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Extra Money? What Do I Do With Extra Money?

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?

Carnival Roundups: The Weaponized Syphilis Edition

Life, Misc

Last weekend, I was in Denver for the Financial Blogger Conference. Last week, I had a sore throat that got worse each day until my tonsils started touching on Friday. I could barely talk, so I went to the doctor, then to bed.

It apparently wasn’t strep throat, but beyond that, it could be anything from motaba to weaponized syphilis*.

This is one of those occasions when I’m happy to be living in the future, where a quick trip to the clinic can knock out what would have been hopeless and fatal and few hundred years ago. Antibiotics and a day spent in bed watching super hero movies made me better. That beats bloodletting any day.

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Yakezie Carnival: Labor Day Edition hosted by Stock Trend Investing

Yakezie Carnival: The Best of Summer Edition hosted by On Target Coach

Carnival of Money Pros hosted by Simple Finance Blog

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Lifestyle Carnival #17 hosted by The Free Financial Advisor

Yakezie Carnival: Dog Days of Summer Edition hosted by Frugal Portland

Carnival of Money Pros: Back to School Edition hosted by See Debt Run

Nerdy Finance #7 hosted by Nerd Wallet

Yakezie Carnival hosted by The College Investor

Yakezie Carnival – Rescue Edition hosted by See Debt Run

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Carnival of Retirement #32 hosted by Young Family Finance

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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.

* Weaponized Syphilis

This involves giving each of the syphilis spirochetes an M16 and a Manifest Destiny indoctrination before releasing them into the wild. The transport mechanism (the “insertion method”) remains as fun as ever.

Have a great weekend!

Getting Out of Debt: The Prime Rule

Finance

The American Dream has been perverted. Life, liberty, and the pursuit of happiness has been cruelly warped to mean

Wipe our Debt (Photo credit: Images_of_Money)

“Toys, free stuff provided at the expense of others, and the ability to buy and do anything I want without regard for the consequences.” To fund this horrible new dream, the people who can’t convince a government program to finance it for them often turn to credit. Credit is the art of putting your future into hock for something that you probably don’t need or want and that won’t work by the time you are finished making payments.

Ick. I’ve chosen not to live my life that way. Every day, more people are waking from the consumerism fog and deciding to reel their lifestyles back in and take control of their lives. They take a look at the world around them, compare it to their check register, and realize that it’s just not sustainable. You can’t survive on credit forever. Eventually, you will realize that there isn’t enough money to continue to buy things today on tomorrow’s paycheck.

What’s the first thing you should do when you decide that a “normal” life—a life in debt—isn’t the way you are going to live your life?

Well, when you find yourself standing in a grave, stop digging. You can’t dig yourself out of a hole and you can’t borrow your way out of debt. If you want to get out of debt, you need to stop using more debt. Period.

It may seem impossible, and the people around you may try to convince you that you are crazy. It is not impossible, just time-consuming. Short of finding an insane amount of money hiding under your front step or a winning lottery ticket blowing across the sidewalk, there are no shortcuts to getting out of debt. It’s just a matter of making the payments and not using more credit.

As far as the haters, screw ‘em. They are brainwashed into thinking their unsustainable and insane lifestyle is not only normal, but necessary. You don’t get life advice in a padded room, and you don’t plan your finances with a debt-addict.

Getting out of debt is a simple process, but that doesn’t make it easy. It only has two real steps: stop using debt, and keep making the payments.

Cutting Healthcare Costs

Finance

It’s not a secret that health care can be expensive. Many people pay two and three digit bills for their prescriptions. A visit to the doctor’s office can hurt the budget. Glasses cost hundreds of dollars? How can you cut this cost?

Drugs

If possible, go generic*. There is no difference between Trazorel and trazadone, aside from the cost. Wal-mart, Target, and many other stores offer common generic prescriptions for $4-5. When you are talking to your doctor, ask if there is an drug option that has an available generic. When you are talking to your pharmacist, ask if there is a generic alternative available.

