Tag Archives: finance

My Fake Budget

About  a year ago, after reading Your Money or Your Life, I created my first budget.  I dutifully added up our income and averaged regular expenses.  Certain things like rent, utilities, gas, and insurance were easy to figure out.  I had to estimate other expenses like clothing, dining out, cleaning help, gifts, etc.  When all was said and done, our expenses tend to exceed our income on a regular basis.

In addition to irregular freelance income and unexpected expenses, another (major) problem was caused by estimated expenses that were basically numbers I grabbed out of the air.  Even after one year, I haven’t been diligent enough to figure out our average costs for many fun categories.  This is hard to do because we pay cash and we are not very aware of our budget.  In other words, if we budget $100, we may spend $100 jointly and still exceed that amount due to separate activities.

If we look on track to exceed our Dining Out budget by mid-month, I may send a half-hearted email to my husband and note to myself that we must watch our budget or cut elsewhere this month.  Only we seem to not do this or we get a bill that must be paid or another excuse…  The reason I am calling this my/our fake budget is that I simply INCREASE our dining out budgeted amount to match our actual spending instead of making any hard attempts to rein this in.

I know this isn’t good because some months we’re on track or under budget and I’m very happy. Then we exceed our budget the next month and I freak out.

Budgeting is hard!

Not Sure Delayed Gratification Is Working…

Part of the reason I’ve been so successful at saving money is my lifelong ability to delay gratification (check out this post on Grumpy Rumblings for definitions and comments, etc..), even in my more impulsive college years and early 20s.  However, lately, I wonder if this method works so well for me anymore.  I just feel like I’m delaying the inevitable purchase (and yes, I know that purchases/spending are rarely inevitable..)  Still, even if it takes me a long time to buy something, I usually end up doing it at some point.  I guess I know my tastes and needs pretty well by this age and it’s increasingly rare that I want something that is useless or frivolous.

That is not to say my ability to delay gratification is useless. Many times, I earmark pretty pictures in magazines or bookmark websites (saving items in wishlists or shopping carts). If I delay the purchase, I usually forget about the urgent “need”.  I may also consult my primary shopping list and remind myself that I have higher spending priorities.  Sometimes I completely forget about the item and lose interest.

With some things and experiences, however, my want usually remains so it’s just a matter of time before I buy those shoes or book that massage.  Of course the delay can mean months, even 1 year or longer, so I suppose this tactic is still working.  And there are times now that I let go of the “want” because more urgent basic and real needs crop up in the meantime.

So I guess it’s back to the inevitability of the purchase that is getting to me.  What difference does it really make if I buy something I want now rather than 3 months down the line ( besides new stuff often going on sale..)??

Useless Financial Advice

The June 2012 issue of Smartmoney magazine featured two popular types of finance articles – a how-to piece about saving money on health care and an interview with a policy expert about rethinking retirement.  Both of these are big topics in the world of finance; after all rising health care costs and inadequate retirement savings are two things that affect each and every one of us at some point.

I admit that the health care article was thoroughly researched.  In addition to standard advice about negotiating with your doctor and finding cheaper meds via mail-order or getting generics, it has some tips for questioning tests ordered by your doctor, going to physical therapy and timing your dental work in one calendar year to save on your federal tax bill (provided your medical bills exceed 7.5% of your adjusted gross income).

The interview with psychologist Laura Carstensen, an expert on aging, focuses on making the most of retirement.  She offers several “solutions” for overburdened social security system, from increasing the retirement age to creating a “phased retirement” based upon a moderately paced career path with more flexible schedules (assuming this will cause less burn-out and allow us to enjoy work longer).

In my opinion, these types of advice articles, and there are many similar ones that periodically crop up in print and online, are practically worthless because they ignore real solutions that would actually help the majority of people. 

I understand that there are times you can negotiate with your doctors and hospitals.  However, when you’re really, really sick or your loved one is truly sick and facing astronomical costs, are you in a frame of mind to negotiate care and bills?  Most people are not and should not have to. When my European friends have to undergo major surgery or treatments, all they have to focus on is getting better or caring for their loved ones.  When you’re scared and facing new and complex medical terminology, the last thing you want to think about is how you’re going to pay for care.   These types of articles ignore the human side of things, as if it’s negotiating for medical care is the same as a cable bill!  You can throw all the great advice about getting a detailed bill and scanning for medical overcharges but who the hell wants to deal with that during a time of crisis? (And while I’m ranting, who the hell has the time to figure out if their anesthesiologist is also “in network” like their doctor or hospital?)

