The Weight of Money

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.

In my reading and social circles, sustainability is a huge topis - from being personally sustainable to supporting agricultural and business practices that are sustainable. I’m not sure if there is a general shift in U.S. socio-consciousness that is focusing on these issues or if I’ve just surrounded myself with fairly “crunchy”, earth/environment conscious folk at this point. But for brevity sake, I’ll focus on personal sustainability in this post.

For us, it is a combination of financial and ethical motivation that prompts us to incorporate more sustainable practices in our life and support other’s doing the same. From an ethical standpoint, we’ve read and watched several books/movies lately that have really helped us define our previously unsubstantiated reasons for making a difference in our ecological footprint and fully utilizing our land. These experiences helped us shape the sometimes incoherent thoughts, ramblings, and reasons we’ve given for our view points that come from a fairly deep-seated personal and ethically motivated response to the current conditions of the world.

Financially, increasing our personal sustainability is a step in reducing financial unknowns and variables. This year’s plans include growing as much food as we can and learning about raising chickens for meat and eggs. One of the requirements for buying a house was that there be enough land to raise as much of our own food as we could and our little one-acre plot provides a good start in that direction. With food prices on the rise, this couldn’t come at a better time.

Currently, we have four garden plots dug and plans to dig up 4 more plots and add space for 4 vertical-crop plots. We’re currently using the Square Foot Gardening method developed by Mel Bartholomew. Anyone interested in growing their own food (whether to supplement your weekly grocery shopping or to replace it altogether), I suggest checking out Bartholomew’s Square Foot Gardening book. For those who are going this route, I like pointing out that we’re using an older addition of the book and method, and are planting everything the ground as opposed to the raised beds he now recommends. The older method is a little more work, but also uses less material resources and makes use of the land we purchased for that purpose.

We started seeds indoors about five weeks ago to get a jump start on the season. Last week, those items finally made it outside and in the ground - just in time for two overnight freezes. Luckily, these are cold-hardy plants and they did just fine. Each weekend, we’re busy adding more and more crops to the plots or starting them in seedling trays with supplemental heat (because I only heat house at 58 degrees during the day) and light. I need to add up how much we’ve spent so far, but I’m pretty sure it’s still less than $100 and half of that was on seeds.

In addition to fruits and vegetables, we’re interested in raising our own meat and eggs. We’re not even slightly interested in becoming vegetarian and I happen to live by the mindset that if processing animals for my table is too gross or offensive, then I shouldn’t be eating it in the first place. We currently have 10 baby chicks that are living in our mudroom, waiting to go outside in chicken tractors. We got the chicks when they were just one day old and have really enjoyed watching them grow. We’ll keep 4-5 of them for egg layers and the rest will be harvested for our freezer. The goal is to start small, in terms of processing them, as we learn what we’re doing and get the hang of it. Financially speaking, raising your own meat and eggs isn’t all the cheaper than buying from the grocer - but you have the reassurance that you know exactly what they’ve been eating and how they were treated. I do plan to sell excess eggs and will probably take a few orders for meat chickens on the next go-round.

While raising our of food reduces the impact on soaring grocery prices on our budget, we trade the financial variables for natural ones. Several things could take our crops, from drought conditions (we live with a well and that is a very real concern for us) to predators. Our chickens could get sick or attacked by a neighboring dog. While we’ll take all the necessary precautions to protect our food investments, it is somewhat more risky than relying on super market convenience. But, when we sit down to dinner, we’ll know exactly how things were grown and that it didn’t take much oil consumption to get it to our table. Separating ethical and financial motivations for increasing sustainability seem impossible at this point, but I appreciate that individuals interested in either motivation can take steps to reduce their environmental footprint.

Every time I run the budget numbers, I have to face the reality that I’m making poor choices. You’d think a month or two of doing this would prompt me to change habits, but it hasn’t. It’s all about food, actually, and eating out far more than I should. 75% of our dining out budget it my fault and its often just the daughter and I. We’re talking about $300/month that could be saved just by staying home and eating at home — we could really use an extra $300/month.

I need to do some serious personal reflection to figure out where this constant eating out obsession is coming from. It is basically a daily occurrence, usually between the hours from noon - 4:00 p.m. This month it could be contributed to the fact that a $50/month for groceries is a pathetic attempt at saving money — if I don’t feel like there is any food in the house, I go out to eat. The most likely reason is that I’ve been moderately depressed the past few months and haven’t been taking care of kitchen duties - like keeping the kitchen clean enough to cook in and grocery shopping.

Its time to get food spending back on track and also own up to the fact that I’m really hurting our family’s finances. Steps to fix this, off the top of my head, include:

1. Tell the partner about my eating-out spending — he knows that I eat out a lot, though I still try to obscure the fact and will give vauge answers about whether we’ve eaten or not. Also, because I manage the budget numbers, he usually doesn’t really see just how much I’ve spent eating out or doesn’t realize how it impacts our budget. This isn’t a good pattern to be in and it certainly doesn’t lend to a trusting, honest relationship that we try to maintain. And it adds to the guilt I feel about eating out in the first place.

