If you’ve read, well, anything I’ve posted since last summer, you probably know that I live a little close to the bone by the middle-class standards I’m used to.
My regular monthly income is generally adequate to my regular monthly expenses and even most of my irregular expenses. It does not, however, leave much over for savings.
That’s where my windfall strategy comes in. I get two main kinds of windfalls: the Earned Income Tax Credit and three-paycheck months. The EITC is a doozy, and it came at a perfect time for me (February).
See, in January I was totally tapped out. I had taken money I didn’t really have yet, plus all the money I did have (Christmas money, December’s third paycheck, everything I could cadge from my HSA) and used it to pay off the divorce lawyer I had consulted. Nothing left, period, and with my monthly earnings so low, reaching a comfortable savings cushion felt very far away indeed. Then I found out the size of my tax refund.
Side note: I’m not sure “refund” is really an adequate word because it is money I did not pay. The EITC is really other people’s money, which makes it more like welfare. I am grateful to receive it, and look forward to paying my share in the future.
I did buy a few things, but my February income turned out to be totally adequate to cover my purchases, leaving my entire EITC available to create savings.
Step one was to budget for March. I have not been following the general financial principal that you should live off last month’s money. I have been living off the money I was earning in the present month, leaving me in the red until I received my support check and last paycheck. Not a pleasant feeling.
So first, I budgeted for March, generously–March’s rent, groceries, everything, and with some left over because I know I probably forgot some things. I was realistic but moderately ambitious; I said I would keep groceries under $300, for instance. I will see how much money I earn in March and that’s what I will budget to cover April.
That took a good chunk of it, but there was plenty left. So I earmarked about 1 months’ expenses as an emergency fund. This is my liquid emergency fund, the money I would use if my car broke down, for instance. More of a rainy-day fund, if you will.
There was still some left over. I earmarked $500 for travel, aspirationally. Some day, I’m going to Paris. Because February was a good month for me, I STILL had some left over, which I earmarked as “investment holding.” I used to have a Roth IRA. It all went into the house we bought in 2015.* I would like to open one again as soon as I have enough money ($3000) to buy into the Vanguard Total Stock Market Index.
*The house where my ex-husband lives with his new wife and stepchildren and my name on the mortgage. This is a sore point.
That will leave me with three potential sources of emergency money, in the order that I would most likely tap them:
- Cash (in my Ally savings account);
- HSA (for medical, sure, but since I pay for things like my $185 asthma medicine out of pocket normally, I could submit those receipts later if I was in a bind for some other reason);
- Roth IRA–you can withdraw the contributions at any time, so again, if I was in a bind I could do so, unless the market had tanked quite spectacularly.
With my savings pretty well covered, I felt comfortable increasing my HSA contribution for the year to $4000, which will put me well over the investment threshold (right now that money is not earning interest, but I’ll have some options once it tops $2100).
I feel good about where I am, savings-wise. It’s not exactly putting me on the fast track to retirement, but it’s adequate for my current standard of living. Which could use a little increase, to be frank, and feeling a little more secure in my savings makes me feel like I can afford, for instance, new mixing bowls, when the old ones start moving past “gross” and into “health code violation.”
How did your tax season shake out? If you got a refund, what did you do with it?
I’ll tell you up front that I ran a deficit in November. Happily, I was able to cover the shortfall with savings and anticipate a rosier December. Here’s how it broke down:
Support, minus my share of utilities for old house: $634.29 (this number excludes $183 that went to the XFP’s share of kid spending, which I do not count as either income or expense)
Library take-home pay: $1338.69
Substitute teaching take-home pay: $254.68
Christmas money: $200
Selling snow tires on Craigslist: $100
Total income: $2527.66
Home supplies and furnishings: $158.47 (includes an electric blanket for me, counter stools from Craigslist, and a variety of miscellany)
Laundry: $45 (still have several loads left on the card)
Bike supplies: $25.97 (I keep bleeding on this category! This is new tubes for me–3 for the price of 2–and lights for Big Brother’s bike, minus some Amazon credit I had lying around)
Car things: $1072.90 (Junkyard OEM wheels to put my snow tires on, plus I went $700 over my budget from the Frugal Patriarch)
XCel Energy: $17.45 (includes start-up charge)
Internet: $9.95 (OK, it’s slow and not that reliable, but I LOVE charity internet!)
