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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?

How to Save Money On Anything

Finance

Haggling (Photo credit: pritzkerphoto.com)

There is a little-known secret to saving money on almost anything. If you want to know what it is, please send a case of beer and a self-addressed, stamped envelope to my house.

No takers?

In that case, I will share the secret that has been passed down from father to son since the Mesopotamians landed the Santa Maria at Plymouth Rock.

Ready?

The secret is to…ask.

That’s right, just suck it up and say “Pretty Please”.

How does it work?

In the easiest version, you call up one of the companies you pay regularly and you say “How can I save some money?”

Allow me to give you some examples.

How to save money on insurance

Call up your insurance company and ask, “How can I save some money with you?” You may be offered a multi-line discount if you let them insure your home and your car or you might be told to raise your deductible. If you have a $1000 emergency fund, you can afford a $500 deductible. They may recommend that you drop some coverages that you don’t need or they may ask you some questions that will allow them to lower your rate. For many years, I lived 2 miles from work and got a discount for the low mileage.

How to save money on utilities

When you call your electric company to ask the magic question, they may offer to conduct a home energy audit to determine where you home is leaking energy. If they try to charge you for the audit, remind them how long you’ve been a customer in good standing.

Another option they may offer is to install a remotely-triggered switch on your air-conditioner. Around here, that switch is good for a 15% discount off of my bill in the summer.

How to save money on your cell phone

If you are out of a contract or near the end of your contract you have leverage. Look up the best comparable deal from another company. Then, call your cell phone provider, ask to be transferred to the retention department, then ask them to convince you to stay. They will.

If you aren’t near the end of your contract, you can still call and ask. If that doesn’t work, watch the mail and any emails from the company. If they change the terms of your contract, you can get out of it without paying a penalty. If you get that opportunity, call and ask for the retention department.

How to save money on credit cards

I am assuming you have a credit card with a balance that gets carried from month to month.

Credit card companies are competitive. Find a competing deal and call your company. Ask them to beat the deal. If the competitor is offering 9%, ask for 8%. If they refuse, call up the competitor. Tell them you will transfer your balance over if they will waive the transfer fee. A surprising number of companies will be happy to do so.

Most bills can be reduced in some way. All you have to do is ask.

Have you had any luck pointing the shrink ray at your bills?

Extra Money? What Do I Do With Extra Money?

Finance

A couple of months ago, I started a new job. The new job has bonus potential every month, and

getting that bonus is largely under my control. Effectively, if I’m not a total slacker, I’ll get
about $500 every month, but it’s not guaranteed.

We’re also getting a small 4 figure tax refund this year. I wasn’t expecting that at the beginning
of last year, but one of my side hustles has taken a turn down a path I didn’t plan for, which
lowered my tax liability considerably.

Both of these things are money that we can’t plan for, so it’s not in the budget. It is extra
money.

What the heck do you do(responsibly) with extra money? It’s easy to take the money and run to the
spend it someplace fun.

Easy.

And tempting.

Very tempting.

But that wouldn’t be responsible at all.

The Dave Ramsey plan says we should put it on our debt, but our debt is down to just a mortgage,
and that’s down to $9000.

Retirement?

I actually over-contributed to my retirement last year, and had to file a form to get the
overpayment back instead of paying a penalty on that money. My wife’s account isn’t getting maxed,
yet, but she’s also way ahead of me in retirement savings.

So what to do with it?

I added a calculator that let’s me punch in a number and it breaks it out by our optional goals.

It has 6 categories:

Extra mortgage payment: 25%. My goal is to pay off the mortgage completely this year.
Retirement contribution: 25%. I do want to max Linda’s retirement contributions this year.
Emergency fund: 15%. We have an emergency fund, but I want to grow it to 6 months of our expenses.
Family: 15%. This if for whatever family thing we’re planning to do. It could be pushed into a down payment for another rental property, or a vacation, or a camper. We’ll decide this each time we get the extra money.
Jason’s Fun Money: 10%. This is for me to blow on something fun, like a 3D printer.
Linda’s Fun Money: 10%. This if for my wife to blow on something fun, like a present for me.

