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Living On Credit Cards

About 2 months ago, Linda and I decided to go back on the envelope system for all of the parts of our budget that we aren’t able to automate.

English: Money seized during "Project Cor... — English: Money seized during “Project Coronado” by the DEA. Going in “La Familia Michoacana” article. (Photo credit: Wikipedia)

The reason we’re doing this is because we’ve been consistently over budget when we do all of our spending on our credit cards.

The reason we switched back to using our credit cards is because it’s a royal pain in the butt to always make sure we’re carrying enough cash for groceries and gas and date night and fundraisers and cover charges, etc.

It’s still a royal pain in the butt, and we still suck at it.

But one of our envelopes is labeled “This went on a credit card” and is used for those times we forgot to grab cash before heading to the store.

In the last two weeks, that’s $500 that we forgot to bring with us.

Cash sucks.

I’m tempted to go back to using the credit card for our primary spending. Yes, we are consistently over budget, but it’s not terrible….for some odd definition of “not terrible”.

We generally seem to have about $1000 left on the card after making our last monthly payment every month. Every month. The overall balance never grows, it’s just hanging out $1000 over what we have budgeted to be paid automatically on the card.

That’s a bad thing, but….

Since I make a payment every couple of weeks, the interest is never assessed on that balance. In the last year, we’ve paid exactly $0 in interest, without any funny balance transfer deals.

By my calculations, that means our credit card has given us $1000 for free.

If we pay that off and get strict about using cash, won’t that mean our free $1000 would have to evaporate?

I like free money.

That also means that the total interest we paid in 2014 is $672.91, all to our mortgage. Even if we have a small balance we carry, we’re not paying interest on that debt, and–worst case–we could raid our savings to make it vanish tomorrow. I’m tempted to make that happen, but our savings goals are more important to me that paying back the free money.

Automatic Everything

Finance

In an effort to simplify my finances, I’ve automated every bill I have. For years, I resisted, fearing a lack of control over my money. A few months ago, I re-examined the bill paying options on my bank’s website and changed my mind. This is one thing that USBank has done right.

The first thing I did was set a budget. Without a budget, it’s not possible to let your money take care of itself. I did this months before I decided to automate.

All of the bills that offer a budget plan–a plan that averages your payments to avoid fluctuation–went on the plan. It means I do overpay some months, but it also means I get to underpay some months. Most important, I always know what will be due. These bills were scheduled in the bank’s online bill paying system as is, along with the rest of the bills that do not fluctuate.

All of the bills that do fluctuate went in to the bill paying system at their highest level. For example, I don’t pay for text messaging on my cell phone. Some months, I send and receive text messages. I pay my cell phone bill assuming that there will be a few messages. This is slowly building a credit on my account. If I don’t use all of the credit, I will get to skip a month of payments sometime next year.

I keep track of all of this using Quicken. Every one of these bill is in the calendar. They are all scheduled to be entered into the register on the first of the month, to post of the actual day of payment. This lets me see, at a glance, my cash flow for the entire month.

But wait! What about the non-monthly payments, you ask? They are also in Quicken, broken into monthly line items. There’s a “Set aside for property taxes” item, a “Set aside for web host” item, and a few other items.

My time to maintain this has been reduced to comparing the bills to the bill-paying system every other week. At the same time, I consolidate all of the “set asides” so I don’t have 10 property tax entries when one will do.

I know this is an inefficient method of saving money, but my goal isn’t to save money, it’s automating money and removing one layer of stress from my life. It has transformed bill-paying from an hour or two per week to 20 minutes, twice per month and very little stress.

2010 Budget Changes

Misc

We’re making some changes to how we manage our finances this year. Our destination isn’t changing, but the trip is.

All of the cards are going away. Not necessarily destroyed, but certainly inconvenient. There’s a $7000 overdraft protection account attached to our debit cards. There’s no need for an “emergency” card. If it’s truly an emergency, we are covered. We are going to destroy some and ice the rest.
We’re going to go “cash only”. We’ve going to the envelope system. There will be an envelope for grocery money, gas money, discretionary money, and baby crap. If there isn’t enough money in an envelope, it will have to come out of another envelope. If we don’t have enough money, we’ll have to do without, instead of spending imaginary money at 10% interest. Gas will be the exception, so we don’t have to bundle the kids up to pay for gas. No money, no spendy. We tried a “virtual envelope”, with every purchase tracked by category in a spreadsheet, but it didn’t work. Real cash, real empty envelopes. Discretionary money covers school activities, miscellaneous household item, and anything else that pops up.
We’re going to start the “30 day list”. If we want something, we’ll put it on a list. If we still want it 30 days later, it will be okay, provided there’s money for it. This is part of what the discretionary budget is for.
My wife is getting $50/month “blow money”. Absolutely unaccountable. If she doesn’t have this vent, the whole system will fall apart.

