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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?

New Debt

Finance

music therapy — Image by emanuela franchini via Flickr

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.

5 Things to Do in the New Year

Finance

: Image via Wikipedia

CNN Money has an article up on 5 things to do this year. After posting a similar article a couple of weeks ago, I thought it’d be interesting to post about someone else’s perspective.

1. Shop for a no-fee checking account.

If you are paying fees for a checking account, go somewhere else. There are so many alternatives available that you shouldn’t be throwing money away. Ally Bank has a great no-fee checking account, as does INGDirect, though ING won’t let you write paper checks against the account. The same principle applies to credit cards. If you have a card with an annual fee and you aren’t getting some monster services or rewards to go with it, run away.

2. Save your raise.

I don’t necessarily agree with this one. If you are in debt, it’s better to use the raise to pay off that garbage, first. When I got my last raise, I immediately boosted the automatic payment for my car to use every new penny. I’ve never had the money available, so I haven’t missed it. Whatever you do, fight lifestyle inflation. Just because you have some more money doesn’t mean you need to spend it. At my last job, I got a substantial raise, so I bought a new car, only to get laid off a few months later.

3. Go for a checkup

Wealth doesn’t matter if you squander your health. Go get a physical. Every disease is easier to treat if you catch it earlier as opposed to later. Don’t make the mistake of running your body into the ground. You will regret it later. Effective this year, most health plans will cover a physical with no copay, co-insurance, or deductible allowed.

4. Score a better rewards card.

B***-****. If you’ve still got debt, don’t concentrate on using more of it. Get that crap paid off. If you’re out of debt, look into getting a rewards card that aligns with your goals. If you like to travel, get a card that gives you frequent flier miles. Otherwise, I’d go with a cash-back rewards card.

5. Use your vacation days.

37% of Americans don’t take all of the vacation to which they are entitled. That’s insane! We work harder and better when we have time to recuperate and relax. Unfortunately, I usually fall into that unfortunate 37%. My vacation resets on February 1st, and this will be the first year in a lot of years that I haven’t had to roll it over or even lose some.

What is your financial plan for the new year?

A Budget Isn’t Enough

Finance

: 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.

Save Your Family

Finance, Life, Parenting

I don’t attach much importance to dreams. They are just there to make sleepy-time less boring. Last night, I had a dream where I spent most of my time trying to prepare my wife to run our finances before telling my son that I wouldn’t be around to watch him grow up. That’s an unpleasant thought to wake up with. Lying there, trying to digest this dream, I started thinking about the transition from “I deal with the bills” to “I’m not there to deal with it”. We aren’t prepared for that transition. Last year, we started putting together our “In case of death” file, but that project fell short. The highest priorities are done. We have wills and health directives, but how would my wife pay the bills? Everything is electronic. Does she know how to log in to the bank’s billpay system? Which bills are only in my name, and will go away if I die? Is there a list of our life insurance policies?

I checked the incomplete file that contains this information. It hasn’t been updated since September. It’s time to get that finished. Procrastinating is inappropriate and denial is futile. Here’s a news flash: You are going to die. Hopefully, it won’t happen soon, but it will happen. Is your family prepared for that?

The questions are “What do I need?” and “What do I have?”

First and foremost, you need a will. If you have children and do not have a will, take a moment–right now– to slap yourself. A judge is not the best person to determine where your children should go if you die. The rest of it is minor, if you’re married. Let your next-of-kin, your spouse keep it. I don’t care. Just take care of your kids! Set up a trust to pay for the care of your children. Their new guardians will appreciate it. How hard is it to set up? I use Quicken Willmaker and have been very pleased. Of course, the true test is in probate court, and I won’t be there for it. If you are more comfortable getting an attorney, then do so. I’ve done it each way. You can cut some costs by using Willmaker, then taking it to an attorney for review.

It’s a sad fact that often, before you die, you spend some time dying. Do you have a health care directive? Does your family know, in writing, if and when you want the plug pulled? Who gets to make that decision? Have you set up a medical power of attorney, so someone can make medical decisions on your behalf if you aren’t able? Do you want, and if so, do you have a Do-Not-Resuscitate order? Willmaker will handle all of this, too.

What’s going to happen to your bank accounts? I’m personally a fan of keeping both of our names on all of our accounts. I share my life and my heart, I’d better be able to trust her with our money. If that’s not an option, for whatever reason, fill out the “Payable on Death” information for your accounts, establishing a beneficiary who can get access to your money if you die. Do you want your spouse to lose the house or the car if you die? Should your kids have to miss meals? Make sure necessary access to your money exists.

Does anybody know what you have for life insurance? Get a copy of the policy and make sure your spouse and someone else knows what company holds it and how much it is worth.