Annual life insurance bill: $116 for $100K coverage
Groceries: $221.26 (Finally some improvement in that category!)
Gas: $62.65 (Because I absent-mindedly put a full tank of gas in my car right before I traded it in!)
Boys’ allowance: $9
Work childcare: $8
Kids’ health: $175 (That’s half of a $250 ER copay plus half of $100 in babysitting for the lady who came to pick up Little Brother while Big Brother and I stayed there until 2 AM. BB’s tongue is all better now but it sure was grueling. I expect a bigger bill later.)
Coffee shops: $17.18 ($13 below my average! Look at me showing some restraint!)
Sewing supplies: $17.44
Artificial Christmas tree: $39.14
Miscellany at Target: $16.48
Annual rec center membership: $221.40 (WOW that’s a good deal!)
Shredding at Office Depot: $2.97
(Note that the figures above do not include the ten thousand dollar gift which which I paid for almost all of my new car.)
Well, that’s a little alarming, a deficit of over eight hundred dollars. I had to just about drain all my savings categories. Obviously, having large car expenses was a major causative factor there. My earning power was limited by last month’s fall break (couldn’t sub) and a variety of ill-timed illnesses that fell on days I normally would have subbed or done on-call. I have sick leave at my regular job, but that wasn’t what I was missing. Ouch.
Fortunately, December is a three-paycheck month and the month in which I get my wellness bonus from my employer, so hopefully if I get my average hours-per-up before Christmas, I will be able to put on Christmas and still wind up in the black. And there are things I could have not skipped buying in November had I realized how short I was going to fall, so I think I’ll try more of a zero-based budget throughout the month. There is cause for caution, but not panic.
How was your November?
Thursday, I stopped by the courthouse on my way to work and finalized my divorce. The whole process was, despite the mountains of paperwork, surprisingly brisk. About four months from first serious discussion to finalization, and the hearing lasted all of twenty minutes. The judge commended us on our “professionalism” and the care with which we had filled out our forms, gave us some orders he had typed out based on them, and sent us on our way. I was at my post at the library when the doors opened for the day.
Now, that doesn’t mean that we have finished tying up our loose ends–far from it. Now that the XFP and I are officially separate legal entities, I thought it would be a good time to take stock of where I am financially–and some remaining pitfalls.
Frankly, disaster looms on this front. We had a contract. Buyers backed out fairly quickly–changed their minds about the neighborhood. Got another contract, cash from an investor, almost immediately, with a 21-day close. I moved out and signed a lease on an apartment. Then the investor changed his mind, too. (We got to keep $500 of the earnest money that time, which is better than a nail in the foot.)
We have both signed leases and have rent to pay, so now it’s a race to see if we can find another buyer before we default on our mortgage. Fingers crossed. We are getting a lot of showings and a fair bit of interest and we still have room to drop the price, so I am optimistic about our chances. Our arrangement calls for me to receive the first two thousand dollars of proceeds with the rest being split, so hopefully I’ll get a little money out of it.
Exchange of retirement accounts
We accidentally made a settlement that we can’t implement yet. The XFP agreed to transfer some of his 403(b) to me. However, he had borrowed against it, and so his bank will not divide it. I will need to monitor the XFP’s progress toward the loan; since all indications so far are that he is acting in good faith, I’m willing to be a little patient. (The plan is to pay it off with the proceeds from the house, assuming there are any.)
This is a big question mark. Can the almost 18-year-old Auto Paragon last a few more years if I sink some money in it? Is it reliable enough transportation for a single mom? It seems to be making a peculiar noise and the transmission could be going bad. I will bring it to Dave the Acerbic Mechanic for his assessment. If his opinion is unfavorable and the proceeds from the house are adequate, I might consider replacing it. (I am imagining something similar to the XFP’s 2008 Fit.) If he thinks a moderate cash infusion could keep me driving in reasonable safety (if not, by any stretch of the imagination, in style) for a bit, then I’ll have it fixed up.
