The Weight of Money

Oh Boy, January was not a pretty month. We started the month with deficit of $3,100, which is pretty much what we spend monthly. I was able to pull in some extra income here and there, but not enough to cover us. Instead, we threw some cash from savings in the account just as a buffer while we work on adjusting for the deficit (it has to be repaid, at some point soon). We knew we were hurting, but did that help us get ahead this month? Not at all.

Income: Since we budget using the previous month’s income and factor in the previous month’s deficit/surplus — we only had $150 available for January. Throwing in some savings as a buffer helped a little bit, but we still ended up $3,000 short for February (add another $2,000 to that for paying back savings). There were a couple expenses in January that made this a painful month — including two trips that the partner and I took separately even though we knew we couldn’t afford it (but, they are also trips that we take annually, so we should have planned better ahead of time).

Unexpected January Expenses:
- Car Repair: $790 bought me a new clutch and new front rotors and breaks.
- Travel: $170 for a women’s retreat I needed to attend
- Medical: $1,050 in orthodontic care (this was planned, but the reimbursement didn’t come through till Feb.)
- Gasoline: $500, about $200 more than last month, $100 more than usual.
- Personal Spending: $70, this was about $50 more than usual, but the partner also traveled in January.

This extra spending added about $2,300 more than our usual spending. On a month where we are still in the hole $3,000, that really hurts.

Sigh, I am still not seeing a light at the end of the tunnel right now. January was a 3 paycheck month, but still leaves February with less than our mortgage payment available to spend. I’m pulling in as much extra work as I can get, but it won’t cover us. The FSA will help some, but not enough. This is getting pretty frustrating because I’m out of places to cut corners. Basically, the only real solution I see is for the partner to liquidate another large machine, but I doubt that will happen (nor am I actually going to suggest that to him). I don’t think I can make up this shortfall because we’re counting pennies as it is.

Perhaps, it’s time to take a better look at our spending and see if we’re not being as honest with ourselves as we should be. February should be better because neither of us are taking any trips (which we knew we couldn’t afford, but took anyways), but I don’t think it’s going to be enough to get us by, much less cover the $1,500 we now owe our savings account (the money was transferred to cover the car repairs, a reasonable emergency fund use, but not to fix the problem - instead, it’s just giving our account a little more buffer since it’s much lower than it’s been for a year or so).

Winter brings dreams of spring and for some people, dreams of gardens and glossy seed catalogs. We jumped into this a little later than some, as we weren’t yet on the automatically mailing lists for any seed companies yet. But, we did some searching and decided one two companies to work with, at least until I read Get Rich Slowly’s recent gardening post. There a commenter left a tip that saved us $68!

For the non-gardening types, when you order a packet of seeds, you usually get more than you’ll use in a year or even three years. Luckily, if stored properly, seeds will last. But for folk just getting started, initial seed purchases can really add up.

For example, we spent a total of $47.20 on 32 packets of seeds. We purchased 22 super-tiny-packets from artisticgardens.com for a total of $11.20 and 10 packets from another seed catalog for $36.00. The packets from artisticgardens.com (also known as Le Jardin du Gourmet) will be enough for all of this years’ planting and most of next years as well. The packets from the other seed catalog will probably last us for 2-5 years.

While the cost per seed is slightly higher in the smaller packets, the savings for our first year of serious gardening justifies the cost. Also, this lets us try out some items to see if we like them or not. We may find that we don’t care for one of the plants we selected — I’d rather find that out with a $0.50 packet of seeds versus a $3.60 one. If we’d gone with our original plan, we would have spent another $68 in seeds. Thanks artisticgardens.comBekah for the tip!

Also, GRS discussed how they also pool resources with other gardeners to split the cost of seed orders. I’m hoping to take advantage of that idea next year when I have time for a little more advanced planning. However, looking at our gardening calendar this past week showed us that we needed to get moving on starting some plants asap and we just sat down and got it done.

Now bring on spring!

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.

It’s been a little more than 2 months since my last phone call campaign to save money, more than three months since calling my credit card companies. Due to pure failure on my part, I needed to make this call but was a little hesitant. Thanks to Canadian Sadie of Cleaning House’s comment, I finally build up enough courage to call (btw, Canadian Sadie, it’s time for you to take action too!).

I needed to call because I missed a credit card payment by pure fault of my own. I was hesitant because I called this company only a few months before for a missed payment, that time due to mail mix-ups related to moving. Knowing they’d granted the request last time made me very sheepish about abusing that consideration. But, as my mom always said, whats the worst they can say, no?

Call #1: With tail firmly tucked, I made the call and laid out the situation. The agent politely responded that due to my previous (and recent) request, he couldn’t help me at this time. I thanked him for checking and admitted that was the outcome that I expected. And then, for no apparent reason, he said “well, I’ve gone ahead and waived that missed payment and fee, but be aware that we will not be able to do that again.” What? Wow! That was rather unexpected and he got my thanks yet again and then I proceed to ask him about current balance transfer offers. More on that in a moment.

Call #2: In the last two months, our primary use credit card jacked their rate up 6%!!! This was absolutely unacceptable and I went ahead and called them too after resolving the missed payment with the previous call. I politely explained why I was calling, but also firmly commented on how this is unacceptable when my other cards had rates more than 50% less than theirs. I let them know that I was prepared to transfer the full balance to another card, but wanted to give them the chance to keep our business — because after 20 years of good business, that seemed only fair. She looked at the account, commented on how we have a perfect payment record, no late payments, and have been a long time customer, and agreed that recent increase makes no sense to her. But, the best she could do for us was send us some paperwork and make us jump through various hoops just to get our previous rate back. Sure, I’ll jump the hoops to drop our rate, but I’ll also transfer over the balance since that was her best offer.

Call #3: I called the first company back and processed the balance transfer based on the rates I was provided earlier (which improved once the late payment was waived). The rates were comparable with other offers we’ve received, but the biggest plus was that in terms of credit utilization, that card could absorb the entire balance of the other without flinching. I’ve been wanting to make this transfer for a while and am happy it’s done. We’ll save more than $1,000 in interest this year and I get the satisfaction of a silent ‘ha!’ to call #2 who didn’t think 20 years of service was worth more prompt attention.

Previous Make the Call Posts:
• Save Money: Make the Call
• Save Money: Make the Call II
• Save Money: Make the call III

Just make the call - whats the worst they can say? Whats the best they can say?

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?

well… I’m really dragging my feet on making the call. The procrastination I’ve posted about led to a missed debt payment that was all my fault. I’ve been to embarrassed to call them up to waive the fee. Especially because I’m sure it is the same company that I’ve called twice within the last 2 years, but those were due to lost mail and moving — so I didn’t mind so much then. Now, knowing that it was my fault, I’ve been afraid to call them. What is the worst that they could say, “no”? The chance that they could say “sure” is worth making the call - hopefully this post will be the motivation and accountability I need to finally give them a call.

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).