This is all stuff my wife and I have talked about and agreed to, but now, it’s organized and laid out. We HAVE to do it or something similar. We are both on board with this plan. We should see our debt management plan skyrocket, without feeling like we are missing out on life.

Twitter Weekly Updates for 2010-04-17

Misc

RT @kristinbrianne: Get Talk and Txt Unlimited Cell Svc w/ Free Phone for $10 per month by joining DNA for Free. http://tinyurl.com/yyg5ohn #
RT: @ChristianPF is giving away an iPod Touch! – RT to enter to win… http://su.pr/2LS3p5 #
74 inch armspan and forearms bigger than my biceps. No, I don't button my shirt cuffs. #
RT @deliverawaydebt Money Hackers Network Carnival #111 – Don't Hassel the Hoff Edition http://bit.ly/9BIAvE #
@bargainr What would it take to get you to include me in the personal-finance-bloggers list? #
Working on a Penfed application to transform my worst interest rate into my best. #
Gave the 1 year old pop rocks for the first time. Big smiles. #
@Netflix @Wii disc works well and loads fast. Go, go gadget movie! #

The Magic Toilet

Finance

: Image by tokyofortwo via Flickr

My toilet is saving me $1200.

For a long time, my toilet ran. It was a nearly steady stream of money slipping down the drain. I knew that replacing the flapper was a quick job, but it was easy to ignore. If I wasn’t in the bathroom, I couldn’t hear it. If I was in the bathroom, I was otherwise occupied.

When I finally got sick of it, I started researching how to fix a running toilet because I had never done it before. I found the HydroRight Dual-Flush Converter. It’s the magical push-button, two-stage flusher. Yes, science fiction has taken over my bathroom. Or at least my toilet.

I bought the dual-flush converter, which replaces the flusher and the flapper. It has two buttons, which each use different amounts of water, depending on what you need it to do. I’m sure there’s a poop joke in there somewhere, but I’m pretending to have too much class to make it.

I also bought the matching fill valve. This lets you set how much water is allowed into the tank much better than just putting a brick in the tank. It’s a much faster fill and has a pressure nozzle that lies on the bottom of the tank. Every time you flush, it cleans the inside of the tank. Before I put it in, it had been at least 5 years since I had opened the tank. It was black. Two weeks later, it was white again. I wouldn’t want to eat off of it, or drink the water, but it was a definite improvement.

Installation would have been easier if the calcium buildup hadn’t welded the flush handle to the tank. That’s what reciprocating saws are for, though. That, and scaring my wife with the idea of replacing the toilet. Once the handle was off, it took 15 minutes to install.

“Wow”, you say? “Where’s the $1200”, you say? We’ve had this setup, which cost $35.42, since June 8th, 2010. It’s now September. That’s summer. We’ve watered both the lawn and the garden and our quarterly water bill has gone down $30, almost paying for the poo-gadget already. $30 X 4 = $120 per year, or $1200 over 10 years.

Yes, it will take a decade, but my toilet is saving me $1200.

What is a Mechanic’s Lien?

Finance

: Image via Wikipedia

When you hire someone to work on your property or provide material to build or improve it, they are entitled to get paid. A mechanic’s lien is the method of enforcing that payment.

Here is what you need to know about mechanic’s liens.

A contractor must usually give you written notice of intent to file a lien if the contract isn’t paid. He needs to do this within a short time of beginning the work. The notice will include text to the effect that subcontractors also have the right to file a lien if they are not paid. This notice gives you two methods of defense: You can pay the subcontractors directly and withhold that amount from the payment to the contractor, or you can withhold the final payment until you have received a lien waiver from each of the subcontractors.

If the notice isn’t given correctly, the contractor forfeits his right to file a lien. Also, in most places, if a contractor is supposed to be licensed to do the work, but isn’t, he’s not able to file a lien.

Subcontractors must also provide notice on intent within about 45 days–depending on the state–of the time they first provide services or material, or the lien is not enforceable.

Protecting Yourself

First, you only have to pay once. If you pay the contractor in full before getting the notice of intent from the subcontractors, you can’t be forced to pay again.

Next, make the contractor provide a list of all subcontractors and keep track of any notices of intent you get. Get lien waivers from everyone involved before you make the final payment to the contractor.

Finally, you have the rights defined in the notice of intent to file a lien. You can either pay the subcontractors directly, or you can withhold the final payment until you receive lien waivers from each subcontractor.

Resolution

The lien holder has 120 days to file the lien and 1 year to enforce it. Enforcing simply means that it a suit has been filed. Once that happens, you can either pay the contractor, attempt to settle with the contractor, or you can take the contractor to court to determine the “adverse claims” on your property. There aren’t too many choices at this point.

Do yourself a favor and get lien waivers before you make the final payment on any work done on your property.

Search Results for: feed/subscribe-by-email/INGDirect/first-3-things-to-do-in-the-new-year

Protecting Yourself

Resolution