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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?

 

Budget Lesson, Part 1

Finance

Sample <a href=budget” width=”300″ height=”185″ />
Image via Wikipedia

Over the next few weeks, I will be going over my budget in detail.

The first section is income, but that’s straightforward.  A line for each income source, bi-weekly, monthly and annual totals.  Simple.

Before we start, a word on the organization.  There are five columns:

  • Category – This is the description of the line item.
  • Cost – How much do you pay for this item?
  • Time – What is the frequency of the payment?  Valid values are ‘m’, ‘q’, ‘y’, ‘w’ for ‘Monthly’, ‘Quarterly’, ‘Yearly’ and ‘Weekly’.
  • Monthly – Cost and Time are combined to calculate the monthly expense, to make it possibly to budget.  If this is $100, I need to set aside a C-Note each and every month to make the payment when it comes due.
  • Yearly – This column is mostly informative.  It’s helpful to see this in comparison to my annual pay.

The first section I am actually going to address is discretionary spending.

  • Groceries/Dining    $475.00 – We don’t budget heavily for groceries, which would be a surprise if you saw me.  At the smallest I have ever been, fit, I was never small.  We shop smart, buy in bulk when it makes sense, and rarely eat out.  We also keep cooked rice and beans in containers in the refrigerator as a cheap and healthy way to stretch almost everything we eat.
  • Discretionary    $250.00 – This gets used for household items, like toilet paper and soap.  It also get used for the odd book or movie, or to cover the gaps between the other categories and reality.
  • Baby stuff    $60.00 – We have two children in diapers.  ‘Nuff said.  This category does get progressively smaller as the baby items are outgrown and the children get potty-trained.
  • Gas/oil    $200.00 – Gas and auto-maintenance.  This is actually higher than monthly costs, allowing us to set some aside for larger maintenance issues.
  • Clothes    $15.00 – All of our dressers are overflowing, so this is strictly replacement cost for the time being.  Our kids wear a lot of hand-me-downs.
  • Blow Money    $50.00 – Occasionally, habitual shoppers need to shop.  If they don’t do it on-budget, they will do it off-budget and kill the whole idea.

Initially, we used a “virtual envelope” system.  We had a spreadsheet and every time something was spent in this category, we entered the amount and stopped when the category was spent.   Didn’t work.  We are going on a pure, cash-only system as of the first of the year.  No money, no spendy.

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.

Flatbed Trucks: Why Buy When You Can Rent?

Business

English: DAF flatbed truck in Bremen
English: DAF flatbed truck in Bremen (Photo credit: Wikipedia)

This is a guest post.

The goal of any business is to maximize profits while limiting expenses. Yet sometimes, a business may need a certain piece of equipment for a special project or other task. For example, a flatbed truck may be needed sometimes, but not enough times to justify spending the money to buy one. When this is the case, renting the truck becomes the smart option.

Renting a flatbed truck is perfect when working with heavy, oversized or irregular shaped cargo. Many times these trucks may only be needed for one or two days, perhaps only a few hours. When this is the case, renting a truck makes perfect sense. Any town and city has numerous rental truck options from which to choose, with the most popular brand being U-Haul. Flatbed trucks come in a variety of sizes, ranging from 8-22 feet in length. They can be rented for several days or only a couple of hours, depending on one’s needs. If necessary, the trucks can also be rented on a weekly or monthly basis.

A truck hire can also be very cost-effective for a business. Buying a flatbed truck can cost a business $40,000-$50,000 or possibly more, depending on the size of the truck. As with any new vehicle purchase, as soon as it’s driven off the dealer’s lot it begins to depreciate, therefore giving a business owner an investment whose value is less and less as time goes by. By renting a truck only when necessary, it saves a business substantially in terms of making a capital investment. Rental prices vary among different businesses, with most averaging $50-$100 per day depending on the truck that’s rented. Generally, the bigger the truck the more it costs to rent. There are usually no hidden charges or fees associated with renting trucks, so long as they are returned on time, in good condition and with the same amount of fuel they had when they left the rental lot. Also, the person who rents the truck is not the only person allowed to drive it. Most rental places allow up to three other people to be added to the driver’s list for an additional fee, often averaging around $10.

Most truck rental places allow reservations to be made online, and payments can be made with credit cards. Reserving online and paying with a credit card allows a business to take advantage of discounts, for most businesses will offer discounts for reserving online. Those who drive flatbed trucks only need to be at least 18 years old with a valid driver’s license, and the trucks do not require any special licenses to operate.

Many companies also provide 24/7 roadside assistance for renters, so if the truck breaks down while being used it can be picked up and replaced at no charge. With all these benefits, it makes far more sense for a business to rent a truck for its occasional needs rather than purchase one for a task now and then.

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Money Problems – Day 8: Insurance

Finance

insurance
Image by alancleaver_2000 via Flickr

Today, I am continuing the  series, Money Problems: 30 Days to Perfect Finances.   The series will consist of 30 things you can do in one setting to perfect your finances.  It’s not a system to magically make your debt disappear.  Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.

