The Weight of Money

The partner and I got an unexpected date night last night since the daughter wanted to hang out at a free movie event at our local library. We stopped at a local yarn store and chatted with the owner and some of the other ladies before heading over to a yummy dinner of thai food. Even though we took our time at each stop, we were still early in picking up the daughter from her event and ended up parking in library lot waiting for her to get out.

This was the perfect opportunity to talk about anything and everything without losing sleep – usually these discussions take place as we’re both drifting off to sleep. The partner reveal another upcoming change with his company’s 401K program. It sounds like his company continues to struggle financially and is still cutting corners here, there, and everywhere to stay afloat. The partner is expecting that the newest announcement, only alluded to at this point, will address the account fees associated with the 401K accounts. He expects that the company, in addition to dropping their matching program and tacking on a lengthly vestment clause for previously contributed dollars, will also stop covering the fees charged by the 401K company and will be passing those charges on to participating members. To me, this is just another kick in the shins from the company at this point.

The partner is currently on is 3rd years with this small start up company. The past year has been full of lay offs, cut backs, scaling down of options, and other negative financial steps (negative from the employee’s perspective at least). What was a nice company to work with has really drained away to just some job this past year. The other draw back is that this company doesn’t pay that well to start with, so the few perks (most of which were not financial) it offered, made a big difference in employee satisfaction. All of that has been stripped away this past year or so. I’m sad to see this change since it was a very family-focused company that seemed to go out of it’s way to support it’s staff in recognition that it’s financial support wasn’t the greatest. At the same time, I’ve hoped that these changes would prompt the partner to look elsewhere for employment, and while there have been days that he’s lost all patience with the company, he’s still pretty loyal to sticking around longer.

During our parking lot discussion, the partner mentioned just stopping all retirement contributions. This would put a few more dollars in our pockets each month, but would it be worth it? I don’t think so. Retirement is something that is going to happen – having a couple more dollars more a month might ease our financial stress a little bit, but not to the point to put future retirement in jeopardy. Since we’re already not seeing that money, I support continuing with contributions, even if we’re paying all the fees to make it happen.

This past year of making no financial progress is taking it’s toll on the partner as well – he wants to see debt going down, savings increasing, or equity growing. I understand the feeling, I want to see those things happening too – but we’re just not there yet. In fact, I’ve been anxiously waiting to hear what his raise is going to be and am starting to worry that one won’t be happening at all since his company has been struggling so much and we’re already entering the third week of July and there has been no word about this year’s raises (they usually go in effect July 1). I also struggle with the fact that the he chooses to stay with a company that limits his earning potential. In my mind, if he really wants to see progress in those areas, he’d be making the effort to apply for other positions that are available to him at this point and would come with a decent pay increase as well. But that’s not a fun argument to make and is one area that I’ve finally learned to not push too hard – but it’s difficult to not push when I see that as one of the only positive steps to reducing our financial struggles.

Sometimes it’s easy to get caught up in the things you want. Sometimes, your brain plays tricks and makes you think that getting what you want is a good idea even when it isn’t — especially when it comes down to money. We’ve made and need to make several purchases for our house and garden this month. Thinking about our current purchasing needs, the partner started wondering if he could get a good deal on a few items purchased in bulk – specifically some EMT. We need some for the vertical garden support, but suddenly he was asking me about how many poles we’d need if we finally got a shade structure we’d been considering for a couple years.

The shade structure idea wasn’t an out-of-the-blue thought. We’ve been discussing getting a good structure for several years and somehow manage to talk ourselves out of it each time. We have a big party coming up in a couple weeks where we could certainly use a nice sized structure – but is that reason enough to get one? He almost had me convinced and those lovely little “Buy It Now” buttons on ebay can be awfully tempting sometimes. But, before clicking that button, my mind started to wonder about some of the details.

I’m a bargain hunter – I hate to pay extra for anything I think I can get for less somewhere else. Considering shipping costs, I’ve began wondering if we couldn’t get some of the structure elements cheaper, closer to home. This threw a kink in the whirlwind of activity – not so much because I was questioning the savings, but because I was taking longer look at the situation. What started out as a conversation about getting a bulk discount on EMT had turned into definite plans to buy the kit and the EMT without even knowing if a discount was possible. Having the shade structure for the party would be great, but having the cash to pay for everything would be even better and thats where the problem comes in.

