- Up at 5 two days in a row. Sleepy. #
- May your…year be filled w/ magic and dreams and good madness. I hope you…kiss someone who thinks you’re wonderful. @neilhimself #
- Woo! First all-cash grocery trip ever. Felt neat. #
- I accidentally took a 3 hour nap yesterday, so I had a hard time sleeping. 5am is difficult. #
- Wee! Got included in the Carnival of Personal Finance, again. http://su.pr/2AKnDB #
- Son’s wrestling season starts in two days. My next 3 months just got hectic. #
- RT @Moneymonk: A real emergency is something that threatens your survival, not just your desire to be comfortable -David Bach # [Read more…] about Twitter Weekly Updates for 2010-01-09
New Debt
For the first time in 2 years(almost to the day), I am acquiring new debt that I can’t afford to pay off immediately. On a credit card.
Last Thursday, my son entered vision therapy. He has what is commonly known as a “lazy eye”, but is more properly called a “wandering eye”. His eyes don’t always lock on to whatever he is looking at. Instead, one of his eyes will (occasionally, but not always) drift to the side and shut off. His brain doesn’t interpret the signals from that eye.
We had two sessions of tests to diagnose the specific problems: $350.
We will have 28 weekly sessions of therapy @ $140 per session: $3920
There is an equipment fee: $85
That’s a total of $4355 over the next 7 months.
Insurance covers some of it, but the therapist is out-of-network, so it’s “pay first, get reimbursed later from the insurance company”. If we pay up front, we get 1 session free, bringing the price to $4215, minus insurance.
I have a health savings account that I have been trying to max out to cover this, to make my payments all pre-tax. I haven’t been able to get enough in there, yet. In fact, since I don’t have my kids on my insurance, my maximum HSA contribution is $3050.
Since finding out that vision therapy was going to be necessary, I have managed to save $1000 in cash, and about $1500 in my HSA. That’s $2500 of a $4215 bill, leaving $1715 that I still need to be able to cover.
Here is my plan:
We’re charging the entire $4215 at 11.9% interest on a card with a 2% travel rewards program. This will give me $84.30 worth of travel rewards good for reimbursing any travel expenses.
I will immediately pay off $1000 from cash savings.
I will also immediately file for an insurance reimbursement, which will cover 80% – $500, or $2972 minus a bit. Our insurance got a waiver on the pseudo-wonderful healthcare fraud act on the grounds that the plan sucks so bad that it would cost too much to comply with the law. No joke. I’m expecting about a $2500 reimbursement, and I have no idea how long that takes.
In 6 weeks, when I have maxed out my HSA contributions for the year, I will file for an HSA reimbursement for about $2500, leaving about $500 to cover some medical costs for the rest of the year. Vision therapy doesn’t count against my deductible, since my kids are on my wife’s insurance plan.
Starting in June, my debt snowball will no longer be going to max out my HSA and will instead go straight to this card, to finish paying it off as quickly as possible. That’s $750 per month.
Any money from any side work will also go towards this bill, but I don’t budget for that, because it isn’t reliable money.
The projected results:
$3215 on the credit card for 6 weeks @ 11.9% = $50 in interest payments.
After the HSA reimbursement, there will be $715 left to pay, which will be paid off in June for another $10 in interest.
When we get the insurance reimbursement, we’ll replenish the medical bill account, to start getting ready for the kid’s braces next year. We’ll drop $1500 into that account and use the remaining $1000 as a debt snowball payment.
We’ll end up paying $60 in interest to save $140 in therapy costs, so it’s good math, but I hate the idea of racking up another credit card bill. I could drop the interest costs a bit by raiding my emergency fund, but that still wouldn’t cover it all, and it would leave me with very little left for an actual emergency. I could raid the emergency fund for half of its value($700), and reduce the initial interest paid to $25 and the total interest paid to about $40, then use the $1000 leftover from the insurance reimbursement to replace my emergency fund.
My Net Worth
I last did a net worth update in August. I don’t worry much about tracking my net worth, but I’d like to know where I sit at the beginning of the year. If I’m going to track it, I’m going to share it.
