I feel like this picture from our wedding is an excellent metaphor for how J and I handle our money.
There are a couple of money issues that are guaranteed to start a flame war online (a gentle one, since personal finance folks tend to be awfully nice). Those include:
- Paying children for chores or good grades
- The relative evilness vs. usefulness of credit
- Paying off debt in a smallest-to-largest balance "snowball" fashion or focusing on highest interest debts first.
- Whether married couples should have joint or separate checking accounts
It's this last one that I thought I'd tackle today, because I think J and I do this differently from anyone else I know.
We have separate checking accounts, separate savings accounts, as well as a joint savings account for our emergency fund and our longer-term savings.
Since J and I have very different spending and savings habits, this is what we need to do in order to maintain sanity and marital harmony in our household. For example, I consider a checking account something that can and should be used, so I plan for it to go down to a zero balance (basically) each month. Because I balance my checkbook on a several-times-a-week basis, I have only ever overdrawn my checking account once, and that was when I was teaching and working a 60-hour week. (Ironically, it was when I was making the most money I've ever made in my career that I overdrew my account. Whenever I've been living hand-to-mouth, I've had no issues keeping my account in the black). I regard my personal savings account (in which I always keep at least $1000) as my "cushion" in case of bad math or other mistakes. Since I am so diligent about double checking everything, I have always been able to transfer money before there's a possibility of overdraft.
J, on the other hand, is very uncomfortable with a checking account that goes down to zero. He prefers to leave a cushion right there in checking, partially because he has never successfully kept a check register (don't get me started), and partially because he likes knowing that he's got money instantly available in case of emergency.
Considering our completely different approaches, if we were to merge our accounts, it would be all over except the shouting.
So, we have separate accounts. That doesn't mean that we don't regard our money as our money. It just means that J gets to have an account with a large enough cushion to keep him from staying up nights worrying, while I get to have an account that I can use to its fullest without worrying about what it's doing to J's blood pressure.
So far, this is pretty standard stuff for the separate account route. Where we differ is in the fact that we still have one person who has been elected Money Czar in the relationship. (That would be me).
One of the "cons" of having joint accounts is that one person has to take care of the finances or else things will quickly slip into a "But I thought you were going to pay that bill" or "I forgot to tell you I charged $150 last week" chaos. (No Money Czar with a joint account means that it's dogs and cats, living together. Mass hysteria!) If neither person wants to be Money Czar (and really, the official hat is not really that cool), then either you end up overdrawing your account and not paying your bills, or someone ends up doing the chore and feeling resentful.
For me, having to be in charge of our accounts would not be bug, but a feature, of having joint accounts. I love managing money. I even like paying bills. It gives me a sense of accomplishment, particularly if we have money left over at the end of the ceremonial bill-paying.
And since J does not keep a check register or really pay more attention to his account other than to see what his balance is (which drives me crazy), I wouldn't be at all averse to being in charge of family finances.
Which is why I am. Even though J and I have separate accounts, and I cannot write a check on his account and vice versa, I do have password clearance to his checking account and have our accounts linked. So when J gets his paycheck, I transfer some of the money to my account so that I can pay bills and take out cash for our envelope system. (I also transfer money from my account to his if I ever receive money in my account that ought to be in his). I keep a check register for his account. I never let his account get below a certain threshold that we have agreed upon. I keep track of the automatic payments and withdrawals from J's account and I pay some bills directly from that account.
This system completely works for us. I get to do the happy dance of numbers for both of our accounts, and J gets to feel comfortable that a) bills will be paid and b) there's always a pre-determined minimum balance in his account, while not having to do the money chores that he hates. This system does make it more difficult to buy surprise gifts for each other (or rather, for J to buy a surprise gift for me), but I'll take the small inconvenience if it means we feel pretty streamlined in our attitude and approach towards money. (Also, unless he's buying a gift for me online, he can always use cash to buy a gift and keep it a surprise from me, since we do use the envelope system and we each have our own spending money from the cash stores).
For me, I feel like having separate accounts with me as the Big Cheese Overseer works because it allows us to both feel comfortable while still taking advantage of personal interests and strengths. It may be a somewhat complicated system, but organizing a complicated system doesn't bother me in the slightest.
If our accounts were joined, I know that we would each get frustrated with the other for how we prefer to handle checking. If our accounts and our money management were completely separate, I know that we would fight about things not getting taken care of in the way that wanted them to. With separate accounts that we both can access (since J also has password clearance to my account--he's just less likely to use it), I can be my OCD self over our money, but still keep both of us happy in how the funds are managed.
The problem with articles about whether to have joint or separate accounts (or Yours-Mine-and-Ours accounts) in marriage is that it's trying to give general advice for something that is very specific and personal to the married couple. I can't imagine many people that our system would work for, and it took us several years of trial-and-error to find this method of managing our money. Every couple is going to be different and will have different preferences, habits, strengths, and weaknesses. So saying there are only two options for handling money--joint and separate--ignores the many different weird permutations that will work on case-by-case bases.
How does your household handle finances? Does anyone else have a system as strange as ours?
Several months ago, I wrote about frugal tips that annoy the heck out of me. Apparently, I'm not the only one who gets irritated with stupid advice, as I had many many people read and comment on that post.
