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Don’t Screw Future-You

Finance, Life

A conversation between me and my temporally displaced self.

Future Me: Excuse me, Jason?

Me: Yes?

FMe: <Slap!>

Me: May I ask what that was for?

FMe: Of course.

Me: What was that for, jerk?

FMe: That was payback for all of the hell you have put me through.

Me: What?!? I’ve never even met you, before.

FMe: Of course you have. I am future-you, and I’m sick of getting screwed by past-me, that is, you.

Me: Huh?

FMe: Listen close. You’re not the sharpest brick in the box and I don’t want to explain this twice.

Me: ???

FMe: A long time ago, when you first met our wife, you were dumb.

Me: I don’t appreciate….

FMe: Shut up. I was dumb then, too. Remember? You…err…we bought a new truck, built an addition on our…err…your…err…whomever’s house, got married in the same year. On top of many other expensive decisions. Do your recall?

Me: Yes, I do. So what?

FMe: If that wasn’t enough, you and your smoking-hot bride are still shopping like you’re rich. You drive a new car. Your kids wear new clothes. You’ve got a house full of new furniture. How did you pay for all of that?

Me: Naturally, I charged it. Zero payments, zero interest for a year! Pretty smart, huh?

FMe: What happens in a year?

Me: I don’t know. I’ve got a full year to figure that out.

FMe: <Slap!> I’ll tell you what happens! Future-you, that’s me, gets screwed! Your raise didn’t come through. You had a baby. The truck broke down. Your wife took maternity leave. A roommate moved out. You took a loss in the stock market. You didn’t plan! You had no savings to cover any of those problems because you were too busy servicing debt to pay for your current life.

Me: How was I to know?

FMe: <Slap!> Life happens! You never know what is coming next. You need to plan and save for what might happen. Otherwise, you’ll just accumulate more debt to be serviced by yours-truly. That is not acceptable.

Me: So? What are you going to do about it?

FMe: <Slap!>

Me: Really? Again?

FMe: <Slap!> I’m struggling to pay your debt. Your son starts college next year, but you’ve left me completely unable to help. Your daughter wants to get married in a couple of years, but the Father-of-the-Bride can’t afford a tux. My wife, your beatiful bride, wants a vacation that I can’t afford. You’ve screwed me, dude.

Me: I’m sorry. What can I do to fix it?

FMe: Buy me dinner, first.

Me: Huh?!?!?

FMe: Stop the excess spending. Spend less than you make, for a change. No credit.

Me: None?

FMe: None. Nada. Zip. Zilch. Only spend what you can afford. Budget. Pay off those nasty bills. Don’t leave me hanging.

Me: So, what you’re saying is that, if I don’t have the money, I shouldn’t buy it?

FMe: Exactly. That’s the path to wealth, freedom, and financial independence. Live in the real world.

Me: Gee, thanks, Future-Me! Now I know.

FMe: And knowing is half the battle.

What would your future-you have to say to you?

My Financial Plan – How I Improve on Ramsey

Finance

In April, my wife and I decided that debt was done. We have hopefully closed that chapter in our lives. I borrowed, then purchased, The Total Money Makeover by Dave Ramsey. budget” width=”300″ height=”213″ />We are almost following his baby steps. Our credit has always been spectacular, but we used it a lot. Our financial plan is Dave Ramsey’s The Total Money Makeover, with some adjustments.

Step 1. Budget:

The budget was painful, and for the first couple of months, impossible. We had no idea what bills were coming due. There were quarterly payments for the garbage bill and annual payments for the auto club. It was all a surprise. Surprises are setbacks in a budget.

When something came up, we’d start budgeting for it, but stuff kept coming up. We’re not on top of all of it, yet, but we are so much closer. We’ve got a virtual envelope system for groceries, auto maintenance, baby needs(we have two in diapers) and some discretionary money. We set aside money for everything that isn’t a monthly expense, and have a line item for everything that is. My wife is eligible for overtime and monthly bonuses. That money does not get budgeted. It’s all extra and goes straight on to debt, or to play catch-up with the bills we had previously missed. I figure it will take a full year to get all of the non-monthly expenses in the budget and caught up.

