Complainypants -- MMM

Complainypants -- Mr. Money Mustache 

Back in 1987 the Houston oil economy went bust and along with the economy, my husband lost his job and we could no longer afford the house/pool/neighborhood we were living in. We sold the house for exactly what was owed on it, losing 15 years worth of equity, and moved into a smaller house. We lived on savings and some part time work while I finished Pharmacy School. My husband knew that to continue in the oil industry was going to be very iffy. So during my last year of Pharmacy School, he started In Pharmacy. That meant that he didn't work for 3 years. 

I decided then and there that this was not going to happen to me again.  I made the startling discovery that the best way to get out of debt was to stop spending money.  I decided to pay off one bill/credit card at a time and I made a chart of when bills such as auto insurance, flood insurance, and homeowners association fees would be due so that I would have the money to pay them. Christmas was bound to come around so I started a Christmas savings account. It was difficult but with perseverance we got out of debt and even paid off the house once we were pulling in two incomes. We did this before I ever heard about Dave Ramsey and his baby steps. I absolutely agree with him on his program for getting out of debt. 

The new guy on the financial scene is Mr. Money Mustache and I love him too. What I especially like about him is when he calls whiners Complainypants. It isn't easy to get out of debt and build an emergency fund and save and invest so that you have money to take care of yourself. It is much easier to make excuses and sit around and complain.

 I see this in so many areas of life today -- so many people whine and complain instead of finding ways to make their situation better in ways other than financial. We become obese and diabetic because we won't exercise and go to Weight Watchers (or something similar). We don't maintain our homes or vehicles and then gripe because things fall apart. I see people buying cigarettes and lottery tickets and wonder why they are broke.  They think they have bad luck but what they have is bad habits.  I think it was Thomas Edison who said that the harder he worked, the luckier he got.

I will now step down from my soap box...and onto the exercise bike...

The Budget

I like to be in control of my finances and the only way that I have found to have that control is to have a plan...better known as a budget.  People say that they try to budget but something always comes up.  It is understandable that it takes some time and practice to get the hang of making a written budget but it is also important to have an emergency fund so that when a true emergency happens, there is money to take care of it.  It is also important that if you are married that your budgeting includes your spouse so that neither feels their priorities are not being taken into account. 

The basic idea is to take the money that comes in (take home pay) and spend it all on paper--just write down all your expenses for the coming month.  It surprises many people that they will have money left over after writing down expenses.  Use that money to build the emergency fund or save for something special; I have a category for "mad money" for each of us to have some pocket money.

Being in control of our finances has allowed us to live debt free, in a paid for home, driving paid for vehicles, and have a good emergency fund.  I know that at the end of the year when property taxes, home owner's insurance, and Property Owner's Association fees come due, the money will be there to pay them because I've been saving $500 per paycheck all year long. 

There's less stress with no money fights because all is agreed on in advance.  There's less stress because expenses are planned and saved for in advance.

Wouldn't it be nice if Congress would sit down with a pad of paper and pencil, list what expected income is, budget anticipated necessary expenses, and put the remainder in a rainy day fund.  Then we wouldn't be having this national nervous breakdown over raising the debt ceiling and paying down the debt.

Quarterly Financial Update

I did the financials for the second quarter.  Retirement savings are $898K, Emergency Fund, $60K, and Net Worth $1.45M.  I am retired but JMM continues with his job for income and health insurance.  No one who knows us would have any idea that we have this much money.  Our house is paid for, our cars each have over 135,000 miles, we dress casually and inexpensively, church and home are our activity centers.

We realize that we are among the more fortunate in this country and certainly among the most fortunate on earth.  It is a responsibility to use the resources that we have been given in a wise and compassionate manner.

Finances 2010

Financially, 2010 was a really good year for us. I know that many people are really struggling with their finances whether it is from debt or job loss or health problems and my heart goes out to them. We are fortunate because we both have jobs that pay well and provide medical insurance. Another major factor is that we have no debt--no car payments, the house is paid off, and the credit card is paid off every 2 weeks. We are both frugal and have lived well below our means all 42 years of our marriage.

Our net worth has increased by about 10% to $1.2 million; of that about half is in our combined 401Ks, the house is worth and property is worth about $415,000, and $56,000 is in savings (Emergency fund, New vehicle savings, Household Savings).

The key for me is planning--saving $500 per paycheck for the taxes, homeowners insurance, and homeowners association fees; saving in advance for a new vehicle (my van has 131,000 miles on it and JMM's truck has even more miles) so it is likely that we will need a new vehicle soon, and finally having an Emergency fund so that if one of us loses their job or a hurricane blows off the roof, the money is there to pick up the pieces.