So, if we get $2500 randomly dropped in our mailbox, we’ll put $625 on the mortgage and a
retirement fund, $375 to the emergency fund and the family fund, and $250 to Linda and I for fun
stuff.

That lets us see progress on a few of our goals, while still rewarding how hard we’ve worked and
how much we’ve done without while becoming financially stable. 65% of it is pure grown-up &
responsible spending. 35% is generally fun, but can be repurposed if necessary.

What do you do with surprise money? Do you blow it or do something responsible with it?

Saturday Roundup – Holiday Edition

Misc

Merry Christmas.

Or, Happy Saturday, as the case may be.

T0day, we are herding all of my nieces, nephews, brothers, sisters-in-law, and parents into my house for a second Christmas dinner and gift exchange. It’s the first holiday we’ve hosted. It should be interesting.

On a side note, we’ve gotten so much snow, I’ve almost lost my grill, sitting on my deck. Another 2-3 inches, and my patio table will be just a white mound of cold.

Best Posts

Here is a great story about waking up the Christmas spirit. That’s spirit, not spirits. We’re not discussing booze.

Think you can retire on a million bucks? Think you can get to a million bucks?

I’ve recently realized that I’ve spent more time on the hiring side of the interview table than the out-of-work side. I’m nowhere close to 500 hires, though.

Oooh! Shopping for money! That’s something I’m going to look into. Nothing like turning habits into cash.

This is some serious travel hacking. 15 flight, 16 cities, 9 countries, 35000 miles for $400.

LRN Timewarp

This is where I review the posts I wrote one year ago.

The secret to fearless change? Just get started. Everything else will follow.

I also wrote a post about one of my core values. Without integrity, what can you really have?

Finally, a post on how distractions will kill your productivity.

Carnivals I’ve Rocked

How Much Should You Tip? was an Editor’s Pick in the Festival of Frugality. Thanks!

Shaving for Real was included in the Carnival of Money Stories.

Anchor Price Your Salary was included in the Carnival of Personal Finance.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

There are so many ways you can read and interact with this site.

You can subscribe by RSS and get the posts in your favorite news reader. I prefer Google Reader.

You can subscribe by email and get, not only the posts delivered to your inbox, but occasional giveaways and tidbits not available elsewhere.

You can ‘Like’ LRN on Facebook. Facebook gets more use than Google. It can’t hurt to see what you want where you want.

You can follow LRN on Twitter. This comes with some nearly-instant interaction.

You can send me an email, telling me what you liked, what you didn’t like, or what you’d like to see more(or less) of. I promise to reply to any email that isn’t purely spam.

That’s all for today. Have a great weekend!

Budget Lesson, Part 7

Finance

It’s been a month(again!) since I’ve written a post for the budget series, so I’ll be continuing that today. See these posts for the history of this series.

This time, I’m looking at how to reduce my “set aside” funds. These are the categories that don’t have specific payout amounts and happen at irregular intervals. One of the convenient features of our set-aside funds–also a feature of our non-monthly bills–is that the money sits in our checking account, providing a buffer against overdrafts. The buffer is big enough that I can withdraw our entire month’s discretionary budget on the first of the month.