Step 2. The initial emergency fund:

Ramsey recommends $1000, adjusted for your situation. I decided $1000 wasn’t enough. That isn’t even a month’s worth of expenses. We settled on $1800, plus $25/month. It’s still not enough, but it’s better. Hopefully, we’ll be able to ignore it long enough that the $25/month accrues to something worthwhile.

Step 3. The Debt Snowball:

This is the controversial bad math. Pay off the lowest balance accounts first, then take those payments and apply them to the higher balance accounts. Emotionally, it’s been wonderful. We paid off the first credit card in a couple of weeks, followed 6 weeks later by my student loan. Since April, we’ve dropped nearly $10,000 and we haven’t made huge cuts to our standard of living. At least monthly, we re-examine our expenses to see what else can be cut.

Step 4. Three to six months of expenses in savings:

We aren’t on this step yet. In step 2, we are consistently depositing more, making us more secure every month.

Step 5. Invest 15% of household income into Roth IRAs and pre-tax retirement:

I have not stopped my auto-deposited contribution. It’s stupid to pass up an employer match. My wife’s company does not match, so she is currently not contributing.

Step 6. College funding for children:

We have started a $10 College fund.

Step 7. Pay off home early:

I don’t see the point in handling this one separately. Our mortgage is debt, and when the other debts are paid, we will be less than a year from owning our house, free and clear. This is rolled in with step three. All debt is going away, immediately.

Step 8. Build wealth and give!

We have cut off most of our charitable giving. Every other year, it has been a significant percent of our income, and in a few more years, will be so again. The only exception to this is children knocking on the door for fundraisers. I have no problems with saying no to a parent fundraising for their kid, but when the kids is doing the work, door-to-door, especially in the winter, I buy something. My son’s school, on the other hand, gets fundraisers ignored. When they come home, I send a check to the school, ignoring the program. I bypass the overhead and make a direct donation.

Festival of Frugality #278: The Pure Peer Pressure Edition

Misc

Welcome to the Festival of Frugality #278: The Pure Peer Pressure Edition. If everyone else was jumping off of a cliff, would you do it, too? Maybe not, but what happens if you surround yourself with people who hold the same values as you and are striving for personal growth in the same way? Peer pressure doesn’t have to be negative.

“Peer pressure is not a monolithic force that presses adolescents into the same mold. . . . Adolescents generally choose friend whose values, attitudes, tastes, and families are similar to their own. In short, good kids rarely go bad because of their friends.” – Laurence Steinberg

Shameless plug: If you like what you see, please take a moment to subscribe to Live Real, Now by email or RSS or follow us on Twitter. All your friends are doing it.

Editor’s Picks:

Dinks Finance shows us a few ways to negotiate your mortgage fees. Take a few minutes to read this post before you get a mortgage.

Money Ning reminds us that everyone needs a crappy job early in their working life.

Personal Finance by the Book is leading the fight against the 100,000 mile mindset.

Free Money Finance shows several ways to have fun dates on the cheap. My secret is to make it look “creative” and “unique” instead of “cheap”. You don’t have to cave to the pressure of “expensive” to have a good time.

“Most literature on the culture of adolescence focuses on peer pressure as a negative force. Warnings about the “wrong crowd” read like tornado alerts in parent manuals. . . . It is a relative term that means different things in different places. In Fort Wayne, for example, the wrong crowd meant hanging out with liberal Democrats. In Connecticut, it meant kids who weren’t planning to get a Ph.D. from Yale.” – Mary Kay Blakely

The Best of the Rest:

Budgeting in the Fun Stuff talks about my favorite tax-funded institution: the Library. I’ve easily save thousands of dollars since I started using the library consistently.