This is where I was sitting in August:
Assets
- House: $252,900
- Cars: $19,740
- Checking accounts: $1,342
- Savings accounts: $5,481 I
- CDs: $1,101
- IRAs: $10,838
- Total: $291,402
Liabilities
- Mortgage: $31,118
- Car loan: $0. Woo!
- Credit card: $20,967
- Total: $52,085
Overall: $239,317
Here is my current status:
Assets
- House: $252,900 (-0) Estimated market value according to the county tax assessor. This will be going down in a few months when the estimates are finalized for the year. It hasn’t gone down, yet, so I’m not counting the change, yet.
- Cars: $20,789 (+1049) Kelly Blue Book suggested retail value for both of our vehicles and my motorcycle. Wee! Value went up on things I intend to drive into the ground!
- Checking accounts: $3,220 (+1,878) I have accounts spread across three banks. I don’t keep much operating cash here, so this fluctuates based on how far away my next paycheck is.
- Savings accounts: $6,254 (+773) I have savings accounts spread across a few banks. This does not include my kids’ accounts, even though they are in my name. This includes every savings goal I have at the moment.
- CDs: $1,105 (+4) I consider this a part of my emergency fund.
- IRAs: $12,001 (+1,163)
- Investment Accounts: $1,155 (+1155) Occasionally, I run across some stocks that can’t possibly go down. I’ve only been wrong once on this front, but I never risk an amount that would be painful to lose.
- Total: $297,424 (+6022)
Liabilities
- Mortgage: $29,982 (-1136)
- Car loan: $0.
- Credit card: $18,725 (-2242) This is the current target of my debt snowball. This has actually grown a bit over the last week. I did a balance transfer that cost $400, but it gives me 0% for a year, versus the 9% I was paying. That will pay for itself in 3 months, while simplifying my payments a bit and saving me almost a thousand dollars in payments this year.
- Total: $48,707 (-3378)
Overall: $249,717 (+9400)
2011 Totals
- Assets: $297,424 (-1441)
- Liabilities: $48,707 (-10021)
- Overall: $249,717 (+9580)
I had two goals in August: Get an IRA rolling and save an extra $2500.
The IRAs I have are just sitting. I haven’t done anything to boost them, in any way, so hurray for the free $1163!
My savings have only grown my $773, but the $1000 I put in the investment account 3 weeks ago came from my car fund, so it would have been a growth of $1773, which isn’t bad at all.
I would still like to kill that credit card debt by August, which I think is doable. My crazy goal is to get rid of it by the end of May.
On 4/15/2009, I had $90,395 in debt. Today, it’s $48,707, so I’ve paid down $41,688 in just under three years, for an average of $1263 per month. That average is down $92 over the last few months. I blame our insane Christmas.
Overall, we had a good year. Paying off my car loan while paying down $4800 in credit card debt feels good. Now, I need to make 2012 better.
10 Ways to Secure Your Kids Against Debt
Everybody wants their children to do well. I want my kids to grow up without making my mistakes. Here are a few ways to help them avoid debt.
- Talk to your kids about money. Your kids will never learn how to handle their finances if nobody teaches them how. This is important. The factor that contributes most to stress, divorce, long hours, and unhappiness can’t be left to chance.
- Set a good example. Spend less than you have and let them see you doing it. No matter what you tell your kids, if they see you doing otherwise, they will learn the bad lesson. Money, work, relationships. They all need attention, and your kids are watching you manage each of them. Make them proud.
- Open a savings account for them, and let them fill it. Teach them the value of their money by letting them work for it, watch it accumulate, and spend it on something they care about. I make my kids work to convince me to make a withdrawal, so they know it is only for the important things. I don’t, however, decide what is important for them.
- Start a college fund. $100 or $10, it doesn’t matter. Start putting something aside today. College costs keep rising. In 10 years, or 20, you can be sure that college will cost more than it does today. Last year, nearly two-thirds of students graduating with a four-year degree did so with an average debt of more than $23,000. Anything you can do to move your kids towards the debt-free 35% will help. They will thank you for it for the rest of their lives. Remember, they are in charge of choosing your nursing home.
