Live Real, Now

The no-pants guide to spending, saving, and thriving in the real world.

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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?

 

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?

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. <a href=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.

My Financial Life

Finance

My financial life right now is boooring.

And that’s a good thing.

When I started this site I was $90,000 in debt, and considering bankruptcy.  I’d just started on the Dave Ramsey plan and was looking for every possible way to scrape up any extra money  I could.

Now, the debt is nearly gone.

US interest payments on debt by sector as a fr...
US interest payments on debt by sector as a fraction of GDP 1960-2008 (Photo credit: Wikipedia)
  • I’m looking at the last $8000 on my mortgage.  I have enough in savings to pay it off today, without draining my savings completely dry.
  • My IRA gets maxed out every year, and this year, my wife’s will be, too.
  • We save or invest about 30% of our income.
  • My credit score according to CreditKarma.com is 826.

Our credit card is almost paid off every month.  There’s occasionally some overlap between our auto-payment and our charges.  And sometimes the budgeted auto-payment doesn’t match the reality of our spending and I don’t notice for a week or two.  Except for the end of last year, but that’s a post for another day.

The short version is: We’re doing well, and we’re nearing the end of our financial problems.

Our scheduled mortgage over-payments will have it completely paid off in October.  Then we are debt-free and can hopefully manage to live the rest of our lives without paying interest on money that isn’t earning us more than we are paying.   For example, I’m willing to take out a mortgage to buy another rental property, but I’m going to wait to do that until our current mortgage is paid and we have a substantial down payment ready.

No debt.

I’m not kidding when I say it’s been a long 6 years of fighting our debt.  Counting a car loan we got and paid early, we’ve paid more than $110,000 of debt in six years.

I’ve run side businesses, aggressively negotiated raises, and left companies(voluntarily and otherwise) for better pay & benefits.

I’ve watched friends and family take vacations around the world.

I’ve turned my kids down for so many things that I would love to buy them, but couldn’t because being financially secure is a much higher priority than spoiling children.  Try explaining that to a 6 year old.

And now, the debt-ridden part of our financial journey is almost over.   Finally.

So what’s next?

I have no idea.  I’d like to travel more.  Linda and the girls want us to move to a hobby farm and get horses.  We want more rental properties.

Whatever “next” is, it will be done from a position of strength that won’t destroy our financial world or put out futures at risk.

 

A Budget Isn’t Enough

Finance

Pre-war Bayer heroin bottle, originally contai...
Image via Wikipedia

You know exactly how much you make, to the penny.   You’ve listed all of your bills in a spreadsheet, including the annual payment for your membership to Save the  Combat-Wombat.   You know exactly how much is coming in and how much has to go out each month.   Your income is more than your expenses, yet somehow,  you still have more month than money.

What’s going on?

The short answer is that a budget is not enough.

A budget is not…

…a checkbook register. Do you track everything you spend?  Are you busting your budget on $10 lattes or DVDs every few days?  Is the take-out you have for lunch every day adding up to 3 times your food budget?  Are you sure?   If you don’t track what you spend, how do you know what you’ve actually spent?  You have to keep track of what you are spending.   Luckily there are ways to do this that don’t involve complex calculation, laborious systems or even proper math.   The easy options include using cash for all of your discretionary spending(no money, no spendy!), rounding your spending up so you always have more money than you think you do, or even keeping your discretionary money is a separate debit account.  That will let you keep your necessary expenses covered.  You’ll just have to check your discretionary account’s balance often and always remember that sometimes, things take a few days to hit your bank.

…a debt repayment plan. You may know how much you have available, but if you aren’t exercising the discipline to pay down your debt and avoid using more debt, you not only won’t make progress, but you’ll continue to dig a deeper hole.   Without properly managing the money going out, watching the money coming in is pointless.

…an alternative to responsible spending. Your budget may say you have $500 to spare every month, but does that mean you should blow it on smack instead of setting up an emergency fund?   I realize most heroin addicts probably aren’t reading this, but dropping $500 at the bar or racetrack is just as wasteful if you don’t have your other finances in order.   Take care of your future needs before you spend all of your money on present(and fleeting) pleasures.

A budget is a starting point for keeping your financial life organized and measuring a positive cash flow.  By itself, it can’t help you.   You need to follow it up with responsible planning and spending.