I thought I'd follow up with more financial advice and frugal tips that make very little sense and what I'd rather see in their place:
1. Coulda Shoulda Woulda Advice. I recently read this quick blog post on Bankrate.com detailing 10 different common retirement derailers, from low interest rates and market declines to supporting adult children and grandchildren and making bad investments. I don't want to pick on Bankrate here, since I generally love their information, but the post simply reported what those derailers are, as determined by an Ameriprise Financial study, and then reported what those who have been derailed wished that they had done differently.
And that's where I get annoyed.
I get that this article will probably be read by those individuals (like myself) who still have the time to avoid the derailing and act in the way that those polled wished they had. But that's hardly helpful for those poor schmoes out there who saw their nest egg lose $117,000 in value and have no idea what to do about it. Yes, hindsight may be 20/20, but for heaven's sake, what now?
I want to make it clear that I have ALWAYS hated this kind of "advice." As a student, when I would be struggling to finish a project the night before it was due and wishing I had a time machine, hearing from a well-meaning individual the words "well, you should have started earlier" could be enough to send me into an apoplectic rage. (I might even pull out the big guns on the "advice-giver" by lifting a single eyebrow in a way that could stop a charging rhinoceros in its tracks--a trick that I used to great effect as a teacher). Frankly, if you don't have anything more useful to say than "boy, were you stupid back in the past in a way that affects you now," then stay out of it. Really.
What I'd Prefer to See: Specific advice geared towards various age groups on how to deal with these sorts of bad choices. Yes, it's nice to know what those who are in a bind wished they had done differently, but without an action plan with specific advice, just telling me that people who are facing a major retirement shortfall wished they started saving earlier and wished they'd worked harder to understand investments is tantamount to saying "Yeah, just don't be stupid." It's not that helpful. Tell me ways to save more now and resources for gaining better understanding of investments.
And for those who have already "been stupid," for the love of all that is beautiful, please give some advice. Telling them "coulda shoulda woulda" just leaves them hanging AND beating themselves up for something that it is impossible to change.
2. Move to a cheaper area of the country. The Mensch family is living proof that living someplace inexpensive can make an enormous difference in your life. We moved from Columbus, Ohio, which was not an extravagant city to live in the first place, to Lafayette, IN, where prices seem to have been stuck in the 1980s. The reason for that difference in cost of living is simple--unlike New York, Chicago, DC, or even Columbus, not many people choose to relocate to Lafayette. (And in some cases, the people who are born here get out of town as quickly as possible.)
I like it here very much. It's a great place to raise LO and Thing 2, but I can tell you that it would not have been my first, second, or 17th choice in places settle down. I'm here because of J's job, and it's a lucky coincidence that we live in an inexpensive small town in an inexpensive area of the country. It allows me to work from home at a career I love and have the flexibility to be LO's (and eventually Thing 2's) primary caregiver. Things just aligned that way, and I'm very grateful for it.
But often, you will see throwaway advice about moving to a cheaper area of the country--as if it's that easy. This advice doesn't take into account your family and social support structure, your (and your spouse's) job prospects, your hobbies and preferences, the cost of moving, etc. It looks at the choice of where to live as a simple financial transaction, when it is so much more complicated than that.
There's nothing revolutionary about advising people to move to a place that's less expensive. Yes, we're aware that there are places that cost less to live. Unless the frugal advice-giver can also explain how to uproot your entire life, including living within walking distance of your elementary school librarian and being able to visit your Grandpa in the nursing home on a weekly basis, this advice is a non-starter.
What I'd Prefer to See: Tips for making your money go farther in expensive areas of the country. Granted, there are plenty of articles out there that offer tips on couponing, dollar stretching (ahem), and otherwise making do with less money, but providing this advice instead of simply tossing off the "move someplace cheaper!" line would help keep people from completely ignoring the advice altogether.
3. Time is Money. I remember three years ago, watching "America's Cheapest" (and most ironically named) family, the Economides, on The Today Show, talking about their new (at the time) book. This family is apparently able to feed a family of seven in Phoenix, Arizona on $350 a month. They do this by cutting coupons, scouring sales, double checking unit prices, and buying nearly expired meat. When Matt Lauer said that all that work sounds exhausting, Mrs. America's Cheapest Family responded that time is money. Anyone not spending that kind of time on feeding their family was going to be spending more money than the Economides.
Yes, I suppose that's true. And I certainly think it's a worthy goal to spend less on food and necessities and to minimize waste.
Time is not just money. Time is also your life. And time is the only commodity that you can NEVER get more of, while it's always possible to earn more money. If you're devoting hours upon hours to your quest for reducing expenses, I certainly hope that you're getting more from it than just the cost savings. Because if you're trading your time for money in such a way and you're getting nothing else out of it, it might make more sense to take on more work or get an additional job.
Clearly, the Economides enjoy living this lifestyle. Money saving is a kind of game to them, and that's great. But there are plenty of frugal individuals (and I am one of them) who would rather spend the extra money on groceries in order to have more time to play with my kid and read and work, etc, etc.
What I'd Prefer to See: Advice on picking your battles.
Money saving tips are not all created equal. For me, cutting coupons and cherry-picking sales at grocery stores is not worth the time. Before kids, when taking seven hours to do all my grocery shopping was not a big deal, it was worth it, but only because I got a little kick out of the savings. For someone who lives in an area with a higher cost of living, it may still make sense to do all that work to save money, even if you don't enjoy it. But forcing yourself through that work when you don't particularly want to spare the time, and you do not enjoy the game of it, is a good way to wonder why you're wasting a precious commodity that you could be savoring.