Currently, it has bits of tape and cardboard and scraps of packing paper all over the floor, the ottoman is blocking the patio doors, my dresser is wedged unsatisfactorily into the children’s closet, and my daybed/the couch (thanks again, Grandma FP) is covered by a mismatched full-size quilt that I’ve owned for twenty years.
I’m working on it.
I’m also working (in the form of trying to save money and increase my earning power) on getting us a place to live, in the future, where I don’t have to sleep in the living room or go outside to do laundry.
Well, it could be worse. I have $600 in my HSA that I could access at any time (by submitting the receipts I have saved). My intention is to build this up as an investment instead, but it provides a little extra security.
According to YNAB, I hang on to each dollar for an average of 36 days before spending it, so I am not living on credit card float–pre-YNAB, I’m not sure I could say that. I have seven hundred dollars earmarked for paying the lawyer who helped me with my divorce paperwork and I may be able to add a little more at the end of the month. For good measure, the Frugal Patriarch* is, I hear, sending me a check to help jump-start my new life, and that will provide an extra cushion.
I also have nearly twenty thousand dollars in personal retirement savings, not counting the share I hope to receive from the XFP. It’s not much, but it’s more than nothing.
Lots of balls in the air. Lots of question marks. But I have a lease on an affordable apartment, a car that runs, and enough money to cover a couple of minor emergencies. That’s a start.
*AKA my grandfather. Yes, he refers to himself as the patriarch, and I am sorry if you do not personally know him, because he is a millionaire next door and master storyteller and just simply a great person to sit around with drinking wine and shooting the breeze.
Where do you stand this month? What are your looming question marks?
I haven’t always posted my monthly spending on my blog, for this reason: I have often been embarrassed by it. I mean, for heaven’s sake, I’m a frugality blogger. How could I come on here and admit that we overspent our income for the month… again? I won’t bore you with the details, but the financial dynamic in my marriage was unproductive, and that’s not something I was comfortable exposing to the interwebs.
But… it’s all me now! I did a “fresh start” budget in YNAB, started a new YMOYL “wall chart” (actually a line graph in a Google Sheet), and here you have it, my unadulterated income and spending for August.
Net Earnings: $1012.79
Selling stuff on Craigslist: $50
Child Support: $350
Spousal Support: $383
Reimbursement: $210 (from Mr. FP for boys’ July health insurance)
Total Income: $2005.79
Total housing/utilities: $844 (This is my share–Mr. FP covered the parts of these billing cycles that dated to before his move-out.)
Home supplies: $83.55 (flannel sheets, Goodwill vacuum, parts to fix vacuum)
School lunches: $41.83 (This is 2-3 months of lunches as the boys are now on reduced-price lunch at $.40 per meal)
Total home/school food: $245.40
Parking and bus fare: $12.55
Total transportation: $57.36
Bike supplies and maintenance: $59.95 (this is a floor pump, Mr. FP having taken his, and new brakes for my bike–parts only, labor to follow in September)
Boys’ allowance spending: $6.78
Clothes and shoes: $49 (new uniforms)
School supplies and swim lessons: $63.87
Total kid spending: $119.67 (Again, this is my share–Mr. FP reimbursed me an approximately equal amount as I had done all the back-to-school shopping.)
Adult health: $8.70
Coffee shops and snacks: $40.07 (Higher than usual because of house being on the market and me having to leave at weird times)
“Out” entertainment: $22.60
Total Entertainment: $86.46
Adult clothing (Thinx): $60
Can’t remember what I bought at Target: $20.42
Total Shopping: $154.15
Travel: $76.38 (My budget for family vacation was $100. That’s almost exactly what I spent–I paid for my own Uber, slipped my niece a twenty for babysitting, and bought some booze, but then my aunt insisted I take a twenty when I got on the airplane. Thanks, Aunt B! Giant thanks to Great-Grandfather FP for the funding and Grandma FP for the planning.)