Babies are undeniably expensive. Squirrelers provides some tips on limiting the early expenses.

“Don’t think you’re on the right road just because it’s a well-beaten path.” – Author Unknown

Wealth Pilgrim shows how his daughter discover the secret to saving 80% on college costs. The trick isn’t just going to a state school, but what you do when you get there.

ptMoney shares some copy-cat recipe sites. I love making copy-cat meals with better quality ingredients for half the price.

“Every society honors its live conformists, and its dead troublemakers.” – Mignon McLaughlin

Magical Penny recommends tracking your net worth. Mint makes that easy to do.

Smart Wallet talks about going cash-only and the benefits of credit cards. I am currently cash-only, but plan to transition to a good rewards card when all of the debt is gone.

Simple Life in France discusses radical simplicity and frugality in relationships.

“There’s one advantage to being 102. There’s no peer pressure.” – Dennis Wolfberg

I’m a bit of a foodie and more than a bit cheap, so when Not Made of Money talks about creative uses for some we stock up on, I’m listening.

Wanderlust Journey explains the Carnival Cruise loyalty program. I’ve been on exactly one cruise and enjoyed it quite a bit. It’s not the best method of travel for all possible destinations, but I can’t think of a better way to spend a couple of weeks in the Caribbean.

Beating Broke just saved a ton of money by switching to…wait, wrong venue. Read how they saved money on a remodel. Don’t be afraid to use your social capital–the skills of the people who care about you.

“If fifty million people say a foolish thing, it is still a foolish thing.” – Anatole France

If you’ve got kids who are planning to play an instrument, you’ll want to pay attention to Budgets are Sexy‘s ideas on saving money on musical instruments.

Free From Broke talks about the hidden costs of home ownership. A home is a never-ending money sink.

“Peer pressure has many redeeming qualities. It is the pressure of our peers, after all, that gives us the support to try things we otherwise wouldn’t have.” – Bill Treasurer

Suburban Dollar explains Swagbucks.

Money Help for Christians shares some tips to save money. I particularly enjoyed the coupon walk-through link.

Provident Planning talks about someone living happily on $7000 per year. I can’t imagine making it on that.

A “Normal” person is the sort of person that might be designed by a committee. You know, “Each person puts in a pretty color and it comes out gray.” – Alan Sherman

Final plug: If you enjoyed yourself, don’t forget to subscribe to Live Real, Now by email or RSS or follow us on Twitter. All your friends are doing it. The coolest ones are even fans of LRN on Facebook.

Let’s Talk Pets and Other Unexpected Expenses

Finance

The following is a guest post by Crystal at Budgeting in the Fun Stuff. Her blog covers living expenses, saving for your future, and the fun stuff in between. (Ed. Thanks, Crystal!)

I’ve been complaining on and off about the cost of my poor Pug’s allergies, so I thought I’d do a little post to let all of us vent a little about unexpected expenses. 🙂

Here’s how much Mr. Pug has cost in vet bills and medicine alone since he developed major allergies to meat proteins and dairy in February 2010:

February 4, 2010 – Mr. Pug licked off some hair, so we visited the crappy vet I will never go to again – $185.29
May 11, 2010 – Mr. Pug stopped eating and his eyes looked cloudy, first visit to new vet for dry eye – $177.78
May 12, 2010 – Dermatology Exam, Skin Scraping, Ear Check, and 6 medicines – $254.00
May 18, 2010 – Check-Up on dry eye – $53.34
June 2, 2010 – Check-Up on Ear Infections, Skin Infection, and medicine refills – $134.00
July 8, 2010 – Check-Up on Skin Infection, 2 new medicines, and 2 refills – $146.80
July 8, 2010 – Antibiotics – $60.60