My financial goal for next year is to continue on the same path--work, save, give, enjoy.

Expenses! Savings!

The last quarter of the year is always very expensive:

Homeowners Insurance: $3250
Property Taxes: $5700
Homeowners Association: $1200
Auto Insurance: $636
Propane fill-up: $300

I have a separate savings account where I save $450 from each paycheck so that when these things come due, the money is there. This account is not my emergency fund because these are not emergencies, I know they are coming and know I'd better get ready for them. I also I have savings account for a new vehicle; my van has 127,000+ miles and JMM's truck has more miles on it. It shouldn't come as a shock that eventually one of us will need a new vehicle and I want to have the cash so it won't be an emergency. Like the Boy Scout motto: Be prepared!!

Habits that keep you broke

These were on Yahoo today:
1. Paying only the minimum on your credit card. (Surely this cannot come as a surprise to anyone.)
2. Buying a brand new car. While I theoretically agree with this, we buy new and drive them forever; my husband's previous vehicle lasted 14 years.
3. Smoking. Well, duh!
4. Keeping a drafty attic. Insulation is good. The most energy saving thing we have added to this house is the solar screens. They really do help keep the rooms cooler so the a/c runs less.
5. Ignoring your student debt. If you want to really go suicidal, figure out how much money you have paid out in interest on those loans. Same principal as #1.

http://finance.yahoo.com/news/5-Common-Habits-That-Cost-You-usnews-2188228706.html?x=0

I would add one more:
6. Short-term thinking. Not planning past the next paycheck. Set goals--what do you want to have accomplished in 10 years, 5 years, 1 year? What are steps are you taking to get there today?

Savings

I am a big believer in staying out of debt. But, IMHO, it is impossible to stay out of debt without savings accounts. Why? Because stuff happens. If you've got a car, it is going to need repairs, general maintenance, and something is going to leak, squeek, fall off, or break and this means money. Same goes for houses, pets, and children. That's even when the big stuff like illness, job loss, or divorce doesn't happen. Everyone needs an emergency fund. Since I am a bit hyper about being in control of my finances, I have 4 savings accounts. The first one is my General Emergency fund--I used to keep $5,000 in it but with the jobs situation & the economy being what they are, I have increased that to $10,000. The second is my new vehicle fund--my van has 120,000+ miles on it and while it still runs perfectly, eventually it will have to be replaced and along with it, I will need a new lift for my scooter installed in the new vehicle. I want to have $25,000 in that fund to be available when needed; I am at $11,000 now. The third savings account is my HIP fund (Homeowner's Association fees, Insurance, & Property taxes). Since our house is mortgage free, we have to have the money to pay our homeowner's insurance and property taxes when they come due. These come to $11,000 per year; so I put $450 per paycheck into that fund and ouila, when I need to pay it, the money is already there. The fourth area of saving is our combined retirement accounts. I am perfectly able to work now but this is not always going to be the case so my goal is to have $1 million in retirement funds; we currently have $730,000.
If you spend everything that comes in, life becomes a series of emergencies and no sooner than you get one emergency paid off than another crops up. This is no way to enjoy life. Even a small emergency fund is better than no emergency fund at all. As Dave Ramsey says, Christmas is not an emergency, it comes every year. My point is that the more things you can be prepared for, the fewer real emergencies you will have. And this preparation can only be done by living below your means.

Planning the new budget

I am in the process of re-working the budget. For the past 5 years the budget has been necessities + paying the house off and that was just about it. I want to stay on a written, planned budget because 1. I know how easy it is to fritter a lot of money away on little things and 2. I like to be in control of my money. Experience has shown me that either I take control and make my money do what I want it to or money issues take over and run me. So there is some thinking to be done--what do I want to accomplish with the income that previously went to paying off the house??
1. Retirement savings--I called last week and resumed 15% going into my 403b.
2. New vehicle savings--I'd like to save $1000 per paycheck but I'm not sure that is doable; we'll see.
3. My WTHIPO list--Since this will vary from one month to the next, I'll need to find an amount that I can build up for more expensive items.
4. Travel--I'm not a good traveler but JMM and TSM like to travel so that will need to be in the budget.
5. Charitable / Church giving -- I am embarassed that I really have given very little in this category for the last several years. I wonder if I could just jump in with a tithe? or would it be better to choose a smaller amount??
6. Property taxes / Homeowners Insurance / Homeowners Assn.--I will have to have a savings account just for this--probably $450 per paycheck will cover it.

OK, now to put pen to paper to flesh out just how much goes to each new category. (Pen to paper?? more like keyboard to Excel spreadsheet...)