There are other ways to save money and stretch a budget that might not be as onerous. When giving advice on how to save money, I'd love to see multiple tips--along the lines of, "if you've got the time, try grocery shopping like the Economides. If you don't, start doing all of your shopping at lower-cost stores like Aldi. Here are great recipes that cost little to make. Try buying meat in bulk, etc."
We need to remember that saving money shouldn't be the only thing you're looking to do when you live frugally. You should be looking to live the life you want, not the cheapest life you can get away with.
Any other annoying tips that I've missed? What else do you wish people would either stop advising or at least clarify?
I'm a big fan of Dave Ramsey's stupid tax idea. At some point, even the savviest and most frugal money manager will do something stupid that ends up costing money. I like calling this the stupid tax because it removes any sense that you need to beat yourself up. Stupid happens. You pay the tax, learn your lesson, and move on with your life.
Unfortunately, the stupid tax is not the only time that you sometimes have to pay for something that ought to be unnecessary. Lately, we seem to have come across other types of "taxes" that are truly infuriating, especially considering the fact that you often do not have control over whether you pay it. For instance:
1. The Other People's Carelessness Tax, aka The Loose Shopping Cart Tax
This is when someone hits your car in a parking lot and leaves without writing you a note. Or, when someone runs over your lawn while turning around in your driveway. Or when someone spills wine on your carpet during a dinner party and simply shifts a potted plant or other item to cover the stain rather than inform you of the party foul.
In short, this tax is when someone else makes a mistake or a mess that affects you, and you have no recourse other than to pay for and make the repairs yourself.
The Other People's Carelessness Tax is pretty awful, but in most cases, you can at least trust that the responsible individual was simply careless and cowardly. That may be infuriating, but it's not the worst kind of "tax" you might have to pay.
2. The Sharing an Abode with a Toddler Tax
Technically, this could be considered a type of stupid tax. After all, it's not particularly intelligent to allow one's toddler to play with expensive equipment.
However, if my experiences with living with a toddler are anything to judge by, it is possible to take every conceivable precaution against toddler-destructo-mode, and still find oneself facing down scribbled-upon furniture/walls, completely unrolled tubes of toilet paper, cartons of eggs thrown willy-nilly throughout a living room, or an ear full of super glue. Finding a way to thwart every toddler's destructive tendencies would require some sort of cage, and not only is that generally frowned upon in polite society, but it also won't necessarily work if my experience with children's ability to open child-safety caps is any indication.
The truly frustrating thing about the toddler tax is that you have no place to put your annoyance. It's useless getting angry at someone who doesn't know any better, and it's equally useless to get angry at yourself for not anticipating an action from a group of individuals known for asking for something and then throwing themselves on the ground in despair upon receiving exactly what was asked for, because...who knows. These are not thought patterns that any rational adult should be able to follow, let alone anticipate.
3. The People Are Nasty Jerks Tax
This is the tax that we will soon have to pay. Yesterday, J stopped at Walmart to pick up our prescriptions and a couple of sundries. When he returned to his car, he found that someone had done this:
There was no possible reason why anyone should feel the need to key J's 1993 Volvo 240. It was nastiness, pure and simple.
While we have not gotten a price quote yet for fixing this, we know that it cannot be buffed out, since the paint was scraped off down to the metal. J suspects that the cost will be somewhere around $750, considering the fact that simply mixing the correct paint color, or ordering it directly from Volvo, could cost a few hundred dollars. We're going to bite the bullet and pay for the repair, however, since J not only loves his car, but he takes great pride in it. But it's a bitter pill to swallow considering the fact that this damage was completely unnecessary and mean-spirited. Some jerk decided to do something that did not affect him/her in the slightest, and yet it will be us who pays the tax.
At least with this kind of "tax" getting angry is a perfectly acceptable reaction. Sadly, other than jumping up and down and yelling, there's not much you can do with your anger.
Thankfully, there's a reason why we put money aside for car repairs. We have the ability to fix this, and it won't make a huge difference in our budget.
It just sticks in our craw that we do have to pay for this. It's way worse than the stupid tax.
Have you ever had to pay one of these taxes? Is there any way to make them sting less?
Photo of a sign that ought to be hanging in every laundry room courtesy of Ched Davis.
I am married to a somewhat absentminded gentleman.
J, who is able to tell me intimate details of the particular cars of people whom he has met but once (and often times, he is able to recall what car a particular individual drives without having spoken to said individual about cars, simply because he was able to identify the comings and goings of cars in a parking lot), has a some trouble keeping track of his personal belongings.
For instance, we have made a habit of keeping any cell phones I have ceased to use when I make an upgrade, since it is likely that J will lose his prior phone long before he is ready for an upgrade himself. In the ten years I have known J, I believe this has happened approximately three times.
If ever J is unable to find his wallet, he simply shrugs and says, "Oh, it'll turn up."
This attitude has been difficult for me to wrap my head around. You may recall the nuclear meltdown I experienced last winter when I misplaced my wallet on an airplane. While I attempted to maintain a tone of ironic and amused detachment in my description of said wallet loss last year, upon rereading all three (three!) posts on the subject, I can detect in my writing the glistening, teary eyes, the lower lip tremble, and the barely contained panic that characterized my reaction. Apparently, a stoic I am not when it comes to missing personal items.