I’m not running the series in 30 consecutive days.  That’s not my schedule.  Also, I think that talking about the same thing for 30 days straight will bore both of us.   Instead, it will run roughly once a week.  To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.

On this, Day 8, we’re going to talk about insurance.

What is insurance?  Insurance is, quite simply a bet with your insurance company.   You give them money on the assumption that something bad is going to happen to whatever you are insuring.  After all, if you pay $10,000 for a life insurance policy and fail to die, the insurance company wins.

A more traditional definition would be something along the line of giving money to your insurance company so they will pay for any bad things that happen to your stuff.   How do they make money paying to fix or replace anything that breaks, dies, or spontaneously combusts?  Actuary tables.  Huh?  The insurance company sets a price for to insure—for example—your car.  That price is based on the statistical likelihood of you mucking it up, based on your age, your gender, your driving history, and even the type of car you are insuring.  What happens if a meteor falls on your car?  That would shoot the actuary table to bits, but it doesn’t matter.   They spread the risk across all of their customers and—statistically—the price is right.

What kinds of insurance should you get?

Homeowner’s Insurance

For most people, their home is, by far, the largest single purchase they will ever make.  If your home is destroyed, by fire, tornado, or angry leprechauns, it’s gone, unless you have it insured.   Without insurance, that $100, or  200, or 500 thousand dollars will be lost, and that’s not even counting the contents of your home.

Homeowner’s insurance can be expensive.  One way to keep the cost down is to raise your deductible.  If you’ve got a $1500 emergency fund, you can afford to have a $1000 deductible.  That’s the part of your claim that the insurance company won’t cover.  It also means that if you have less than $1000 worth of damage, the insurance company won’t pay anything.

You can get optional riders on your homeowner’s insurance, if you have special circumstances.  You can get additional coverage for jewelry, firearms, computer equipment, furs, among other things.  You base policy will cover some of this, but if you have a lot of any of that, you should look into the extra coverage.

Auto Insurance

Car insurance is required in most states.  That’s because the kind caretakers in our governments, don’t want anyone able to hit you car without being able to pay for the damage they caused.  To my mind, I think it would be more effective to just make whacking someone’s car without paying for it a felony.  If someone is a careful driver or has the money to self-insure, more power to them.

Auto insurance comes with options like separate glass coverage, collision, total coverage (comprehensive), or just liability.  Liability insurance is what you put on cheap, crappy cars.   It will only pay for the damage you do to someone else.

Rental

I’ve never had rental insurance.  The last time I rented, I could fit everything I owned in the back of a pickup truck with a small trailer, and it could all be replaced for $100.   Heck, I had the couch I was conceived on.  Err.  Ignore that bit.

Almost everything you can get homeowner’s insurance to cover will also cover renter’s insurance, except for the building.  It’s not your building, so it’s not your job to replace it.

Life Insurance

If you care about your family, you need life insurance.   This is the money that will be used to replace your income if you die.   I am insured to about 5 times my annual salary.   If that money gets used to pay off the last of the debt, it will be enough to supplement my wife’s income and support my family  almost until the kids are in college. You should be sure to have enough to cover any family debt, and bridge the gap between your surviving family’s income and their expenses.  At a minimum.  Better, you’ll have enough to pay for college and a comfortable living.

Life insurance comes in two varieties: whole and term.  Whole life…sucks.  It’s expensive and overrated.     The sales-weasels pushing it will tell you that it builds value over time, but it’s usually only about 2%.  It’s a lousy investment.  You’re far better off to get a term life policy and sock the price difference in a mutual fund that’s earning a 5-6% return.

Term life is insurance that is only good for 5, 10, or 20 years, then the policy evaporates.  If you live, the money was wasted at the end of the term.  The fact that it’s a bad bet makes it far more affordable than whole life.  It doesn’t pretend to be an investment; it’s just insurance.  Pure and simple

Personal Liability Umbrella

An umbrella policy is lawsuit insurance.  If someone trips and hurts themselves in your yard, and decides to sue, this will pay your legal bills.  If you get sued for almost anything that was not deliberate(by you!) or business related, this policy can be used to cover the bill.

If you call your insurance company to get an umbrella policy, they will force you to raise the limits on your homeowner’s and auto insurance.  Generally, those limits will be raised to $500,000, and the umbrella coverage will be there to pick up any costs beyond the new limit.

A little-known secret about umbrella policies:  They set the practical limit of a lawsuit against you.  Most ambulance chasers know better than to sue you for 10 million dollars if you only have a policy to cover 1 million.   They will never see the other 9 million, so why bother?  They’ll go for what they know they can get.

The flipside to that is that you should not talk about your umbrella policy.   Having a million dollars in insurance is a sign of “deep pockets”.  It’s a sign that it’s worthwhile to sue you.  You don’t want to look extra sue-able, so keep it quiet.

Insurance is a great way to protect yourself if something bad happens.   Today, you should take a look at your policies and see where you may have gaps in coverage, or where you may be paying too much.

 

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