AND we’re scheduled for another $105 check-up this coming week for his hopefully healed ear infection. So, between February 4 and this coming week, we will have paid at least $1116.81 for vet visits and medicines alone. That doesn’t even take into account the $45 bags of vegan dog food that only lasts about 6 weeks or the $500 we spent last year on 5 tooth extractions. 🙁

Thankfully we didn’t get pets until we had excess cash flow, but DANG! He’s an expensive little boy! I love him and we’d pay it again, but I wouldn’t suggest pure breeds for anybody not willing to lay out major dough for something as “simple” as allergies. We would totally let our dogs go if they needed chemotherapy or something (yes, I have my lines), but allergies…well, how do you turn down treatment that can make a pet 99% better? I’m a sucker for his big Pug eyes…I mean, look at him:

Have you had any unexpected expenses pop up? If so, what have they been and how are you dealing with it?

Overbanked

Finance

Last week, when I mentioned that I lost my phone, there was some interest in my self-insurance warranty plan.

Post Office Savings history — Image by brizzle born and bred via Flickr

The truth is, that’s just one of 14 savings accounts I keep. I find it’s simpler to keep track of my savings goals by moving the money to separate accounts than to track everything in a spreadsheet. This lets me tell how I’m doing at a glance.

I have one account each at two major traditional banks. These savings accounts exist to provide a target for an automatic transfer that eliminates fees on the associated checking accounts. Whenever much money accumulates here, I sweep it out and throw it at my credit card.

I also have 12 accounts at INGDirect. I chose ING because they are extremely convenient and, at least at the time, had a competitive interest rate. Different countries have different banking options.

Here are the rest my accounts:

Emergency fund. I deposit $25 every month. I also keep part of my emergency fund in a CD that’s also at ING.
Property tax fund. Every month, I deposit a bit more than a twelfth of my annual property tax bill. When the time comes to pay, I just transfer the money from my account to the tax assessor. It works well.
College fund. Yes, this is a straight savings account. Right now, I’m focused on debt, not college. When my debt is gone I’ll ramp this up. I started this just to get started. From here, it’s a few seconds of work to increase the amount I contribute, which is currently $10 per month.
Warranty fund. Instead of buying warranties, or going into a panic when something breaks, I deposit $50 into this account every month. When something breaks, I take the money out of this account(assuming I have enough) and use it to replace or repair whatever is missing. $50 isn’t a lot to contribute, if you have things breaking every week. I go several months without touching this money, and it’s always been enough to cover what we need.
Vacation fund. This is pure fun money. I sock away a bit out of every check, and occasionally when other money comes in. Then, we plan our vacation around how much money we have here and how many points we have saved on our credit card. Vacations seem like a luxury when we’ve got debt, but I work so much and miss so much of my kids, day to day, that I consider this a necessity. It’s a week of downtime with my family, doing something they will remember. It’s worth it, several times over.
Braces fund. So far, we know that two of our kids are going to end up in braces. One of them will probably be this year. We had more in this account, but stole some to cover our vision therapy bill. When our insurance reimbursement finally comes back, that will go straight into this account.
Camera fund. My wife really wants a prosumer-level camera, so I started an account to save for it. If we go over budget, this is the first account we raid, since this is purely a luxury.
Personal goal accounts. We each have a goal account set up for things that don’t affect the family. As a practical matter, I save to go to FINCON and a hunting trip with my Dad and my brother, while my wife saves for a couple of scrapbooking retreats each year. These accounts are funded solely from extra money and don’t have an automatic deposit.
Car fund. This started as a car repair fund, with a $50 deposit each month. When my car was finally paid off last year, I took half of my car payment and redirected it into this account, to help us pay cash for our next car. Last month, I stole some money from this account to play stockbroker. It wasn’t a lot of money, but I’ve gotten a 25% return over the last 6 weeks.
Internet. This is just a convenient account to catch money that gets paid from things like my Amazon affiliate account.
Held for tax. The name should be self-explanatory. When I get paid from any of my side hustles, I set aside about 25% to cover any tax bill I may be missing. After I file my taxes, I shoot any leftover money out to my other savings goals or my credit card, as appropriate.