- Teach delayed gratification. Don’t let them think that every whim needs to be satisfied…ever, let alone immediately. Sometimes, anticipation improves the act. When I am looking forward to a good meal for a few days or weeks, I really savor it when I finally do get the chance to eat it. If they want everything they see, make them figure out what they want most, and what it will take to get it.
- Teach them to balance a checkbook. This is one of life’s basic skills that far too many people are lacking. If you can’t balance your checkbook, how do you know what you have? If you don’t know what you have, how can you know what you’re able to spend on necessities, or even luxuries? Knowing where you are is at least as important as knowing where you are going.
- Give them control of money. This is the best time to learn how to manage money. Give them an allowance and make it big enough to cover school lunch and bus fare. Let them practice real-world skills and, more importantly…
- Let them make mistakes with it. This is their opportunity to make financial mistakes that won’t haunt them for years or decades. Let them have some money and let them screw it up. When they can’t buy the new game, or can’t fix their car, they will learn. It’s better to do that as teenagers living at home than as adults forced to move back home.
- Let them see your pride in their good decisions. If they do well, tell them. Let their endorphin rush come from your praise instead of their purchase. You aren’t helping them by getting them hooked on the latest gadget. You are helping them by making them feel good about making the right decisions.
- Beat them with a stick.
How do you protect your kids’ future finances from the kids themselves?
Three Ways to Make Christmas Cheap
We failed Christmas Budgeting 101 this year. I haven’t totaled the damage, yet, but we have spent at least $500 more than we had planned.
It hurt.
Next year, we’re going to handle the Christmas budget differently. This year’s model isn’t working. It’s a lot like pushing a car down a hill to get it started, but ignoring the cliff at the bottom.
1. Use cash. A huge part of our problem was that Capital One is helping us celebrate. It’s horrible, because we both know we shouldn’t be using a credit card, for exactly this reason, but we can’t seem to make the transition back away from the plastic. Part of the reason is that Amazon and ThinkGeek don’t accept cash, and part of it is convenience. Don’t get me wrong, we’re not carrying a balance on the card, but it’s still far too easy to overspend.
2. Communicate! If our gift budget is $500, and I spend $300 online while she’s busy spending $300 in stores, out budget is shot. Worse, if we spend that money buying stuff for the same people, our budget is shot before our shopping is done. A little bit of this happened to us this year.
3. Explore atheism. There really is no more effective wa
y to cut down holiday expenses than to eliminate the holiday completely. This may not be the best answer for everyone, but it’s effective. On the other hand, I know several atheists who celebrate Christmas as much as anyone else. This probably isn’t a good alternative for most people.
3, Take 2. Cut back on “stuff”. My kids have more toys than they can play with. My kids’ parents have more toys than they can play with. Do we really need more? Wouldn’t it be better to spend the money I’d normally use to buy my wife a present on a series of date nights, spread out through the year? I could take my kids to Feed My Starving Children so they can understand how privileged they are and how much the things they take for granted are really worth.
There are so many other ways to celebrate a holiday that has turned into a national orgy of consumerism. Next year, we’ll be trying some of the alternatives.
A Brighter Future: 3 Simple Things Parents Can Do to Make a Difference
[Editor: This is a guest post from my good friend Terra. I’ve know her for–jeez, really–20 years. If you’re looking for a staff writer, hit her up. Seriously. She’s good people.]
Who doesn’t want a brighter future for their child? Book store shelves overflow with parenting advice tomes and how-to guides to make “uber-kids”. Eager parents lap up promises to raise their children’s I.Q., increase their chances to get into college, and improve their social skills.
From books to apps to specialized software, there is a dizzying number of products available to help your child grow into the genius you know he or she is.
But what if I told you that the secrets to increasing your child’s likelihood to succeed in life were absolutely free. Simple things you have complete control over. No batteries or special upgrades required. No matter your income, education level, or what country you live in, these deceptively simple tips offer powerful results.
- Make Mealtimes Sacred
Food connects people. From the dawn of time, our species has gathered around the fire, to break bread and share our stories.
