus too much on buying locally).

Actions to reduce spending: 1. Having a weekly meal plan really helps keep spending in line. I often want to check sales fliers to see what the good-deal-meals are for the week, but never get them in the mail. I need to focus on looking those up online and making up meal plans. 2. I also need to stop exclusively shopping at my favorite store (they let you scan and bag as you go) because that convenience is having a serious impact on our budget. While our store selection is geographically limited, driving another 2 miles may actually make more sense. 3. Finally, I need to update my pricebook with price comparisons from different stores in the area and make purchasing decisions based on those numbers.

Hopefully these steps will help us rein in food spending. In the meantime, I’m going to try to be happy with the pantry meals were eating this month and not retaliate with an over the top grocery or eating out purchase.

In all my readings and learnings on wealth building and actually moving from ‘getting by’ to ‘doing well’ takes dedication, commitment, and discipline. I often ask myself if I have the discipline to be rich and the answer is pretty sobering — no, not yet.

In deciding to buy a house, we had two very clear paths available to us: stay the financial improvement course and rent or buy a small place or over-stretch financially and buy a house with some land. We selected the less financially beneficial path.

We knew, without a doubt, that it would have a huge impact on our finances and pretty much put all our positive progress on hold for at least 6 months and perhaps an entire year. But, that whole idea of quality of life came into play and we took the instant gratification instead of waiting until a point, financially, when we could better afford the gratification.

To me, this is just another sign of the lack of discipline to be rich. Another comes up this weekend and next, as we both realize that we are really hurting this month but we are both continuing with travel plans that simply are not affordable right now. Both are for once a year events that we religiously attend, but the budget really says we should consider otherwise. Instead, we’re taking the leap and will simply deal with the fall out, again, we don’t have the discipline to be rich.

Now, this doesn’t mean that all hope is lost. We do make positive strives and have enough discipline to make reasonable choices. They are not always the best, but when we consider all the options and impact, they are ones we can live with. Oh, but to think of how much faster we could reach our financial goals if we had more discipline… and no children (but thats a whole different post).

There have been many contributing factors to why I’ve neglected our finances the past few months — the biggest one is simply not thinking about them. When you’re reading and writing about your finances frequently, it’s pretty hard to not think about them. The day after we closed on our house, I left my job and all of my personal finance bookmarks and posting habits. As I let life take over, I stopped reading the personal finance blogs that had offered more than a years worth of inspiration and stopped posting.

I’m finally rebuilding my pfblogs reading lists and trying to figure out this rss thing. I’ve set time in my schedule for posting (2-3 times a week) and a weekly appointment to face our finances. Hopefully, these measures will eliminate my continued procrastination. Oh, and if anyone can tell me what kind of free rss reader will list all subscribed to posts in chronological order, I’d be happy to give it a try. I’m giving Sage a try, but it seems to only display posts from individual sites in order — I really don’t want to have to click on every site I read to see whats new for that day.

I look forward to catching up on the many sites I’ve not been reading and checking out some new ones that have been on the scene the past few months. Thank you for the comments and emails I’ve received the past few months, it’s great knowing that my absence has been noticed. Maybe I’ll even make it out to one of the local pfblogger happy hours — though I admit DC is a real drive for me now.

Today’s not been a very good money conversation day — seems to be one of those days where one little thing turns to another, another, another until everyone is rattling out all the millions of things that could be wrong. Guess it’s just a little crack of financial stress and it isn’t all the surprising, though I found some of the comments so.

The partner and I were discussing the “sacrifices” that have been made the past two or so years to help us get our house and eventually our financial house in order. Lots of financial progress is on hold as we mostly tread water, which doesn’t make for feelings of comfort and joy at this time of year. Seems that the partner is struggling with how his life has changed and how he can’t just throw a wad of cash in his pocket every weekend and spend it however he wants. Burning a couple hundred dollars on a lark just isn’t in our budget and even a couple hundred dollar for needed items is a hard sell right now. But with this argument, I can’t help pointing out that nothing has changed between now and his previous spending other than he’s now looking at reality and taking responsibility for it.

We started out our relationship, each with pretty sizable debt. Mine was tied to the degree I’m still not using in terms of student loans, his was all in unsecured credit card debt. So all these comments about how he was spending whatever, whenever had to be correlated to the sizable credit card debt that we’re still working down. So, are there sacrifices being made now, or is it just facing reality? Obviously, I’m much more in the facing reality camp, and I’m not looking for support one way or another — just commenting on the very different perception each of us has at the current situation.

I’m sure that this is an uncomfortable situation to be in, watching dimes and knowing that making ends meet takes real work, but to continue mourning a lifestyle that wasn’t financially responsible to begin with doesn’t win bonus points with me. As for the current financial stress, I’ve dealt with money issues my whole life and I can’t help seeing the fact that because we can pay our bills and have more than enough to eat - it isn’t all that much to get upset over. I’ll work on having more sympathy for the partner who doesn’t have the same life experience or outlook.

We’re all set to start round two of orthodontia for the daughter. First order of business is to use up the funds in our 2007 FSA ($600). I’ll just apply it to the orthodontic treatment and not worry about the piddly prescriptions and copays that we had earlier this year — from a paperwork standpoint, this is easier. I’ll also need to pull $468 from the daughter’s child support fund to make the first payment. Oh what fun.