I can justify needed expenses that are necessary. We have to get vertical supports up for the crops (now!) and I don’t mind forking over cash to make that happen. However, we don’t *need* a new shade structure for the party – no matter how nice it’d be to have. Also, we’re currently looking at options for buying another vehicle – one with 4-doors and a/c – and now is not the time for buying frivolous items. Once I started adding up the shelter details, all I could see was that adding up to the 6-month or 12-month increase in auto insurance we’ll be paying for a 4th vehicle.

It’s easy to get pulled along by ideas, but sometimes you still need to hit the breaks and really look at the situation. We may end up with a shade shelter, but it’ll get a lot more consideration than the 2 hours of talk we gave it last night. Also, before we make that decision, we’ll need to finally decide if we’re going to get another older car for the cash we can spare, or it we’re going to add a car payment to our already tight budget. I’m already leaning toward the first option, but am not sure the partner is on board with that idea just yet so we gotta talk it out a bit more first.

The partner’s work started a matching 401K program about a year or so ago and that prompted the partner to finally open an account. We’ve been putting in just enough to get the full match from the company even though we know we need to put in much more if retirement is ever going to be possible. Here is one area where a head in the sand approach is bad news and we know it (no one said personal finance bloggers always make the best financial decisions).

So, we just got notice that his company is going to stop doing this. The company has been struggling financially lately which puts a little extra stress on us because job security is something we’ve taken for granted. But there have been many changes at the company in the past few months that gave us the impression that they were finally getting things under control. To drop this program, out of the blue, implies to me that the situation is more serious than we assumed. The company has been laying off lots of folks lately — mostly a corrective action since they really hired too many people last year — the cuts have been to more overhead type positions (one was their first Chief Financial/Operating Officer that they hired just 6 months prior). We’re still pretty confident that cuts to the engineering department are highly unlikely since they need them to get and fill new contracts and bring in the money. I think the partner will be updating his resume, just in case.

Last night the partner asked if he should pull back his contributions for a while to give us a bit more cash on hand. It seems like a easy solution to help with our financial crunch, but we also both agreed that we’re too behind in retirement contributions to consider reducing them at this time. So, we’re losing “free” money from the company, but will still keep contributing anyways and hope to increase those contributions later this year. Having a few extra dollars today isn’t going to offset the pain we’ll feel if retirement is not a possibility.

Last year started out nice and slow and ramped up to an almost unimaginable pace. There are so many things that I was going to work towards that got pushed aside by minor emergencies and new obligations striving for my attention. Before I get started planning for 2008, I wanted to see just how we finished out the year. After some major procrastination, I finally closed out our November and December budgets and the picture ain’t pretty – more on that in a bit. First, lets look at our 2007 goals:

• Goal: Increase Savings for Home Purchase to $20,000 by July 2007. Meeting this goal was my biggest financial-ego boost for the year. We dropped about $8,000 – $9,000 on all the costs with buying and closing on the house and we still had another $10,000 sitting in savings after the fact. This was a major stretch for us and I’m proud that we made it happen.
• Goal: Reduce Credit Card Debt to $10,000 by December 2007. We’re about $5,000 short of this goal for the year. $2,000 of this total is my fault since I replaced my laptop when it died on credit instead of pulling from savings. Also, we’ve taken a 6-9 month break on beating back debt as we do what we can to keep our heads above water.
• Goal: Buy a house in July 2007 Success! We are the proud home owners of an old (137 years) farm house with just an acre of property. It was less house and land than we wanted at a pricer higher than we really wanted to pay. Despite those things, it is working out and we managed to stay within a reasonable commuting distance for the partner. The majority of the houses we were considering were much further out and now, having lived with the commute, we are very appreciative of the house we have.
• Goal: Increase retirement investments to 15% of income by December 2007. I’m a little embarrassed to say that I’m not sure where we are at with this goal. I think that the partner is still contributing only 6% of his income to retirement. I expanded my home business to be my only income source but did not put anything into an individual retirement account. This is something we need to get a handle on for 2008.
• Goal: Increase Passive Income to $200/month. We’ve managed to accumulate about $50-$75/month in passive income. I don’t see this increasing anytime soon.

Overall, I think we did a pretty good job in 2007. The last 6 months have been a serious stretch as we started to resonate with those crying “house poor” from time to time. But, even though our budget has been hit pretty hard with the new housing costs, we’re still well fed and clothed and not standing on a corner with a tin cup in hand.