Parties – Twice a year, we have large parties. We have a barbecue(not necessarily low and slow, I’m in the midwest) and a Halloween party. We also have three kids with birthdays. Each year, we try to do something exotic at the barbecue. One year, it was a turducken. This year, we’ll be skipping the show-off portion of the show. The Halloween party is never expensive. I don’t drink much, so the bar stays well-stocked without frequent expensive shopping trips. We throw two large parties for less than $300 combined, and our guests start RSVPing a year in advance. We’re fun. The kids are getting gypped this year. I am over my addiction to expensive birthday parties for my kids. There will be a small party for one, a sleepover for another, and a party combined with some cousins’ birthday parties for the third. It sound horrible but all of them will have fun.
Gifts – We set aside money for presents, but we don’t feel we need to spend all of the money we have set aside. Anything left over stays here. Eventually, it will be something nice for all of us.
Pet Care – We have 4 cats and a dog. Cat litter and food are expenses that we can’t make disappear. We don’t buy the fancy food, but we also don’t buy the stuff that uses cardboard as filler. We have set a new limit at 3 pets, but that limit will only be reached through attrition. There’s nothing to cut here for a few years.
Car Repair – This is another category with nothing to cut. If we don’t spend it, and something catastrophic happens to a car, we’ll be covered. If it doesn’t, we’ll have a bit more cushion in our checking account.
Furnace Warranty – When we bought a new furnace and air conditioner, we got the extended warranty. This is an unlimited renewal warranty, so, in 5 years, we’ll have to buy it again to keep it. If we keep it forever, they will eventually replace our furnace when it dies.
Medicine/Medical – It’s a sad fact that people get sick. We set aside a small amount to cover our costs. The costs rise and fall, but over any given quarter, I don’t think I’ve been off by more than $5.

I’ve taken a hard look at most of the bills over time, so there isn’t always a lot to cut. Next time, I’ll be addressing our discretionary spending.

Teaching My Child about Money in a Way I Was Not Taught

Finance

When I was in high school and working 15 to 20 hours a week, my mom gave me free rein to use the money I earned as I would like. Actually, she said nothing to me about saving for college or putting some money into savings.

When I had friends who complained that they had to put away some of their earnings, I commiserated with them. How unfair of their parents to make them save some of their money! They worked hard for their money, often at crappy part-time jobs. They deserved to spend the money any way they saw fit.

The way I saw it, why save for college? According to financial aid rules, if the student has any savings, she would have to use the majority of it to pay for college. How unfair. To add insult to injury, if prospective college students have some savings, they would qualify for less financial aid, which often meant fewer student loans.

The injustice.

Yes, it was better to spend my hard earned money than save it and be penalized.

No one told me differently. In fact, many people in my family agreed with me and encouraged me to buy a used car to get to and from my job. Of course, I paid the loan payments for the car, the gas I used and my insurance out of money from my job. That was a responsible use of money, but I also went out to eat with friends, a lot. At 16, I was going out to eat with my friends twice a week at least.

However, my plan worked perfectly. When I went to college, I didn’t have to use any of my hard earned cash. No, not me, because I hadn’t saved anything. Instead, I left college with nearly $20,000 in student loan debt. I took two years off and paid down as much student loan debt as I could, getting it down to about $8,000, but then I went to graduate school and took on more student loan debt. I graduated with nearly $25,000 in debt total. I am still paying on it today, 13 years later.

Now that I am the parent, I am one of those “awful” parents who makes her kids save. My son knows when he gets his allowance, some goes to save, some goes to donate, and some goes to spend. True, it makes me cringe when he uses his spend money on little trinkets like temporary tattoos, stickers, and gum, but I keep silent. He did the work to earn the money, and he can spend it as he likes. However, I am inflexible with saving; that money must be set aside. When he goes to college, I expect that he will have to use the majority of that money. Rather than seeing it as a waste, I see it as an important component of his financial education. Spending his money to pay a portion of his college education will hopefully make him take college more seriously.

Meanwhile, I have already begun having chats with him about money, spending, and budgeting. He watches his dad and I work hard to pay down our debt with gazelle intensity. He sees me use a calculator at the grocery store to see how much our groceries will be.

Ultimately, he will make his own financial decisions as he grows up, but I plan to teach him throughout these important years so that even if he turns into a spendthrift, he will have a firm financial understanding to revert to as he ages. While my mom taught me how to stretch money further, she never taught me how to save; I hope saving is a lesson my son takes with him throughout his adulthood.

How do you teach your kids about money management?

Melissa writes at Fiscal Phoenix where she encourages people to rise from the ashes of their financial mistakes as she and her husband are doing.