A friend had a child in intensive care, racking up hundreds of thousands in bills.  Although she had insurance, she still had to pay quite a lot out of pocket.  The worse part is that she did not bring home a completely healthy child.  As she received mysterious bill after bill, she also had to focus on caring for her sick child.  I’ve read similar stories of parents desperately fundraising for their child’s care.  I can’t believe that anyone should have to worry about finances at a time like that.  It’s fine that some people pay more for cable or airplane tickets because they’re bad at negotiating or comparison shopping.  However, this should not be a consideration when it comes to essentials like health care.

In the retirement article, one key point is that we must work longer to make our finances last longer.  The interview states that 88% of people 65 to 74 are healthy enough to work.  Great advice, in theory.  The reality is that the majority of older people who want to work longer simply can’t.  While some climb high enough up the ladder to enjoy respect or can jump into consulting, many more people face age discrimination and are the first to be laid off.  It’s great that 88% of older people could work; however, how many companies are eager to hire these people? The expert also states that longer careers would be possible if we all didn’t work so hard in the “middle” years.   While  I do know people who have opted out to go back to school, which is not really a break, or to travel, most people who ramp down or opt out of work do so to care for kids or parents.   The majority of these people don’t find great jobs after their “break”.  I’m not saying that we can keep the current retirement age or benefits as is, but the typical solutions given in money magazines are not very realistic either.

The lack of reality is what bothers me most about discussions addressing health care in the U.S. and retirement.  They seem to be made by the upper echelons who have little or much less to worry about in terms of finances, with little regard for how the majority of people will be affected.

I’m even more bothered that many regular middle-income people I know seem to feel the same way, especially if they haven’t been personally affected by serious health issues or reached retirement age.  I want to know if they will feel the same if/when they face a serious illness or if they have a sick child.  And when they reach age 70, I wonder if they will re-think how great or easy it will be to work longer….maybe they’ll get lucky and Walmart needs a greeter.

Why I Stopped Reading Personal Finance Blogs

About 4-5 years ago, I discovered the world of personal finance blogs, or PF blogs.  I loved how they put a personal spin on the rather impersonal world of finance.  I stopped reading traditional finance websites and spent hours reading blogs like The Simple Dollar, Boston Gal’s Open Wallet, Get Rich Slowly, I Will Teach You To Be Rich, Fabulously Broke, and Blogging Away Debt.  Many of these sites had not yet “monetized” and were more personal than they are now (some may be gone, I’m not sure..).   I read and participated in some money “carnivals” which are basically a compilation of finance-related posts. You have to submit to the host blogger and get selected for inclusion.  Reading and commenting on these blogs were a daily part of my weekday life.  Then about 2 years ago, I decided to stop reading most PF blogs.  I still read Money Saving Mom and a handful of 20-something PF bloggers but not on a daily basis.

Why? Was I such a financial guru that I had no need for the words, wisdom or support of pf-bloggers? Yes and no.  I was getting more than enough information from traditional money websites and magazines.  I had set up my saving accounts and investments (index, no-load, watch those fees) and could consider myself an intermediate investor.  However, I could certainly still learn new things.  For example, to this day, I still have little knowledge of ETFs, bonds or college savings accounts.

OR Did I make so much money that I no longer needed to look for ways to save and earn more?  Definitely not!  As I mentioned, I still read Money Saving Mom and occasionally other money-saving blogs.  However, the frequency and participation is nearly zero.

OR Did I lose interest in the topic, period?  That’s not quite true either.  While I don’t like reading about pf blogs daily, I am still very interested in reading/learning about money, more so than most people I know.

So why did I stop reading?  Here’s the longish answer.  I once read about a study that reported wealthier people are often more selfish and less empathetic than those with lesser means.  While I am certainly not wealthy, I realized that reading all those finance blogs made me think of money ALL THE TIME.  With money on my mind, I worried more about finances.  Was I saving enough? Did I get the absolute best deal on those batteries and toilet paper? Even worse, I felt somewhat superior to those who were/are less concerned with money.  Since I thought about finance daily, I could not understand why many of my friends, co-workers and family members made “wrong” choices in regards to spending and saving.   Looking back, not all their choices were wrong, per se.  They were simply making choices based more on emotions than financial security.  In short, I lost my compassion and empathy.