Here are some numbers on our total spending for 2007:

• Credit Card Debt: $4,951 or 9.3% of spending
• Student Loan Debt: $3,805 or 5.7% of spending
• Utilities: $3,829 or 7.1% of spending
• Housing: $20,803 or 38.8% of spending
• Groceries: $4,098 or 7.7% of spending
• Eating Out: $2,933 or 5.5% of spending
• Transportation*: $6,401 or 11.9% of spending

*Transportation includes gasoline (about 8% of total spending), insurance, repairs, and fees.

The above numbers only reflect spending from our personal account. Items that are automatically deducted from income, such as retirement and health insurance, are not included.

Reviewing last years goals’ progress and our annual spending (especially the percentages) prepares accurate and reasonable numbers for spending and savings for 2008. As I emerge from several months of serious financial neglect, I have a lot of work ahead of me to get us back on track to be in a position to pursue goals of any type. As I mentioned, November and December were ugly months, fiscally speaking. I chose to continue spending without considering the impact it would have on our budget, and didn’t follow through with the partner to mange his spending as well. As it turns out, we closed out the year $3,000 short – which is almost an entire month’s worth of bills and spending. I’m frantically working to correct this and get our numbers in order for 2008.

Painting a room is often the quick, cheap decorating fix listed in books and magazines, but is that really the case? We just moved into a new house and my new craft room was dripping with old-lady style, hideous wallpaper and old molted brown carpeting. Having just bought the house, there wasn’t much cash for drastic improvements so I decided to give the old “just add paint” approach a try (photos at the end).

Painting seems like a simple choice until you consider the materials needed. Luckily, we had several on hand, but I’ll approximate their purchase value to give an approximate cost.

The project…
The room was 12×18 feet with three windows, one front door, and two entry ways. The carpet was removed (revealing rough, somewhat damaged plywood) and the walls stripped of wallpaper all the way down to bare plaster. Instead of installing another flooring option, such as new carpet or sheet vinyl, I decided to just paint the plywood floors to save some cash.

Materials:
– med. paint brush, $10*
– paint roller, $15*
– 2 roller sleeves, $12 (one for plaster, one for floors)
– roller extension, $10*
– handheld paint pail, $10* (very nice to have)
– paint pail liners, $5* (very convenient)
– roller tray $8* (turned out to be a waste, the roller grid was much better)
– roller tray liners, $5*
– paint stirrer (attaches to drill), $4
– 5-in-1 painters tool (for cleaning rollers), $5
– paint brush comb (for cleaning brushes), $4
– paint roller grid, $3
– 5 gallon bucket, $6
– 5 gallons primer, $75 (used about 3 gallons)
– 2 gallons wall paint, $40 (used little more than 1 gallon)
– 2 gallons floor paint, $40 (used less than 1 gallon)
– 1 gallon trim paint, $22 (used 1/8 of a gallon)
– painters tape, $20 (this stuff is expensive)
*items I already owned

Cost of primer used: $45
Cost of paint used: $43

Total cost of supplies: $117
Total cost of paint/primer: $177 (but I only used $88 worth)

Total Price of Supplies and Paint: $294
Actual Cost factoring in paint used: $205
Amount Spent (excludes on hand items): $223

Overall Results…
I’m pleased with the price and outcome, spending about $200 on the room seems like the right price for what I got. We actually spent more because we used a product, Peel Away, to remove the lead-based paint from two of the windows before painting them. It was about $20-30 a window for the peel away and a very messy and labor intensive process (when it came time for cleanup). Lead abatement is my least favorite activity right now, but thats material for a post on the joys of older homes.

Time wise, I’d say that it took me 3 hours to remove the carpet, clean away the foam residue, and prep the floor for priming; 2 hours to remove all the wall paper and prep wall for painting; 2 hours to paint the walls; 1 hour to paint the floor; 1 hour to paint the trim; and 4 hours of cleanup; for a total of 13 hours of work. This doesn’t include necessary drying times between coats, the 3 hours per window for using the peel away, or the 2 hours per window for scraping the window sashes (which still need repainted and reinstalled).

More on the flooring…
I decided to paint the rough plywood floors to save some money. All of the decent vinyl flooring options I found were running at least $1.50/sq. foot with more acceptable options running around $2.00-$2.50. Also, since the plywood was damaged, I would need to replace it and add leveling compound if I wanted the new vinyl floor to last for a while.