Cat food: $24.75
GRAND TOTAL FOR AUGUST: $1759.39
First of all, I think that a 12% savings rate on such a low net income is nothing to sneeze at. And I participate in a mandatory defined contribution pension plan at 8%, so my actual savings rate is higher.
That said, I’ll need to be putting away more than a couple hundred dollars a month if I’m ever going to pay off my lawyer, rent an apartment and rebuild my life. So I’ll obviously be working to reduce the categories of Coffee Shops, Frippery, Adult Clothes, and Bike Supplies and Maintenance. All of those categories had non-typical charges in them.
And I’ll need to make more money. I am in the process of signing up to substitute teach and have been picking up on-call library shifts. After-school child care remains a big hurdle–more on that later.
How was your August spending?
I have been in charge of taxes at Casa FP ever since we were married in 2001. (Prior to that, my parents’ accountant did my taxes, and Mr. FP did his by hand, on paper.) In the early years, I used to take them to H&R Block or some other tax place, but these days I do them with tax software.
Some years we’ve owed several hundred dollars, depending on my self-employment income (which has been as high as about $10K). One memorable year, we got a large refund. In fact, we got back more than we paid–when Mr. FP was teaching at a boarding school, we qualified for the EITC. (Since we were getting free housing, we were actually doing pretty well, but the IRS didn’t ask if we had to pay rent.)
I thought this year would be pretty neutral. Maybe a small refund. I made just a few thousand on the side and we have kids.
Then I found out I made a mistake. A big one. See, we both have dependent care FSAs. I thought that we could withhold, pre-tax, five thousand dollars each in those accounts. So… that’s what I did. Our child care expenses were about $9370, so that’s what I had withheld.
Turns out, that five thousand dollar limit is per family. Not per person. That means we had about $4730 on which we owed taxes, but had not had taxes withheld.
Why didn’t I know that? I have no idea. You’d think I would have noticed. Or researched it. Or something. But neither employer’s paperwork mentioned it and I didn’t think to look it up. Oops. Friends, learn from my example. You gotta Google this stuff. You can find all kinds of reasonably clearly worded explanations of tax stuff online*.
TaxAct keeps a little running tally of how much it thinks you owe, and at one time, this was close to two thousand dollars for federal and state, including a federal penalty as federal owed was over a grand. I began to panic. I contemplated freezing all purchases even though I have been wearing the same sweat pants since 1998.
Happily, I had two more pieces of info to put in. The first was one last IRA contribution of $500. That actually tipped us under a thousand owed and did away with the penalty. The second was Mr. FP’s tuition paid. He learned that with a few easy classes, he could up his paycheck (by getting to “master’s plus 15” on the pay scale). He did that, and spent around $1500 in the process. That was good enough for a $300 Lifetime Learning tax credit.
Total owed, federal and state, came to $1499. No penalties. It’s money we were always going to owe, it’s just that instead of paying it throughout the year, we’re paying it now. It sucks. It stings. But it could have been worse. And while it’s going to eat up a lot of our cash savings, it’s not going to clean us out. We’ll still have enough left for, say, one major car repair after we pay. I decided I was not so destitute that I had to mend 18-year-old sweatpants and bought sleek new exercise pants with some belated birthday gift money. (Thanks again, Auntie B.)
How did your tax season go? Do you DIY?
*Obligatory disclaimer that if in doubt, you should talk to a CPA. I am obviously not one and have, as evidenced here, absolutely no expertise in this area.
I’m always on the lookout for objects, tasks, and habits in my life that could be optimized. So when I began to feel the nip of fall in the morning air, and wanted to put slippers on my feet, I knew something had to change.
See, Mr. FP has, in the nearly sixteen years that I have known him, owned exactly two pairs of slippers, and the second is still going strong. They are leather-soled LL Bean moccasins that I believe I bought him in the early aughts.