However, after years of watching J shrug off missing wallets, cell phones, iPods, watches, glasses, IDs, car keys, house keys, tools, and various other sundries which he doesn't ask for my help in finding because they live in the garage, I'm starting to see the benefit in not panicking. (It seems Douglas Adams was onto something.)
You see, more times than not, the missing item in question does turn up. And so you are really only facing a minor inconvenience when you cannot find it.
For example, sometime last summer LO and a friend of similar height, age, and temperament, had a wonderful time taking every toy LO owns and spreading them out along the floor of our living room while J and I and the friend's parents ate dinner in the next room. As I was cleaning up the incredible mess that two children under the age of two are capable of wreaking upon a home, I realized that our television remote was missing.
Since I do not need the remote in order to board a plane, pay for anything, or make a phone call, I decided to use the J system of dealing with it. I shrugged and thought, "Oh, it'll turn up."
About a week later, with the remote still AWOL and neither LO nor his co-conspirator willing to talk, I considered buying a replacement.
J talked me out of it. "It'll turn up," he said. "You know it has to still be in the house."
That may be true, I thought, but it was also possible that we would be manually changing channels until the time came for us to move out of the house--toddlers being the crafty and close-mouthed individuals that they are. But, being of a frugal nature and realizing that my life is not exactly negatively affected by having to stand up, walk three feet, and hit a couple of buttons while watching television, I decided to follow J's lead.
That remote remained missing until January of this year. (I found it shoved in the cushions of the couch, which tells you more than I'd like to admit about the regularity of our sofa-cleaning schedule.)
While I was annoyed on multiple occasions about having to get up every. single. time. I wanted to change the channel (I know, poor me), I was very glad that I had not purchased a replacement remote. Since then I would have not only wasted money, but I would have also ended up with two remotes and had to deal with the guilt of getting rid of one.
So, when J yesterday was unable to find his prescription sunglasses before heading to an air show in nearby Kokomo, I managed to tone down my immediate "Red Alert Crisis Mode" reaction with which I would normally greet such a pronouncement from J. There was no need to freak out about the cost and time of replacing prescription sunglasses. I could just sit back and wait for them to turn up.
And turn up they did. This morning, J found them in a messenger bag he'd taken with him on his most recent motorcycle ride. Crisis averted.
Now, J is just hoping someone has seen the brand new D.I.D. chain for a 1975 Honda CB400F Super Sport that he just bought.
He's sure it's around here somewhere.
Photo courtesy of Jesslee Cuizon
Sometimes, the best things in life really are free. Here are some of the free services I use on a regular basis (even daily!) that truly improve my life:
I like to listen to music throughout the day, which is one of the reasons why I love working from home. Pandora is an online radio station that claims to play only music you'll love. Basically, you tell the site what your favorite artists/composers/songs/albums are, and it uses the algorithms created by the Music Genome Project to analyze your favorites and find other works that fit the profile of the music you already love.
There are lots of different free online radio stations out there, but I always come back to Pandora because it requires little from me to create an enjoyable listening experience. Depending on my mood, I can play my classical "station," my jazz "station," my 80s "station," etc. If I were to try to recreate that on something like Spotify (which is J's free online radio of choice), I'd have to choose all of the artists myself.
Pandora has ads every few songs, which makes it feel basically like old-school radio listening (remember that?), and it will stop playing about once every hour or so to double check that you're still listening. But it's a lovely way to listen to music all day long and my favorite way to find new artists.
My Fitness Pal
While I'm not a huge fan of counting calories (or Points), I love love love tracking my exercise. It makes me feel accomplished to be able to say "I burned X calories this week!" in a humble-bragging tone of voice. It's also helpful to know the caloric content of things, even if I don't strictly track calories. The other cool thing about My Fitness Pal is that there is a social aspect to it. You can invite friends to join and converse on the site. I haven't taken full advantage of this, but it is cool to know I can have friends cheer me on in my fitness goals if I so choose.
This is a truly cool project/site. LibriVox enlists volunteers to create audio versions of books in the public domain. Each volunteer reads a chapter at a time, and uploads those chapters to the site. Listening to a LibriVox book can be both entertaining and a little disconcerting. One book I listened to had a different reader for every single chapter, so I got to hear a variety of lovely accents and interpretations of how different characters spoke. I love that you can get wonderful books on audio for free--and considering my addiction to books on audio while exercising, this is a real boon to my bottom line. The best part is that this service is completely ad-free.
If you've ever lamented the cost of Microsoft Office, this is the free software for you. Open Office was created to provide free office software that can be read and write in other (paid) software packages. It looks just like the software you already use, and since it has an open development process (meaning anyone can report bugs), problems actually get fixed and you might find Open Office works better than the software you paid for. We downloaded Open Office on our laptop, since we would have to pay separately for each computer using Microsoft, and I love using it. I still use the traditional software on our home computer, but I love that there is a completely free option out there.
I've already blogged about my love for my email provider, despite its low-class status. After twelve years of emailing through Yahoo, I can't imagine changing to a new system, particularly since Yahoo has treated me well for every day of those twelve years. (I'm not counting the one or two times I was hacked. That could have happened with any email account). At some point, I probably will set up an email forwarding system so that my Yahoo account looks like it's coming from my own domain. Just because I'm apparently the only person in North America who has such warm fuzzies about Yahoo.
What are your favorite free services? Is there anything you use daily that costs you nothing?
"I'd buy you a green dress. But not a real green dress. That's cruel."