The room is 216 sq. feet, the starting costs for vinyl ran from a total of $324 ($1.50 option) to $540 ($2.50 option) before factoring in replacing the plywood (which appears to be running around $10 a sheet, I think). Painting the floor for just under $45 in paint was clearly a better cost option for me.

To make the floors looks a little better than just painted plywood, I used a router and carved lines in it to give it the appearance of being a hardwood floor. It’s a cute faux floor look that masks the fact that it is just plywood. So far I’ve reived positive feedback from those who’ve seen it and I’m very happy with the results.

Before Picture:

After Picture:

Saturday evening, after a week long vacation away from home, the daughter wanted to talk about the dream house she designed. It was a house with multiple floors and all the entertainment an 11 year old can think up, and probably a little more. She had drawn up extensive floor plans and summary sheets for each floor.

The Dream
The room that she prized the most was the Electronic Den (the size of 3 football fields). Here, visitors would find thousands of tvs, game systems, dvds, games. She mapped out the game closets for each different game system, 1,000-person movie theaters and their furnishings (bean bags for kids, couches for the teens, and traditional seats for adults). She seemed to have thought of everything, from education, housing, exercise, food, and entertainment, except some major economic considerations.

“Everyone wants to work here and loves it so much they don’t want to be paid. I’ll make billions.”

“But how do your employees pay for the things they need if they don’t get paid, like a house?” Wanting to know this through a little wrench into her dream.

“If they need to buy a house, I’ll give them a loan to buy it.”

“But how can they pay you back if they don’t make money?”

“Okay, I’ll just give them the money.” Satisfied with that answer, I started to ask about how will they buy food (”they can eat at restaurant for free”), medical care (”I’ll pay for it”), education for their children (”attend the school for free”), retirement savings (”I’ll pay for it”), vehicles (”I’ll pay for it”), etc. She continued to respond to everything saying she’ll pay for it, but she drew the line at family vacations — they’ll have to pay for those but she’ll help them get on shows like Deal or No Deal and maybe they can win the money. Only the “lucky” ones would get to take vacations, the rest were stuck with their 12-hour work day (3 hours for breaks, time that could be spent at another job to pay for the vacation) and 9-hours of sleep everyday.

I kept asking questions and pointing out inconsistencies (”you say admission is only $5 for adults and $3 for kids, how many people need to come in each day to pay for all your employees and utilities?”). She finally got tired of my questions, “Mom!, it’s a *dream* house”.

Reality of Dreaming
The next day, as we were walking to the park, she suddenly blurted out, “I’ll never get to have my dream house.”

We talked about the reality of what she wanted and I told her that if she really wanted it then she could probably make a realistic version of it happen with enough effort. “But all those games and systems would cost too much!” We estimated how much she’d need and it was a pretty big figure, but certainly obtainable through the right choices and planning.

Just dreaming won’t get you there
I shifted the conversation further and brought up the example of winning the lottery. People who play the lottery are dreaming about what they could do with the money. Some people spend a lot of money each week on the lottery and end up with nothing in the end. Instead, if they stopped just dreaming and starting saving, they could work toward obtaining at least a portion of their dream.

Small steps add up
Our discussion veered into savings and interest (passive income). I provided the example of how much we have in savings, the interest ($20/month) it is making, and how that $20/month continues to increase every month. “But $20 is nothing,” she complained.

I continued the example through 5 years and pointed out how it was a way of making money doing nothing. “But it still nothing, I could get a soda machine and make more.” Yes, but the soda machine requires work because you have to stock it, withdraw the money, make repairs, etcetera. But still, in her eyes, the savings example wasn’t enough, why save at all if it’s only going to add up to just a little bit over time.

Necessary Persistence
I hope that I can raise her to eventually see that all those little bits, saved a little at a time, do add up to something more. Hopefully, we can get to a point where she realizes that dreaming can be supported by planning and that things are possible if you have enough motivation. For now, she seems more focused on an unreasonable dream and disappointed that she’ll never just wake up and it’ll be true, oh the limitation of being so young and considering only today.

The Weight of Money is approaching it’s one year anniversary. In preparation, I’m gathering our net worth data and look to compare where we stood a year ago to today. The timing is great because I’m currently sending copies of all our accounts and statements to the mortgage broker to verify income and cash on hand, so no additional scrounging for numbers will be needed.