It wasn’t actually easy to stop reading.  First, I reduced my list of favorites to a handful of blogs.  I also stopped trying to discover new pf-blogs.  However, I still read finance carnivals during the work week, and this habit kept me in the same money-focused mindset.  I realized that I had to go cold turkey.   I deleted all pf-blogs from my favorites list and did not read any for weeks.  It was relatively easy to stop reading but the hardest part was not finding out about sales and drugstore deals.   Luckily the arrival of kids cut my free time and I am now happy if I get a good-enough deal on household staples and groceries.

As they say, eventually your new routine becomes your new habit.  While I still occasionally visit a few finance blogs, I no longer read any of my old favorites on a regular basis.  A few weeks ago, I stopped by “The Simple Dollar” and “Get Rich Slowly”.  I skimmed a few posts and quickly moved on.  I don’t have a new focus, or rather my new interests are all over the map.  I like reading blogs by intelligent women on career/work and family.  I read some design/lifestyle and cooking blogs.  I get my money “fix” from finance websites or magazines.  If I do come across a pf-blog, I may look up a specific topic but I no longer browse numerous personal finance stories.

Nowadays, I’m mostly satisfied with my financial knowledge and choices.  I’m happier when I don’t think about money so often, even if I probably still think about it more than the average person!

Do you read personal finance blogs? If so, how often?

My Perfect Weekend

A Chapter of Laura Vanderkam’s book “All The Money In The World” focuses on a reader’s perfect weekend.  For most people, the perfect weekend involves spending money, even if it doesn’t have to be high amounts.  Even if you focus on quality time with friends and family, there is usually some spending on food, entertainment or other expenditures.

This got me thinking about my perfect weekend.  While the book and most people would lay it out by time, I thought I would just list ideas and categorized by costs:

No-Cost

  • Sleep, Sleeping In, Napping.
  • Sex.
  • Play with kids. 
  • Go to the park with family. 
  • Go to a friend’s house and watch DVDs.
  • Read a library book or a favorite old book. 
  • Stay up late.
  • Take a long, leisurely walk in a park, preferably by a pond

Low-Cost

  • Exercising (can be a DVD or using the gym membership, which is a cost). 
  • Watch a marathon of a favorite show (netflix or already owned)
  • A nice meal at home (cooked by my husband)
  • Starbucks cappuccino or latte
  • Calling in sick (I’m counting this as a “cost” since this would deduct from my sick days.  For some reason, things that are a bit off the straight and narrow really appeal to me!)
  • Massage ( from husband)
  • Taco or Tamales night

High-Cost

  • Hire a personal assistant to tackle all the things I hate doing, like help clean out the garage, mopping, getting oil change, handwashing clothes, washing dogs, washing dog mats at the laundromat, etc..the list goes on! (Or I could just switch places with some A-List celebrity for a day?)
  • Massage and Facial (can be fairly inexpensive if you get a good deal on Groupon or LivingSocial; also see low-cost option above!)
  • Expensive dinner out – sushi?
  • Baby sitter for one night (can also barter this if you have a trustworthy friend/neighbor/family member)
  • Hotel stay near the beach
  • Drinks at a bar (something we rarely/never get to do!)

How would you plan out your perfect weekend? It starts Friday evening!

Old Happy Purchases

A lot of popular blogs and magazines  frequently feature things to buy. Spring is in the air! Time for new stuff in the latest colors! Everything you bought in previous seasons is out-dated!  I admit that I’ve been tempted so many times and if you are, too, you might need to do this little exercise, too.

Go through your house or closet and remind yourself of past purchases that still make you happy. You might be surprised that many things you thought of as “investment” pieces did not bring about as much happiness or return-on-investment as expected.  You might also get a small dose of happiness from old purchases and not feel the need to buy new things.  At least that’s what I was hoping when I wrote this post (inspired by my new spending mentality due to “Your Money or Your Life” Regular readers will be tired of my constant reference to this book by now).