Meanwhile, I have owned more like eight pairs. The problem is virtually all women’s slippers have hard plastic soles. Once the padding wear down, which in my experience takes like three days, you’re walking around on the hard bottoms, and they become extremely uncomfortable. What’s a girl to do?
That’s when I thought of looking for boy’s slippers. See, boys’ sizes go up to 6, and they run about two sizes smaller than women’s sizes. So any woman with feet size 8 or smaller has the option of shopping in the boys’ department for shoes, especially if her feet are, like mine, on the wide side.
Now, in the interest of full disclosure, I’ve never owned LL Bean women’s slippers, so it’s possible that their rubber soles are softer and their padding lasts longer, and they would have given me my money back if I was displeased. However, women’s slippers start at $39.95 for fleece with a rubber sole.
These boys’ fleece slippers with a nice suede sole–no rubber, yay!–cost me $19.95.
I was spending that much on slippers every year or two. So if these last me even just three seasons, I will have saved twenty bucks. And if they don’t last three seasons, well, I will ask LL Bean for my money back, and will still have saved twenty bucks.
Next optimization: Banking. Roughly every two weeks, I receive a paper paycheck for my trivia editing job that I must deposit at a bank. Quaint, isn’t it?
Now, Mr. FP and I remain devoted users of Virginia Credit Union for basic checking. We’ve moved a lot, and we just don’t like the trouble of finding a new bank. We’re used to this one, and the checking is really and truly free. Plus you can use any ATM gratis. So I was taking these checks, filling out a deposit slip (if I had any–when I ran out, I would use old tear-off pages from a trivia-question-a-day calendar), putting it in an envelope, and putting a stamp and return address label on the envelope. Super inefficient, plus the cost of the stamps and envelopes.
Then I realized I could download the Ally banking app. Now I just have to take a picture of the check, and it goes right to our cash savings (which we’re trying to build up anyway).
Have I told you guys how much I love Ally? It’s easy to use, they pay a full one percent interest, and they just gave me and a bunch of other people twenty dollar Amazon gift cards in celebration of their one millionth customer.
This e-deposit is only saving me like thirteen dollars a year, but, as Grandpa FP would say, thirteen bucks is better than a nail in the foot. Sorry, USPS.
What minor things have you streamlined lately?
So… I am two months plus behind on this. Haven’t done it since January. Oops!
Obviously our situation has changed since we bought a house–not so much as far as our actual net worth, as where it is distributed. In other news, we have switched from Mint to Personal Capital. I just found Mint very clunky and awkward to use, and kept hearing good things about PC… we’ll see.
Cash: $3840.75 (includes our emergency reserve of about $2K)
Investments: $53,389.03 (This used to be more, but we spent my Roth IRA on a giant pile of bricks). New in this category: Mr. FP’s traditional IRA. We will owe taxes on the capital gains that were part of my IRA balance when we cashed it out, so decided to do a traditional IRA to help offset that.
- My rollover IRA: $18,222.11
- Mr. FP’s traditional IRA: $2,944.28 (He is rather depressed that this has already gone down–he just opened it with $3K a couple of weeks ago!)
- Mr. FP’s old 403(b): $32,221.88
Property: $308,000 (assuming that the value of our house is exactly what we paid for it). We do not count our cars in this category.
Total assets: $365,229.78
Credit Cards: $2873.70
Total liabilities: $296,152.13
TOTAL NET WORTH: $69077.65
Since January, that’s a change of $883. Hard to believe it has stayed so steady! On the other hand, at least it hasn’t gone down. The market has not been great and we have been seriously hemorrhaging money on things for the house. Normally we don’t run around buying used pianos and photo prints and whatnot.
When I started this blog in January 2015, I was surprised to find that our net worth was over $50K–it was at that time $51,681.47. That’s an increase over the last year and a half of $17, 396.18, or 33.7%.
Let’s call that “good, with room for improvement.” The next big question: When will we add that fifth zero?
How’s your net worth growing? How do you track it?
I have written here about how we lost all our money on an ill-advised house purchase. And yet, here we are, buying a house again! Why on earth would we do that to ourselves?