I have been thinking quite a bit about how I would spend "extra" money lately, partially because of this interesting post from Crystal on the blog Budgeting In the Fun Stuff. If you don't get a chance to read through Crystal's post, she talks about how even if you're making enough, there will always be some wants that are out of reach. She concludes that it's really important to find happiness where you are and with the life you have, rather than always focusing on what you don't have.
J and I were discussing this the other day, having one of those fantasy "If we had a million dollars" type conversations.
Unfortunately, we seem to be as boring as Samir from Office Space, who, if he had a million dollars, "would invest half of it in low risk mutual funds and then take the other half over to my friend Asadulah who works in securities..."
As much I wracked my brain, I came up with bubkes during our million dollar conversation. Yes, there are expensive things I want to do: travel extensively through Europe, see Machu Picchu, go to Hawaii, visit Israel. But even money wouldn't make those trips doable right now considering the fact we've got a toddler and a baby on the way. And other than traveling, I honestly can't think of any extravagances that I would want from my life that are currently missing.
As for J, in addition to his travel dreams, he came up with the idea of taking a year off to go back to school for a Master's Degree...and that was about it. Neither of us could come up with much in the way of tangible things that would improve our lives.
On the one hand, I sort of feel like we're the world's most boring couple. We can't even come up with the idea of eating lots of Kraft Dinner with gourmet ketchups in our plans for hypothetical riches. Surely there's something I could do with a boatload of money that I'm not currently doing.
But, on the other hand, it also feels like a kind of freedom that our "extravagant" plans include nothing more than travel, education, and funding our retirements and the kids' college accounts.
After all, wanting stuff can really weigh you down. And I know for a fact that owning stuff can become a job in and of itself. It can almost be said that your stuff owns you, since you have to take care of it, maintain it, and secure it. Bigger houses mean more rooms to clean. More expensive cars mean more systems that could go wrong. Expensive jewelry has to be secured. Beautiful furniture has to be protected from baby spit-up and dog slobber. A lot of work goes into owning a great deal of stuff.
Even just having more money means more money management. Once you start banking more than the amount that is FDIC insured (which is currently $250,000), you either have to have your money spread out over several banks or have it invested and have to keep track of it and take care of it. As much as I love playing with money in our accounts, at a certain point, that much management just sounds like a chore--one that I would either have to do myself, or one that I would have to contract out to someone else, which means doing the work to find someone I could trust.
Don't get me wrong--these would be good problems to have. It's unlikely that I'd turn down a million dollar book contract.
But I completely understand why there are some multi-millionaires (like Keanu Reeves) who give away a great deal of their money. Having less makes it easier to live simply and it probably feels really good to help people in that way.
So, I guess it comes down to the realization that J and I are in a good place. We have enough for our needs and some wants, and we're satisfied with our lives.
We're really *really* lucky.
Maybe one day, we'll have enough money to afford a tree fort, and a tiny little fridge to put in there. Until then, it's nice to dream about the low-risk mutual funds we'd spend our million on...
Do you ever dream about being wealthy? How would it change your life?
As of Thursday, May 23, 2013, my student loan is officially vanquished!
To pay this bad boy off, I sent a double payment (a little over $1200) electronically last Monday to wipe my debt slate completely clean (except for our mortgage). I chewed my fingernails all week while I waited for the payment to process. (I love how the money was deducted from my checking account promptly on Tuesday, but it took until Thursday for MOHELA to acknowledge the payment. Where exactly was the payment for those missing 48 hours?)
My Student Loan History
I graduated from Kenyon College back in May, 2001 with somewhere around $18,000 in student debt. (My numbers from the early years will be fuzzy, because I don't have the records still available, and in the beginning, the amount of money I had to pay off was so much I simply didn't pay attention to the specifics). I frankly have no idea what my initial monthly payment amount was back in the day. I know that I started making payments (using an actual coupon book, because 2001 was apparently a LONG time ago) in November 2001. By June of 2005, when I enrolled in the graduate English Education program at OSU, I owed somewhere around $13,000.
My entire graduate program was financed by a federal student loan, so I finished up at OSU with an M.Ed. and a grand total of $33,000 in student loan debt.
(Since I only taught for four years, I have wondered if I made the right decision back in '05 to get a degree on credit. But, teaching was an invaluable experience that I know I could not have had without the degree, and it really has made a difference in my writing career--which is what I used to pay off nearly half of what I owed. So if I were able to have a conversation with my 26-year-old self, I doubt I would advise her to do anything different. Other than avoid the disastrous hair cut of 2007).
I was able to consolidate my loans at 4.5% in '06, just barely missing the June 30, 2006 cutoff for the really really really good consolidation rate. (I think J was able to consolidate at something like 2.9% in the years before I went back to school. Sigh.)
My initial monthly payment for the loan was $358 and change, so I set my automatic payment to pull $400 per month from my account. That way, I'd be a month ahead every nine months. On occasion over the next four years, I would return the payment back to the minimum for a few months (to help with bills or to add to savings), but it always made me feel twitchy, so it would go back to $400 soon enough.
Then, a lot of things happened all at once. J and I learned that LO was on his way, J took a new job in Lafayette, Indiana, we moved, I decided to stay home for a year, and it took us nearly a year to sell our house in Columbus. Sometime around August 2010, J and I both put our loans on forebearance. At the time, I owed around $21,000.