Thought for the Day:
By failing to prepare, you are preparing to fail. Benjamin Franklin

Goal 2009 (+27days) Update #23 (Final)

Free at last! Praise God, I'm free at last! I got a cashier's check from the bank for the payoff amount and sent it overnight by FedEx to the mortgage company. It is finished and I will never again have a house payment hanging over me. My main feeling is one of relief. I generally anticipate that things will take longer and cost more than originally planned but sheesh I never thought I'd be paying on a frigging house until I was 62. Oh well, hindsight is always 20-20. At least I won't be paying on a house when I'm 63. Hallelujah, I'm debt free!! I wonder if I can get through to Dave Ramsey???

Flight 253-- An analogy for the future

http://www.nytimes.com/2009/12/27/us/27plane.html?_r=1&ref=us

By now we've all read about the passengers and crew on the Northwest Airlines flight who took charge of their own survival by subduing a terrorist who was trying to set fire to explosives shortly before landing in Detroit. I think that this is analogous to what we all must do to survive and live in the coming turbulent economic times. We must take charge of our own lives. Too many people are waiting for something--for a government rescue or program, for the jobs to come back, to get an inheritance, to win the lottery. Folks, it's not going to happen. Governments at all levels--local, state, and federal--are going to be taking more and providing less, not the other way around. The jobs that have disappeared are not coming back especially if those jobs were making or doing something that can be made or done more cheaply elsewhere. As for the inheritance or lottery, well, don't hold your breath.

We must be responsible for making our own future. How? If you've read this blog before, there's nothing new:
1. Manage your finances--make a budget, live on less than you earn, pay off all debt, save for the inevitable rainy day.
2. Do everything possible to maintain your own health--stop smoking, stop eating junk, turn the television off and go for a walk.
3. Learn how to do someithing--cooking, sewing, quilting, gardening--no one is born knowing how to do any of this--so learn how.

Whether we realize it or not, we are all on our own personal Flight 253 and we must take charge of our own lives.

I am part of the problem (tee hee)

I read the other day that part of the reason credit is so tight is that banks are undercapitalized. They are required to have a certain amount of reserve capital for the amount of money they can loan out. They are undercaptialized because their assets have taken a huge hit from the decline in housing prices and from people like me who are paying their houses off early. Yea!! I think it is about time people shed off their shackles to the banks and live free!!

Goal 2009 Update #22

I have done a preliminary run through the end of the year and it looks like we will be able to pay an extra $4000 with the Jan 1 house note. That will bring us down to $4949 left on the mortgage. It is very tempting to take $5000 out of savings to just pay it off but I think I will just be patient one more month and pay it off February 1. Not that I am superstitious but it really seems like the best way to ward off Murphy visits is to have a fully funded emergency fund.

Goal 2009 Update #21

We were able to pay $4000 extra principal with the December 1 house payment. That gets us down to $10,875 remaining. If everyone stays well, safe, and employed, it is looking like Goal 2009 will be completed by February 1, 2010. We'll see. I'm glad that we have done this this year but frankly I sure wouldn't want to do it again.

I've been thinking about my financial goals for 2010 and here is what I have so far:
1. Up the Emergency Fund to $8,000
2. Save $1,000 per paycheck toward a new vehicle
3. Resume my 403b contributions
4. Once the house is paid off, open a new savings account with $500 per paycheck to cover the Homeowner's Insurance, Property Taxes, and HOA fee.
5. Needless to say, stay completely out of debt.

What Black Friday Means to Me

It means that I stay in the black in my own ledger by not buying anything.

It means that it is time to take the autumn decorations down and put up the Christmas decorations.

It means that it is time to address the few Christmas cards that I send out.

It means that we eat Thanksgiving leftovers and I don't cook.

It means that it is time to check on the New Year's Eve Neighborhood progressive dinner and see if they will be coming to my house or if I will be making my SIL's wonderful Seafood Gumbo.

Thought for the Day:
(I thought today's verse very appropriate for the beginning of the Christmas season.)

Proverbs 11:25
A generous man will prosper; he who refreshes others will himself be refreshed.

My Own Middle Class Survival Strategies

Morrison at http://alldoorsconsidered.blogspot.com/ has a thoughtful post up about the increasing pressure on the American Middle Class and ways to maintain a middle class life. No longer can one just coast along and expect to maintain a middle class lifestyle. The pressures toward downward mobility are just too strong. Morrison's post got me to thinking What are my strategies for economic survival??

Here are my 7 strategies for middle class survival:

1. Don't retire. You may have to change to a less physically demanding type work or work fewer hours but do not cut off your source of income.

2. Get out of debt. I like Dave Ramsey's baby step approach but there are many other debt reduction plans. Stop borrowing/charging now. Embrace creative frugality.