So here goes my list of old purchases that still make me happy:

  1. Peacoat: A classic in blue that I got a good deal on
  2. Leather boots from Italy: Pretty and classic; needs a little shine!
  3. Party dress:  Looks like new because I only wore it once! I wish I had occasion to wear it again.
  4. Bathroom Cabinet: A small change that greatly updated our bathroom.
  5. Sweater Dress: Still pretty new. An excellent deal and so comfortable!
  6. Selected DVDs of classic TV shows: I can watch some shows over and over again.  Which reminds me of #7…
  7. Old books that I can re-read and that I never get bored of.
  8. Black fake leather purse: Maybe I’m too old for fake leather but I love it and don’t care. It’s sporty but still OK for work environments.
  9. Shiny black leather flats: I think I love it more because it’s from a designer brand.  The cobbler was doubtful about adding shoe taps on it until he turned it around and saw that it was made in Italy.
  10. Red Land’s End sweater: Work appropriate yet so comfortable. 
  11. Gray cardigan: I wear this all the time.  Hides the butt which makes it very practical, too.
  12. Dark jeans: It’s on the skinny jean side and I’m sure that trend is over but I do love it.

Just by doing this quick exercise, I realized that love for stuff can wear off pretty quickly.  For example, a pretty blouse from one of my favorite designers would have definitely made this list just two years ago.  It’s still in good shape but I don’t wear it as often anymore for some reason so I can’t say that I love it.

Ironically, in some cases, the more I’ve worn something, the more likely it will fall off the list because it doesn’t look shiny and new anymore.  Since I’m a complicated person (haha), I can also say that if an item does not get that much use, I love it less because it did not meet my expectations in some way.

Furnishings did not make the cut because my kids destroy furniture.  My favorite pillow is stashed in a closet out of reach and I’m tempted to sell or give it to someone who can really appreciate it.

Technology wasn’t included but I admit that I love the use I get out of various tech stuff.  I would give up many things before cutting internet access!

What old things are making you happy right now?  Please include clothing items, shoes, and purses so that I don’t feel shallow.

YMOYL: I Hate Charts

I’ve been sharing my general impressions of “Your Money Or Your Life” (YMOYL) on my journey as a book club of one.  Part of me feels like I should have started the online book club but I would not have been as thorough as minhus and a bout of flu would have killed any enthusiasm.  And as you can see from my distaste for doing the actual exercises, I can’t lead a club if I am doing the minimum to get through the book! 

As I mentioned earlier, I did finally come up with my real wage.  According to YMOYL, this is your hourly income AFTER you add in your commuting time and subtract all work-related expenses from childcare to work wardrobe to lunches.  I think my number is on the low side but I’m sticking to it for now and using that as a mental yardstick to rein in my purchases.  This is working so far and I highly recommend this step!

In Chapter 5, you’re also supposed to figure out your monthly income and expenses, then create an awesome chart so that you can have a visual reminder of your spending habits.  I haven’t take the step of tracking my real-world expenses.  However, I did an estimate which takes my gross income minus health insurance, taxes, and regular monthly expenses.  I looked at my previous year’s expenses for auto insurance, auto repairs and renter’s insurance and divided it by 12 to come up with a monthly amount.  End result: I have a $300 buffer each month.

It’s a bit of a relief to know that I even have a buffer.  At the same time, I’m not sure how/why we have a buffer considering that a few years ago, I estimated that we had about $100 left over after expenses.  Since then, expenses have generally gone up while wages have been stagnant.

Possible reasons for this mysterious buffer are:

  • Grossly under-estimated expenses: In other words, I really should track expenses.
  • Lower taxes due to child credits? 
  • Lower bills for cable, DSL and phones: I re-negotiate expenses all the time but this year, I was able to really trim these bills by reducing cable channels and getting $40-50/month discount off my DSL/phone.  Most years, the rep offers a $5 – $10 discount if I threaten to cancel.  As I learned this year, the offer can vary greatly depending on timing and the customer service representative you talk to!

I may have to suck it up and chart expenses and/or go over old credit card statements to get more accurate numbers.  Part of me thinks that this buffer is real. I included as many variable expenses as possible from gifts to auto insurance.  I also estimated on the higher side for stuff like household goods and toiletries.    However, nothing beats a real estimate based on actual tracking of expenses!