Here is where I threw the financial secretary for a loop. We’re basically just doing monthly payments of about $133 — but because I’ve decided to apply $1,000 of next years FSA to her treatment, I’ll be making a $1,000 payment in January and then just make $50/month payments for the remainder of the year. It took a lot of discussion to finally get her to realize that this is exactly the same thing as paying $133/month (well, actually, it’s about $4 more for the year) and that I’m doing it that way because then I can put in an FSA claim in January for the $1,000 instead of putting in monthly claims for $133. Again, I like making the paperwork easy and I love that you can file a claim before the full amount is in the account. Woot!

Simple, right? It certainly didn’t feel like it after being on the phone for way too long. Of course, even with all this hoop jumping, the daughter won’t be getting her new appliance until after the new year as it’ll take a few weeks to get it made. I know she’s awfully disappointed about that (note of sarcasm).

But, to make financial matters worse, the same day I’m working out all of these details, I get an email from the daughter’s summer camp that registration is now open. A quick glance at the rate confirms my fear that prices have gone up again - only $50 this year, compared to a $100 increase last year. But I guess when you’re looking at almost a thousand dollars for summer camp, whats another $10, $50, $100?!? Come next year, when I imagine rates will hit (and hopefully not cross) that $1,000 threshold, I’m going to have a very hard time getting my hand to stroke that check. Fortunately, the child support fund has enough to cover the application fee and deposit and should have enough deposits to make the final payments on time.

Side note on sumer camp: not attending summer camp is simply not an option; while paying for it is a major strain, I continue to firmly believe that it is worth even (painful) cent. But for parents just now considering summer camp, be sure to pick one that is affordable before you fall in love with it and vow that it is indeed an experience your children must have each year. At times I wish that I didn’t know about this camp, but it’s too late now.

2007 is basically over in my book, time keeps rushing past and there is no slowing down in sight. As I start thinking about 2008, I’m starting to panic — just a little. I feel like we’re teetering on some major financial obstacles that I don’t think we’ll be able to skirt around as we have this year. Basically, there are five major expenses simmering under the surface and 2008 looks like the boiling point. As I reflect on the goals that did or did not happen this year, I need to get a very thorough action plan in place for what we are going to do about next year. Time to get off the procrastination wagon.

• Buy a family/commuting car. We need a vehicle that is better suited for commuting than the small SUV the partner is currently driving or my stick shift vehicle. The mpg on the SUV isn’t the greatest, but the issue is mostly that it’s falling apart, slowly and surely — I’m pretty sure I said this last year too and the new commute is hastening it’s demise. Also, it’s a two door family car and we’re finding that just isn’t enough any more. So, we need a new (to us), four-door, family/commuting car. The reason my car doesn’t fit this bill is that its two-doors, manual transmission, and has no a/c. The manual transmission doesn’t lend itself to low-stress, stop and go commute driving, and while the lack of a/c has been a standard in all of our vehicles (and our home), the partner has reached the end of the line for putting up with that.
• Buy a truck. We both need new vehicles (partially explained above and left somewhat vague intentionally) and the truck is to replace my car. We need to be able to haul stuff and my car can’t do it and the SUV is dying. We do have a utility van, but we often need to haul stuff and people and the van only seats two. Now, it may end up being another SUV type vehicle, even though I don’t care for those very much, as long as it has a hitch and the ability to pull a trailer. Whatever it is, it’ll be my new get-around-town vehicle, as the new car should be more suitable for commuting. Despite my long-stated reluctance to get a larger vehicle, I’m starting to accept this idea; though I’ll still mourn the lost off my little compact car.
• Build a shop. Even though this big-ticket item fell off my fall agenda, the need for it hasn’t decreased. It’s not an optional choice, though the need for two new vehicles makes it a financially more painful one. Now, I can ramble on about the differences between needs and want, but the end result is that a shop is a must have and another year without one is not acceptable. Hopefully the partner and I will find time to evaluate our outdoor space a bit more and figure out what the bare minimum is for the initial structure (with plans to build on more as finances allow). We already have a few required elements that are already having a pretty serious impact on the price — as in the need for a two story shop (not just one with some attic space) — and we need to figure out how to get the minimum erected and hope to do more on our own as time and resources allow.
• Orthodontia for the daughter. I’ve been putting this off for the past two months, but we’ll need to get started. I’ve finally decided to continue with our current providers, versus finding someone new, and just need to bite the bullet and sign the agreement to part with several thousand dollars over the next year or so. Maybe we’ll be able to drag it out a bit longer than usual to make it a little more manageable.
• Medical Expenses. Looks like there are some upcoming medical expenses that we probably won’t be able to avoid next year. The non-insured amounts are still somewhat vague, but it’ll still be significant compared to the less than $100 we spent on medical expenses this year.

Oh boy, looks like I’ve got some work cut out for me in making these things happen. Winning the lottery looks more and more appealing every day as I struggle to figure out how to make these things happen. Luckily, my business is expanding rapidly at the moment and next year looks even more promising for new avenues of income.