In modern times, our schedule can be crazy (between work, social activities, and, you know, life) so having dinner on the table at 6 o’clock every night is not always possible. However, studies consistently show that having a family meal at least 3 times a week has huge benefits for children (from teenagers being less likely to abuse drugs and alcohol, to increased academic success, to reduced risk of developing eating disorders or becoming obese, the implications are impressive). And it doesn’t have to be dinner, any meal will work. Consistency is the key.
Far from being boring, children find the predictable routine of family meals reassuring, promoting warm, fuzzy feelings of closeness and comfort (though teenagers will never admit it). Whether it’s take-out or made from scratch goodness, nothing says “I care about you” like sharing a meal.
Quality matters here, so remove distractions during meal time (turn off the TV, ban phones) and focus on each other. Take this time to reconnect and talk about your day and ask the kids about theirs. Make this time sacred. It matters that much.
- Hug Frequently
“We need 4 hugs a day for survival. We need 8 hugs a day for maintenance. We need 12 hugs a day for growth.” – Virginia Satir, psychotherapist
Receiving a loving hug feels wonderful. But beyond feeling “nice”, hugs literally have the power to heal us and improve our lives.
Hugs have superpowers. A hug has the power to release a “happiness hormone cocktail” of oxytocin (natural antidepressant, promotes feelings of devotion, trust and bonding), dopamine (intense pleasure), and serotonin (elevates mood, negates pain and sadness) in both the giver and receiver. Bonus, hugs are naturally gluten-free, organic, and have no unpleasant side effects.
To get the most benefits, prolonged hugging is recommended, around 20 seconds. A full-body hug stimulates your nervous system while decreasing feelings of loneliness, combating fear, increasing self-esteem, defusing tension, and showing appreciation. However, this hug fest only works its magic if you’re hugging someone you trust. Since children love to be held and cuddled, this is ideal for family bonding. Not so much with that new client you just landed (awkward…).
How does hugging effect children specifically? Children who aren’t hugged have delays in walking, talking, and reading. Hugging boosts self-esteem; from the time we’re born our family’s touch shows us that we’re loved and special. All of those cuddles we give to our children are imprinted on them at a cellular level and will still be imbedded in their nervous system as adults. Hugs today equal the ability to self-love as adults. That’s an awesome gift.
- Create a Home Library
We all know how important reading aloud to children is, from infants to teenagers. Reading is one of the most important factors affecting the development of a child’s brain. But reading skills are not hardwired into us; we don’t pop out of the womb quoting “Pride and Prejudice”. Reading skills need to be taught and encouraged.
Parents are a child’s first, and most important, teachers. While children can learn from flashcards and workbooks, nothing is more powerful than seeing your passion for reading. Whether you like it or not, your children are learning from your every move. What you find important, they will find important. No pressure! Teaching reading to your child requires attention, focus, and motivation. It also requires access to books, lots and lots of books.
Libraries are a great resource for developing a love of reading in your child. Most have a thoughtfully arranged children’s area offering story-time and other enrichment opportunities. However, nothing beats having a book to call your own, to hold and cherish, until the edges are worn with love.
Having a well-stocked home library, it turns out, matters. A lot. This study found that having a 500-book library was equivalent to having university-educated parents in terms of increasing the level of education their children will attain. That’s pretty powerful. It doesn’t matter if your family is rich or poor, from North America or Asia, if your parents are illiterate or college-educated, what matters is that you have books in your home.
Don’t’ have the space for 500 books? No worries. Having as few as 20 books in the home still has a significant impact on propelling a child to a higher level of education, and the more books you add, the greater the benefit.
Having a variety of books available makes a difference; especially important are reference books, with history and science texts having the greatest benefit.
No money for books? No Excuse! Dolly Parton’s Imagination Library is a great resource for free, high-quality children’s books. When you sign up, your child is mailed a new book each month until the age of five, addressed to them (a very special thing indeed).
I hope these tips empower you to take action. Small changes can have a big impact on your child’s future. Just remember, it’s not the money you make or the tutor you’ve hired or the new app you’ve installed that will catapult your baby Einstein ahead in life. It’s the quiet moments with you at home, eating, hugging, and reading that will carry them through whatever life brings their way.
Are these things you would like to focus on in your family? Do you have simple parenting tips that have made a difference in your child’s life?