When we finally sold our Columbus house in May 2011, we were lucky enough to get a great deal of equity out of the place. Once we had funded/saved/replaced/otherwise used the equity for necessary home related expenses, we had enough left over to pay off J's (much smaller) student loan and send $5000 towards mine. That left me with $16,466.86 as of May, 2011.
My Debt Payoff Philosophy
As I've mentioned several times before, my view of debt is not entirely rational. The difference between my minimum payment and the amount of money I have been sending to MOHELA is enough to make a nice cushion to my retirement savings. I was only paying 4.5% on my student loan, which is certainly low enough to argue that I could get a better interest rate on an investment. And if you add in the big jumps you see on my debt payoff thermometer above (those jumps represent the extra money I'd send along to MOHELA from things like selling my Mazda, from tax refunds, and from other found money), that's even more money that I could be using for savings and the magic of compound interest.
But my feelings about debt really come down to my psychological makeup. Basically, I need things to be DONE.
As it turns out, I'm very much like my grandmother Ruthie. She used to handle the books for my mother's business. For each entry, she would need to categorize the income/spending, and if she didn't know what the category of a particular line item was, she'd call/interrupt my mother to find out. Then, she'd get to the next line item, realize she didn't know that category either, and would call/interrupt Mom again. This would go on over and over again, with Mom wondering aloud (with increasingly ill-feigned patience) why Ruthie couldn't just wait until she'd gotten to the end before calling for all of the categories at once.
Ruthie wasn't built that way. She couldn't continue on to line 2 of her bookkeeping until she'd completed line 1. She couldn't complete line 1 without calling Mom...and so it went.
I feel much the same way when it comes to my money management. I couldn't throw myself into retirement savings (although I have certainly been saving for retirement), until my debts were cleared. I feel better knowing my money can go farther each month now that I don't have to earmark any of my income for debt repayment. And I feel much more comfortable earmarking a certain amount for retirement or other savings now that I know that everything else I make isn't owed elsewhere. Now that my student loan is crossed off my mental to-do list, I feel as though I have more brain energy available to think about other intelligent uses for my money. I'm not trying to work on lines 2-10 without having completed line 1.
It makes a huge difference for me.
About six weeks after J and I got married (and more than 5 years into our total relationship), J made a post-wedding confession to me.
He likes pro wrestling.
I'm not sure how he knew that this was the kind of deal-breaker that he needed to keep to himself until after he'd gotten a firm, Ketuba-signing and ring-wearing commitment from me--but he was pretty darn lucky that he did keep mum about his love for pro-wrestling for all that time.
Since we were sharing, I decided to let him in on my dirty little secret that I'd been keeping from him.
I like chain sit-down restaurants.
J groaned when he heard it. He not only wants to support local businesses when he dines out, but he also prefers the "realness" of a local restaurant ambience and menu. Chain restaurants could be anywhere, so why bother going there?
After these confessions, J and I looked at each other as if we were meeting for the first time. You think you know someone!
I tell this story to explain why we will be celebrating my debt payoff in the particular manner we have chosen. Our friends Rick and Carla have similar feelings about debt payoff and have been big cheerleaders in my quest to be done with my student loan. They also know our dirty little post-wedding confessions and find them hilarious. They have offered to take us out to a chain restaurant of my choice (I'm waffling between Applebee's and Olive Garden) to celebrate. (No doubt they will offer to take us to a pro-wrestling match the next time J gets a promotion.)
No matter what restaurant I choose for the celebration, I'm sure that will be one darn tasty meal. (And if I ply J with enough beer, he might even agree with me--although I'm not holding my breath).
My apologies for not getting a post up yesterday. We were all too exhausted after a day at the Indianapolis Motor Speedway to do much more than lie around on our sofas before an early bedtime last night.
LO, of course, was quite blase about the entire experience:
"Yeah, I'm riding along on the world famous Indianpolis Motor Speedway. What of it?"
In any case, our immersion in car culture yesterday dovetailed nicely with my last post on living below your means. Regular readers and commenters Haverwench and frugal_fun had a very interesting comment discussion about the affordability vs. snob appeal of the Dodge Caravan. I wanted to talk a little bit about their discussion, particularly because it started an interesting conversation between myself and J.
In her original comment on the living below your means post, frugal_fun wrote:
We have driven cars until the wheels fell off and the body was falling
apart. We did just buy new, but instead of a Honda Odyssey, we bought a
base Dodge Caravan. We're in the low brow mini-van of our neighborhood.
*gasp* :) But without the power "family" do-dads, our Caravan gets the
best mileage in class and domestic cars are cheaper to repair. Yes, it
will be more prone to repairs as it grows older, but I can buy many
repairs with the $10K difference of base price.
Haverwench asked for clarification regarding the relative cheapness of repairing domestic cars. Frugal_fun responded:
Generally the parts [for domestic cars] are cheaper and I've been told by our mechanic
they are less prone to having proprietary repair codes. Domestics (as I
understand it) usually publish all the codes, which means you're not
forced to the dealership for certain repairs. That saves money as well.
Domestics usually are not as well made as foreign cars, but I've
found they are "good enough" for our purposes. Even if I have to
replace the parts that I wouldn't on a better made car, the parts
themselves are cheaper and I've got more options in who does the repair.
I read the comments to J over breakfast the other morning and I was really interested in his insights as an automotive engineer and all-around car guy, who also happens to be frugal.