3. Do everything you can possibly do to maintain your family's physical and mental health. Diet, exercise, and attitude.

4. Learn useful skills. No one is born knowing how to do these so get in there and learn:
How to cook
How to sew and mend
Gardening

5. Combining households--Saves money and keeps away loneliness.

6. Develop community ties--church, gardening society, local businesses.

7. Be prepared to take care of yourself in an emergency or natural disaster. Food, water, medication, fuel.

If we do these things and the economy continues to worsen, we have a chance; if the economy improves, we've lost nothing and gained much.

Thought for the day:

Dig a well before you are thirsty. Chinese proverb

Goal 2009 Update #20

I've done a preliminary run through the finances for the December 1 house payment. It is looking pretty good-->We may be able to pay an extra $4000 on the principal. (It would have been $700 more but the #%&## septic system aerator went out and had to be replaced and No it could not be put off until after the house is paid off!!LOL) Anyway, that will get us down to $10,800. If there are no other disasters between now and December 31, I will take what I need from savings and put it with the January 1 house payment, post it for payment on Jan 1, 2010 and be done with it!! Keep your fingers crossed!!

Thought for the Day:
Proverbs 22:7 The rich rule over the poor and the borrower is slave to the lender.

Lowering stress levels

Wouldn't it be nice if you got a paycheck and then got to decide how to spend it instead of hoping that it would stretch far enough to cover all the bills for the stuff you already bought, bills you've already run up, payments you've already signed up for? Wouldn't that lower one's stress level? Imagine for a minute that you just got a paycheck and you don't have a single credit card, car payment, student loan, or house payment--the money is all yours and you get to spend it or save it or share it however you wish. Well, it doesn't have to be imaginary and it doesn't have to be at some far off date in the next decade. The first step in getting out of a hole is to stop digging; no more debt period, ever. And don't annoy me by telling me that in today's world it can't be done; it can and people do, every day. The next step is called a plan, a budget and it starts with how much money you have coming in on your next paycheck. Write this amount down and spend those dollars on paper--have a purpose for every dollar, make it work for you--what is the best use for each dollar. Concentrate on one debt at a time, I think paying off the smallest debt first gives you a boost but others pay off higher interest debts first--it doesn't matter as long as you've permanently stopped digging the hole. The third step is what makes it all work--you stick with the written plan for the next two weeks. If it wasn't on the plan, you can't have it--no whining, crying, or feeling sorry for yourself. OK, you can whine, cry, feel sorry for yourself if you want but you stay with the written plan anyway. But what about emergencies?? Well, that's why you have an emergency fund--I like $1000 but $500 will get you started; it's enough to cover most car repairs, fillings coming out of teeth, or leaking hot water heaters. Christmas is not an emergency--most banks or credit unions have a Christmas Club plan where you can have $10-15 taken out of each paycheck and ouila at the end of the year you have about $300 to spend on Christmas presents; otherwise, you bake cookies or make aprons for gifts. Lastly, you repeat the process before the next paycheck. You are in controll and you determine how the money is spent. It's a great stress reliever.

My next stress reducer will be on noise but that is yet to be written.

Going ahead

We have been totally focused on getting the house paid off for the past several years. During that time I simply put off purchases and repairs as much as possible. I kept a list of things that would be purchased or repaired as soon as the house was paid off. We are down to $16,600 left on the house and aim to have it finished by April 1. The fact though is that I have reached the end of my patience and have started down the list. This month I had the dishwasher replaced; next month, I will have the broken window replaced and the carpets cleaned. In January I will resume my 15% 403b contributions with I had lowered to 3% for this year. I have rearranged the budget so that I will have the cash for each item before the purchase. I think I will be more content if I go ahead with these needed items and stretch out the house for a couple of months longer.

Goal 2009 Update #19

This was a 3 paycheck month so finances were unusually good. I was able to repay the Emergency Fund and get it back to $7,000. We paid for a new washing machine after the old one died beyond any hope of resusitation. And we were able to add $2700 in extra principal to the November 1 house payment. So now the mortgage down to $16,604. If everyone stays healthy and employed and if the car doesn't die, 4-6 months and I can breathe again.

Over the $1 Million Dollar Mark

I finally got around to doing the 3rd quarter numbers and things were considerably improved in the retirement accounts and in the mortgage categories. We have gone over the $1 million mark in net worth which is nice but it doesn't really change anything. My plans and budget stay just where they are for the next 3 months until the house is paid off; then we will adjust the budget for saving for vehicles, working my way down my To Do List, and increasing our charitable giving. Who knows, maybe we'll hit 1.5 million before we retire??
People who know us in real life would have no idea of our net worth and that is just the way I want it.