2. Make a food plan for the week — I do this about once every other month. It really helps us keep spending in check and the house stocked with food for a week or two. However, I always dread this task, even though it can be so simple. So each week, by grocery shopping day, I must make a plan for that week. If I don’t have one, I need to just pick a week from my Saving Dinner cookbook and use that.

3. Make a grocery list and go shopping — This may sound silly, but the grocery store is the most stressful place in the world to me. For many years I avoided it altogether (difficult to do as a single parent). The past several years, I’ve mostly gotten over it, but I still drag my feet when it comes time to go shopping. Also, when were short on funds, it’s very difficult for me to go and spend money on food when I feel like we don’t really have it. Of course, not doing that just means I’ll send twice as much, or more, eating out when the cupboards are bare.

4. Make sure there are easy lunch and snack items available - I’m home all day, most days, so I need to be sure that I don’t just buy food for dinner. If I can’t instantly find lunch in the kitchen, I’ll run out and get something. The majority of my spending is on lunch or pre-dinner meals (around 3pm).

5. Find a way to hold myself accountable — I’m still not sure about how to do this. Perhaps I’ll just post a weekly report on how often we’ve eaten out (including how much was spent) and whether is was a family meal or just me avoiding the kitchen.

6. Keep snacks in the car at all times — I just bought several snack items that I can keep in my car for the moments that I’m suddenly starving. Rarely are my trips away from the house that a snack won’t tide me over until we get home. The partner has always been good at this and it’s time I follow his lead.

I expect to see positive progress in April that will encourage me to make even more progress in the following months. I also expect to see a slight increase in our grocery spending as I’ll probably buy extra convenience foods that will make eating at home easier until it’s a settled pattern.

Reading other personal finance sites is starting to paint a rather ominous airs about our near future. These ramblings have been going on for a while now and seem to be hitting near crescendo effect. I’ll admit that the more I hear, my nerves prickle just a little. I try not to get too worked up over popular media reports, especially because of their sensationalist nature, but money is a very touchy subject and the thought of tough, lean times is a little disconcerting.

All the doom and gloom feelings aren’t just from popular reports regurgitated by bloggers, I’m facing the commentary from the partner which leads to even more ominous second-hand observations. The partner works at a small start-up firm that is quickly approaching that magical sink or swim timeout-point for most new companies, and the waters seem to be pretty deep right now. Their recent financial struggles and budget trimmings has made me nervous. At first, I was confident that the partner’s position wasn’t in jeopardy because his position is essential to the company in terms of getting in more money — they can’t pursue contracts if they don’t have the engineers to develop items. I felt that all the other staff — overhead, prototyping, and production were in a much more vulnerable position because, while they’re needed to complete contracts, they don’t help bring them in.

Things have been quiet on his work front, but he still brings home occasional comments that send my panic sensors flying. The biggest concern is that the new contracts are running dry. In fact, there are no new contracts waiting for current contracts to build before progress can continue — this is a scary situation as many current contracts are reaching the end of their terms. The partner’s primary project for the past few years ends this month, after that, there is nothing waiting on his desk to take his attention. Also, he has made comment that he’s been getting help from other engineers eager for something to work on… a year ago that wouldn’t have happened as everyone was so buried in their tasks.

The other major stressor is that the partner’s supervisor will be leaving the company in a few months. This is a serious job-security blow because this person has made the past few years of new company growth bearable and is also, from my limited view point, the partner’s biggest advocate in the workplace. While I like the partner’s company, I find myself liking it a lot less when I picture it without this person present because he seems to help balance the overall energy of the company. Losing him will have a huge impact on my comfort level with the partner’s continued employment, and probably with his as well.

So, things are felling a little sticky at the moment and I’m getting a little nervous. Our continuing financial struggles aren’t helping, though I’m constantly just repeating how it’s just a temporary house-poor adjustment that will be a faint memory in a year or so (please, don’t burst my bubble on that one little, though not guaranteed, comfort I have).

Update: After writing this article and before posting it, the partner and I had a long talk about these concerns and for once I feel like we’re actually on the same page in terms of his employment prospects. It looks like he’s feeling motivated to make some steps, though tentative, at checking out greener pastures - what a relief from my perspective.

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.

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.

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.

It’s been a while since I talked about my efforts to improve my credit score, but I just wanted to chime in with a quick cheer that my score is now in the 700s! I’m so excited to see that, even if I know it’s a variable adjustment due to the fact that we just did a balance transfer over to another card. So, this my be a temporary jump into the 700s, but even if it is, I’m still happy.

Perhaps in 2.5 years* we’ll be in a position to get a better interest rate on our house because of improvements to my credit score — and hopefully to the partner’s as well if out debt management improves.

* If we refinance before that point, we’ll get dinged with a charge equal to 3% of our loan — basically, a clause that prohibits refinancing for a certain period of time. We could have skipped that clause and added almost a full percentage point to our interest rate - so we took it.