First, I asked him about the proprietary codes on the on-board diagnostic (OBD) systems that frugal_fun was referring to. As it turns out, OBD codes are mandated by the U.S. government to be standard across all vehicles. For example, a code PO171 means that the engine/air fuel ratio is wrong. (J told me something way more complex than that, but that's what it boiled down to. Not that the boiled-down explanation made it that much more clear for me, but that's why he's the car guy.)
While the codes are federally mandated, if there is any additional information that OBD sensors can detect in order to help a mechanic to diagnose a problem, that information could be proprietary. (Even J did not know if OBD sensors can/do provide extra information above the mandated codes).
So, for example, if you have a Porsche that provides a PO171 code when the check engine light comes on, your friendly neighborhood unaffiliated mechanic might have to do some additional diagnostic work in order to figure out what is causing the engine/air fuel ratio to be off, but a mechanic at the Porsche dealership might be able to look up the additional information that the OBD sensors are providing in a handy-dandy book that is not available to the public and know immediately what needs to be fixed. (I use Porsche as an example because J worked as a Porsche mechanic at a dealership when he was in college, and we still have a Porsche wheel that we mounted to the outside of the house and wind our garden hose around to prove it).
This means that if your car's manufacturer does have proprietary repair codes/information above and beyond the mandated standards, then you're one of those inevitable car repair Catch-22s. The dealership will be able to diagnose the problem quickly, meaning there will be less labor involved in your total cost of the repair--but they'll otherwise charge you through the nose. Your friendly neighborhood mechanic might have to dig a little to diagnose the issue, meaning you might have to pay for more labor hours--but they'll be cheaper labor hours.
All that said, J was not able to confirm nor deny the existence of these kinds of proprietary repair codes. OBD is federally mandated. If there is anything extra, J does not know about it. (Some electronic procedures, such as anything having to do with the security system, do tend to be proprietary. So if something in that part of your car breaks--like your remote lock, for example--you'll likely have to go to the dealer, whether you have a foreign or a domestic car. That's because the manufacturers don't want to publish the information that would provide anyone and everyone with a universal key to their cars).
The other aspect that frugal_fun brought up was the relative cost of parts when comparing foreign to domestic cars. That is, that parts for domestic cars will be much cheaper than those of foreign cars. This has long been the conventional wisdom, and J again told me he wasn't entirely sure if it's as true in 2013 as it might have been in the 20th century. (He suggested I look up the most popular makes and models of various classes of cars, and call around local parts departments to ask about the cost of common parts, like alternators, to compare. While I may do an investigative report of that kind at some point, I simply don't have the time today and I was hoping to get this posted before June).
However, based on J's own experiences, there have been some trends:
1. German cars (J owned a Volkswagen Jetta TDI, a diesel) tend to eat parts after a few years.
2. Those parts are SPENDY!
3. Despite my love for them, J has made it clear that if I ever want to own a new Beetle, I will be on my own for taking care of repair and maintenance issues because he's not going to touch it.
4. Even extremely well-engineered cars that shouldn't otherwise require parts/repairs can have serious design flaws. For instance, my 2002 Honda Accord is a fabulous car, but the engineers fell down on the job when it came to designing the transmission. That means we have a ridiculously expensive repair bill in our future, because transmissions are not cheap to replace. And that replacement will only buy us so much time before we wear out the new one, because the replacement will necessarily have to be of the same flawed design.
5. Cars that maintain similar platforms throughout the years (like the Ford Crown Victoria, for example) can have basically interchangeable parts from one model to the next. If you're J and my uncle Arnold, you can go to junkyards to get parts for next to nothing.
For the rest of us, there are websites like car-part.com.
In any case, the issue of the cost of parts is another Catch-22. What I will save in owning a Honda that doesn't (generally) need parts/repairs, I will end up having to spend on the transmission--and I would have spent on the purchase price of the car had it not been a family sale.
So, I asked J how one should go about deciding on the best financial course of action when it comes to car ownership. Being a car guy, I didn't exactly get a straight answer. (It's like living with Click and Clack sometimes.)
He told me that things make him crazy about cars in descending order:
1. Expensive cars that are poorly engineered make him tear his hair out in comical ways. Land Rovers, for example, are ridiculously expensive to buy, and they are shoddily designed and built.
2. Inexpensive cars that are not well engineered get more of a pass from him. In order to keep the price low, they have to let something give. The Dodge Caravan is one of his examples of this kind of car. (Sorry, frugal_fun). J drove one of these about 500 miles on a business trip, and there were many issues that drove him up the wall on it. However, he's got a very specific skill set that allows him to notice issues that most of us mortals would completely miss, even if he pointed them out. (For example, J can tell that my transmission has limited time left, but I can't feel a difference between it any other car I've driven. It's still okay and safe to drive, but like the dogs that detect earthquakes a week before they happen, J can feel the slight issues that indicate the difference between a healthy and unhealthy transmission).
When talking about the Dodge Caravan, J reminded me that a friend of ours with three kids (who had also worked with J at Honda) bought a Caravan rather than an Odyssey when he needed to replace his old mini-van. The friend said he needed transportation that could handle the whole clan, and he didn't need to spend the extra $10K. J admitted that if we were in the same position--kids outnumbering adults, a need for a van that would simply get the carpooling job done, and the ability to think of other uses for $10,000, he'd possibly make the same decision. (And then make me be the one to drive the Caravan).