I’m please to say that we have a total of $29,800 in cash assets, $6,900 of which in in our retirement accounts, leaving $22,900 in cash/savings. This really cheers me up since I’ve been feeling stressed in the money department. We hit a money snag in our relationship recently in discussing cash available for home purchase and this help relieves some of the tension, on my part at least. Hopefully I can get in more detail later this week (the post is half written, at least).

Between now and the end of May, I’m currently juggling multiple projects varying from musical rehearsal, finishing 3-D sculptures for an upcoming art show, nonprofit planning, professional sewing, house hunting, and an ever increasing workload. Needless to say, it’s been a challenge keeping up with all of these items and our finances.

I’ve yet to compile April’s budget and haven’t entered spending for March. It is moments like these that I love living on last month’s income. I don’t have to stress too much because I know that there is money in the bank, even if I haven’t had a chance to budget for it yet. If we were counting on each paycheck, it’d be a much more stressful position.

I’ve got a thing for sushi, such wonderful,, yummy goodness. But, it comes with a price tag that puts it on the very-rare treat list. It wasn’t always that way though. I used to go our for sushi a couple times a month and threw away lots of money on getting the good stuff. But, now that I’m being a more responsible steward of our dollars, sushi is a luxury that never happens.

The I-want-sushi desire hit this weekend and it hit hard. Every time the partner would mention something about food, groceries, or dinner, I’d start pushing to go get sushi. “You want to spend $100 on dinner?” He’d want to know — no, not really. Sushi for two doesn’t really cost us $100, but getting out for less than $60 would be an achievement. Throwing the $100 amount out there helped paint the picture.

So, how to manage the hyper-drive-cravings that show up with the scaling-back-to-buy-a-house budget we’re living with? For one thing, it’ll include skipping out on sushi for dinner. But, all is not lost. I now work within walking distance to one of my favorite sushi places, so maybe, just maybe, I’ll stop in for a lunch special that will fit my budget and take care of that urging.

Now that I’ve run the figures for our taxes, I need to actually file them. I can’t believe I didn’t do this two weeks ago! For every day that we don’t have the refund, we’re losing potential interest gains. tick tick.

This weeks goal: file taxes. I’m keeping this week simple. Once I manage that task, I’ll list another one that I need to take care of.

I posted our goals for 2007 and include a stretch for saving $1,200 a month for the purchase of a house later this year. This was to combine $700 in direct savings and $500 in ebay sales. I figured the ebay portion would be the stretch, but we’ve already hit a snag 15 days into January.

Last month we were on budget until the partner and I started stroking checks for magazine subscriptions – most for several year subscriptions. This was more his thing and I just happened to be holding the pen at the time. However, this plus some organization dues (that we’ll be reimbursed for) threw us over budget by more than $500.

Also, as I’ve recently mentioned, we’ve had another round of car trouble to the tune of $350. This time it is the partner’s van that blew out a brake line while going in for the semi-annual emissions testing. Our repair shop must be liking us a lot right now, almost $800 in a little over a month.

So, January’s available funds are short by about $900. I’ve scrutinized all our budget categories and just there is nothing we can reduce spending; everything has already been slimmed down to the bare minimums.

I know that the best plan would be to trim back on our new savings plan to avoid increasing credit card debt and get back on track, but I’m not ready to take that step. Instead, I’m going to take a major leap of faith and hold to our steep savings plan despite the crunch we’re under.

My only real action plan is to push the ebay button very hard this month in the few weeks we have left. We need the $500 for savings and another $500 to help ease the deficit. Considering that the ebay income is less than $100 at the moment, this will take some serious work. Our upcoming vacation is also going to put another kink in sales too.

The remaining $400 shortage will be carried over to February. Thanks to how we manage our finances, we can spread the $900 out over two months to help ease the strain and get back on track.

This comes one month before our finances will really get tight. Next month we’ll be seeing less money coming home because 1) my new job is part-time, 2) medical insurance premiums increase, and 3) the partner signed paperwork for 5% contribution to the 401K since the company began offering matching funds (working out to a 4% raise – free money).

For now, I’m going to have faith that this will work out and that we must keep with our planned savings contributions because dropping the ball in round one jeopardizes our overall success.