Well, for starters, we think it is worth the extra money right now to live in a detached house (as opposed to a townhouse, where we lived before). Our two boys are very active and I really want them to be able to be playing outside while dinner is in the oven, or while we relax on the patio with glasses of wine. (Boxed wine, of course.) Comparing similarly sized houses and locations, buying compares favorably to renting right now.
It seems like a safer decision this time. We have, we hope, outgrown making impetuous, poorly researched moves. There are a lot of opportunities for both of us in Denver, so our willingness to live here is not tied to one particular job (which was the case last time–and when that job went south, we were desperate to leave).
We’re optimistic it will be a good investment. Denver has a robust, diverse economy, and we bought in a neighborhood that is still up and coming. If we want to downsize when the boys are older, there’s a good chance that selling the house would free up a nice chunk of money for investment.
Then there’s the security issue. By buying, we insulate ourselves from rent increases–AND create the possibility of paying off the mortgage, eventually, and having housing drop to a minimal line item in the budget.
Despite the advantages, I’d be lying I said we didn’t have reservations. We’ve enjoyed not being responsible for maintenance, and we are not accomplished do-it-yourselfers. Will we find home ownership too stressful or expensive? The neighborhood school doesn’t sound right for our kids–will we be able to “choice them into” a better fit when the time comes?
Did we do the right thing? Did we choose the right neighborhood for our needs? Did we choose a good time to get in the market? Ask me again in five years!
Do you own or rent? What were the deciding factors for you?
Not a lot of action over the last few months but a lot of holding steady. Here’s what it looks like:
Investments: $60,769 (up 2.6%, all of it market gains)
Property: None of interest. I used to count my car here, but have decided not to do so. It’s not an asset unless we would sell it, and we wouldn’t. So it’s not an asset so much as just a big, expensive thing we happen to have.
Credit Cards: $784
TOTAL NET WORTH: $68,195
That’s an increase of $4659, or 7.3%. It’s nice that the market has gone up, but again I think we should have set aside more ourselves–it looks like we only managed $1335 even with some generous Christmas gifts. I’m a little behind on my dependent care FSA reimbursements, though, which is several hundred dollars.
Next month: Uber-Frugal February! The goal will be to figure out a little more clearly where all our money goes and hopefully have more left over!
A couple of month back, I blogged that I wanted to raise my mediocre credit and wasn’t too happy about the only way I could find to do it: Taking on more credit, in the form of a brand-new Amazon rewards card and asking my credit union to raise the limit on my existing card.
The good news is, at least it’s working! Credit Karma shows that my score has gone up by a solid twenty points. Credit Karma is not super exact, but it does at least show the overall trend. They have me at 695, or poised at the top of “Fair,” but it gets better.
Mr. FP and I wanted to start looking at houses, at least to start getting an idea of the market, and real estate agents don’t like to drive you around unless you are preapproved for a mortgage. So we went ahead and did that, and of course the lender pulled our credit scores.
They showed me at every bit of 725. That’s right, folks, they consider me someone with GOOD credit. And now, this part is petty, but it made me happy: I now have better credit than Mr. FP by a coupla points. His was higher than mine because he carried all our credit cards and had taken out an ill-advised car loan, and I never thought it was fair that an ill-advised car loan ought to raise one’s credit.
I’m happy that our credit looks good, but the system still seems off. Why should taking out more credit cards make me more mortgage-worthy when, let’s remember, I defaulted on my mortgage* a mere four years ago?
Other oddities in the system: According to the lender, our incomes—which are less than $90K a year, even with my side gig editing trivia questions—are adequate for a mortgage of, brace yourselves, four hundred and seventeen thousand dollars. We would have to come up with 5% down, which we could do by cashing out or borrowing against our retirement accounts, and no one would stop us. Yikes, that’s a scary thought. You’ll be relieved to know we are not looking at $400K houses.
Have you ever had to game the credit system? Any brilliant suggestions for how to fix this seriously limited metric?
*Still not proud of this. I remember now, though, that we were required to pay for private mortgage insurance on account of our low down payment, so… I guess the system worked.