3. Expensive and well-engineered cars. These cars can be worth the money, but they're expensive. Add in the fact that even well-engineered cars (we're looking at you Volkswagen and Audi) can still need parts down the road, which is part of the reason why they depreciate like rocks. There's a saying among car types that there's nothing more expensive than a cheap Mercedes. This is part of the problem that frugal_fun was referring to with the Honda Odyssey. Those are fabulously well-engineered vehicles (with J's signature on the current incarnation's engine, I may say with pardonable pride). But you're paying for that engineering and for peace of mind, as well as the snob appeal. (Honda specifically wants the Odyssey to be the high-end mini-van. Remember the "Respect the Van" campaign?)
The important thing to remember is that the peace of mind you get by spending the extra moola isn't necessarily real, as even well-engineered cars will break and will need some TLC.
4. Inexpensive and well-engineered cars are J's holy grail. (Well, to be fair, I suppose they're everyone's). This is why he drives a 20-year-old Volvo. This thing is a tank and could potentially live long enough for LO and Thing 2 to learn to drive on it. But cars of this caliber and price range are few and far between and will often need a mechanic in the family to be sure you're getting the excellent car that you want. As frugal_fun pointed out, not everyone can be lucky enough to marry J, so buying something like a Volvo 240 really isn't practical for most folks.
So, if you have to decide between an expensive and well-engineered car, and an inexpensive, not-as-well engineered car, it really is a toss up as to which will serve you better. If you're able to put aside the difference in purchase price and prepare for inevitable repairs, I would probably recommend the Caravan. Spending the extra money on the Odyssey doesn't guarantee that you'll have a repair-free ride for years.
To put it another way: Buying car is a lot like parenting. Ultimately, any decision you make will (at some point) seem to be completely WRONG.
What compromises have you made in car-buying? How have you decided which car is going to give you the most bang for your buck?
Greetings Dollar Stretcherians!
I owe you a post today, but today was also my deadline for getting the first chunk of my book to my editor, which means my brains are currently slowly leaking out of my eyeballs. I'm hoping to be able to find and replace all the various brains by tomorrow, at which point you'll have a new post from me.
Until then, I need to bathe my brain in something mindless.
(Also, tomorrow J, LO and I will be heading to the Indianapolis Motor Speedway for Community Day, during which time we will be allowed to drive the Volvo 240 around the track. Not to worry, there will be pictures and video of this incredible ridiculousness).
Picture of an automobile I could realistically imagine J trying to talk me into buying/restoring courtesy of the unfortunately-named Fornax.
It is full spring now, which means J and I have been hit with the home improvement bug. We have been planting some perennials in the garden, removing some of the ugly pavers left over from the previous owners' landscaping attempts, weeding and fencing in the strawberry patch in the hopes that we'll actually get to eat some of them this year rather than just having the happiest rabbits in the greater Lafayette area, painting the picnic table in our back yard, and pruning hedges. We've also got plans to paint the exterior of the house this summer and finally get to work on the downstairs bathroom, which has been on the back burner for about a year and a half.
I was mentioning all of this work to my mother when she suggested now might be a good time to fix the foot moulding in the upstairs hallway.
You see, back when we moved into our house in 2010, we pulled up the upstairs carpet and refinished the lovely hardwood floors underneath. Unfortunately, at some point in our home's history, the original foot mouldings were spirited away, possibly to make room for the world's ugliest Pepto Bismol pink carpeting which we gleefully ripped out. While the company that handled the floor refinishing could have easily made new floor moulding to match our gorgeous floors, it would have put us over the budget we'd set aside for it. So, we let it be.
Other than the time I dropped an earring that got lodged in the space between the floorboards and the wall because there was no foot moulding to cover such a gap and thereby prevent such an earring loss, I haven't given a single thought to our missing flooring pieces in the last three years. (We were able to get the earring out with a pair of tweezers and some patience, and then soaked the earring in a 100% alcohol solution to kill whatever crawlies it might have picked up during its short floor-bound incarceration. So no harm, no foul.)
While J and I could certainly have the floor fixed at any time--we just need to set the money aside--it doesn't bother us enough to bother with. We have other places we want to spend our money (like on our garden) and other places we need to spend our money (like on our exterior paint), so we just let little things slide.
And that, I've realized, might just be the reason why we are able to live as far below our means as we do. For instance, J drives a 20-year old Volvo 240 station wagon for which he receives a great deal of ribbing from friends, co-workers, and family. But the car runs great, has the Volvo level of safety, and J is happy to do the work on it. Even though J's boss teased him about the giant blue brick recently when J drove a group to lunch, we ultimately know that it doesn't matter in the slightest what other people think of the car. It's an inexpensive (and fun) car to own, and it fits our needs. (J's boss also found himself reluctantly impressed with the car by the time he'd ridden in it).
In addition, I'm still wearing the same maternity tops that I bought three years ago that are getting a tad worse for the wear. While it would be lovely to have some clothes that don't have tiny stains on them, I also know that I don't have to look professional (or even pulled together) at any point during my day, so I save my money for other issues. I'm happy to wear out my clothes until they've fallen below even my unfastidious standards of what constitutes something you can wear in public.
You, too, can pare down your list of necessities to a much more affordable tally if you simply lower your standards!
For me and J, floor moulding, a car built in this Millennium, and clothing free of stains/holes are simply luxuries that we consider completely unnecessary. Our lives wouldn't be appreciably better with those things, so we do without them.
What do you do without/consider a want rather than a need/no longer consider as standard, in your quest for frugality? What kinds of teasing do you get from others who just want you to fix the dang floor!?
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