Now, it’s time to make some lists. You need to gather account numbers and contact information for everything.

Bank accounts. List every bank and account you own. Checking, savings, CDs.
Investment accounts. Again, every company, every account.
Mortgage and car payment information.
Life insurance. Get your policy numbers, contact information, beneficiaries, and amount of coverage all in one place.
Credit card accounts. Every card, every company. If it’s just your name on the account, your spouse will need to send certified death certificates to stop collections. Otherwise, she’ll need to pay the bills.
Utilities. Get the account number for the electric bill, the gas bill, water/sewer/garbage, cable and phones.
Other bills. These include car/home insurance, Netflix, memberships and anything else you pay.
I’ve included the account information for my web host, registrars and websites. Some of it is salable, some of it is income-generating.
Car titles. Put the actual titles in the pile of lists.
Property deeds. Keep these here, too.

Non-financial information to list:

Online accounts. Any financial sites that would be useful, or any community sites you would like to have informed about your death. Your online presence is a part of who you are.
Email accounts. Will your survivors need to interact with anybody potentially contacting you? They will need your username and password, or most big providers won’t let them in.
Social media. How many networks do you participate in? Do you want to disappear, or should all of your Facebook friends know your dead?
Blogs. Do you have a blog that needs an announcement? Does it generate income? Could it be sold?
Contact list. Who else needs to be informed of your demise? Don’t make your loved ones hunt for the information.

Now, take all of this information and put it in a nice, fat envelope and lock it in the fireproof safe you have bolted to the floor. Make a copy and give it to someone you trust absolutely. Make sure someone knows the combination to the safe or where to find the key.

Your loved ones will appreciate it.

Fixing Your Credit Report

Finance

Sometimes, negative things appear on your credit report. Usually, they do a good job of maintaining

Credit card (Photo credit: Wikipedia)

accuracy, but mistakes do happen. The creditor or the reporting agency may screw up, or you may have your identity stolen. If either of these situations are true, you’ll want to correct your credit report, making yourself eligible for lower rates on future credit and, occasionally, lowering the cost of things like auto insurance.

If you throw “credit repair” into Google, you get 18 million hits. Most of those are either outright scams or hopelessly optimistic about what they can accomplish. As I said once before:

Credit Repair is almost always a scam. There are ways to get correct bad information removed from your credit report. If the information is correct, those methods are illegal. There are two legal methods to repair your credit. First, stop generating bad credit. Make your payments on time and eventually, the bad items will fall off. Second, write letters disputing the actual incorrect items on your credit report. There are no quick fixes, and anybody telling you different is flirting with a jail sentence, possibly yours.

There are ways to avoid the scammers.

Avoid advance-fee credit repair. If they are any good, you will pay for results, not intentions. If they charge beforehand, they are already breaking the law.
If they insist they can erase the accurate, but negative information, run away.
If they tell you to dispute everything negative, even the accurate information, run away.
If they tell you to create a new credit identity, don’t just run, report them. It’s a felony.

Legally, you cannot get valid information removed from your credit report. Anyone who tells you differently is advocating a crime. However, according to the Fair Credit Reporting Act (FCRA), you are entitled dispute incorrect records.

To verify the accuracy of your credit report, you need to see it. You can get a free report if your credit is used to deny you for something. This is known as an “adverse action” . You have 60 days from the denial to request the report. You can also get one free report from each of the major credit bureaus each year. I space out these requests so I see my credit report every 4 months.

If there is inaccurate information on your report, dispute it in writing. Send a letter to the credit bureau that is reporting the error. Explain the problem and politely demand an investigation. They will contact the creditor, who usually has 30 days to respond. In the meantime, send a dispute letter to the creditor, along with proof of the inaccuracy. If the investigation does not go your way, the creditor will have to report the dispute status to the credit bureaus in the future.

If the negative items are accurate, there is only one way to get it off of your report legally: Wait. Most negative information can only be reported for 7 years, while a bankruptcy will be reported for 10.

Another way to build your credit in the face of negative credit is to start building good credit to overshadow the bad. Get a credit card. Your first credit card from the bottom of the debt-barrel will probably be a gas card or a store-branded credit card. That’s fine. The main consideration is are low or nonexistent fees. Don’t accept application fees, activation fees, fees for carrying a balance or fees for not carrying a balance. Annual fees are becoming a fact of life, so look for low fees. The interest rate does not matter. You will be paying this card off immediately, meaning no less often that every two weeks. Make sure every penny is paid during the grace period, and make sure your card comes with a grace period. Some don’t. Those are bad cards to get.

There are no quick fixes for bad credit, just good new habits and time.