I also have a couple of monthly line items in Quicken that I haven’t broken into separate accounts, just to provide an overdraft buffer, like our gift budget.

That’s proof that I am over-banked. How about you? How do you track your savings goals?

My First Major Side Hustle

Business

This post was published a year ago as part of Budgets Are Sexy’s Side Hustle series.

On a chilly February day in 2007, I went with a friend to get a permit to carry a pistol. It was partially on a lark, and partially because a right not exercised is a right lost and I am a strong believer in the right to self-defense.

I spent the morning in an overcrowded classroom and the afternoon on an outdoor shooting range when it was -9 degrees Fahrenheit. I was cold numb, but I had the paperwork I needed. As my friend and I slowly thawed out on the drive home, we looked at each other and said “We can do better than that.”

After picking up teaching certifications from the NRA, the Minnesota Dept of Natural Resources, the Minnesota Association of Defensive Firearms Instructors and finally, the Minnesota Bureau of Criminal Apprehension, we started teaching as Metro Defense Training, LLC.

We’ve been doing this for 3 1/2 years, holding one class per month. In the first two and a half years, we taught about 80 people what they needed to know to legally carry a gun. Last year, it exploded. By March, we had made more money than we made in all of 2009. The rest of the year rocked just as hard. We turned ourselves into one of the top 10 training organizations by volume, among a field of 200 competing agencies.

This isn’t a huge market, and it will never make us rich, but it is bringing us a decent chunk of extra cash. It’s made a huge difference on my debt repayment. I don’t include this money on my budget, so every penny I take as pay goes straight to my debt. This has pushed me two whole years ahead of my debt repayment schedule.

What did we do right?

The most important thing we did was to partner with each other. We make a good team. My partner is a natural-born salesman, while I’m an introvert. I couldn’t have built this without him. I am a super-geek, so our technical costs have been nonexistent, aside from a domain and hosting. I’m also a bit obsessive about my passions, so I keep us up to date on any legal issues and developments. He’s working on an MBA and has run small businesses before, giving us valuable knowledge and experience.

We’ve never cut any corners. We give the best possible class we can, no matter what. No extra fees, or sardine-packed students.

We answer questions for our students for years after class. If a student wants a refresher, they can come back for free as often as they’d like.

Word of mouth has been a godsend. The local sheriff–in the most populous county in the state–recommends us when people call. You can’t buy ads like that.

What did we mess up?

Marketing. If a tree falls falls in the business district, does anyone care? If you run a business, put up some ads or fliers and get the word out. No matter how good your business is, you’ll never make a cent if nobody knows about it.

Scheduling. The nice thing about a business like this is the flexibility. We can run a class whenever we’d like. Unfortunately, we forget to schedule the next class until the end of the current class. We could do better. That still leaves a full month’s notice, but some people have to request time off from work far in advance, or do things like going on vacation.

Would I do it again?

Absolutely. We found an accessible niche that serves a need in the community. We’ve turned a passion into a healthy side income, without having to devote full-time labor to it. The buy-in cost was low. It only cost about $1000 and a few weekends to get the equipment and make our training presentation.

It has been an excellent learning experience. I’ve learned a lot about running a business, and I’ve become something of an expert on the related laws. It’s led to my involvement with a non-profit, which has put me in contact with a number of lobbyists and politicians. I’m learning more about how our legal system works than you’ll ever learn watching C-Span and sending letters. Even if the business failed, I’d still be ahead of the game when you count the skills and knowledge I’ve acquired.

The most important thing I’ve learned is that, when you are looking for a side-hustle, you should find something you care about and chase that until it turns into money. Not every hobby or interest can turn into a paycheck, but many can. Ultimately, you have to do something you care about and care about what you do.