Get the price match. The Cub Foods pharmacy near me matches the Target generic drug price, giving us $4 generics for the asking. This is often an unpublicized deal, so make sure you ask. If your pharmacy will not match nearby prices, consider going elsewhere.

See if there is a 90 day plan. Many insurance companies sponsor a 90 day prescription plan that gives you a 90 supply of drugs for the 60 costs as long as you are willing to accept the drugs by mail. For expensive prescriptions, this 33% discount can be a substantial savings.

Physician

Does your clinic offer online consultations with your doctor or nurses? Some clinics offer a chat or email option to talk to your doctor without requiring a visit that will add fees and copays to your expense sheet. Most clinics and hospitals have a free nurse line for basic questions, like “When is my baby‘s fever dangerous?” It’s a great chance to save some money. I know, from personal experience, that they won’t be shy if they feel you need to come in, but they generally won’t try to convince you to come in if aspirin will fix the problem.

Stay in-network. Check with your insurance company to make sure the doctor you want to see if in your network and therefore, available at the cheapest out-of-pocket price. If not, and you really want that doctor, ask your insurance company if they accept nominations for the network and ask your doctor if he’d be interested in being nominated.

Stay home for your cold. Don’t go to the doctor for every minor problem. The best remedy a doctor can give your for your cold will reduce it to a seven day malady. On the other hand, if you do nothing, it will go away in about a week. Why waste the money? This counts double for the emergency room and urgent care. Strep throat is not an emergency. Wait until morning and go to the clinic, paying the lower fees instead of the large ER costs. Make an appointment for a doctor visit, if possible. Urgent care is billed the same as a regular visit, but most insurance plans double or triple the copay for urgent care visits.

Cash Flow

A Health Savings Account(HSA) is a pre-tax account to save for qualifying medical expenses similar to a Flexible Savings Account(FSA). The main differences are that HSAs are only available for people with high-deductible insurance plans and do not have to be spent on medical expenses. Non-qualifying expenses move from pre-tax to post-tax, meaning you will be charged federal income tax for non-qualifying withdrawals. FSAs are “use it or lose it” plans. If you don’t use it, it will go away, usually at the end of the year. That makes December a great time to stock up on over-the-counter medicines and possibly replace your eyeglasses, as both of those are qualifying expenses. Find out if you have either option available. If you use either one, set aside a place to store every imaginable medical receipt, so you can be reimbursed. Make sure you understand the FSA-eligible expenses.

An Ounce of Prevention

Get routine checkups. The earlier you find a problem, the more options you have. This goes for everything from cancer screenings to blood tests. Get a physical every year and know what is happening with your body. We may be living in the future, but replacement parts are still hard to come by.

Maintain Your Health

It’s cheaper to be healthy. Eat right, exercise, quit smoking.

I enjoy a good meal. It’s one of my favorite things. I won’t cut rich foods out of my diet, so we reduced portions. Beyond the first few bites, the flavor isn’t nearly as enjoyable or even noticeable. There’s no more enjoyment for huge servings than small ones.

Get more exercise, even if it’s just a 2o minute walks twice a week parking on the far side of the parking lot, or taking the stairs instead of the elevator.

Vision

Go online. This one is worth a write-up all by itself. I have 6 pairs of prescription glasses–all varieties of frames and coatings–that have cost a grand total of about $150. There is no noticeable difference between my cheapies and the designer alternatives. While I work on the write-up, the best site to introduce you to the concept of online glasses is GlassyEyes. Reviews, coupons, and discount likes. They have step-by-step instructions on turning an intimidating idea into a simple and cheap solution to an expensive problem.

How do you save money on health care?

* There are no generics available on new drugs until the initial patent expires. This gives the pharmaceutical companies a change to recoup their research and development costs. Without this patent period, new private drug research would evaporate. Don’t hate the brand names, but don’t show undue loyalty.

Ignore Your Budget

Finance

For the first year of our journey out of debt, we had a strict budget, with all of our discretionary money spent out of an envelope system. We had an envelope for groceries, one for discretionary spending, one for clothes and one for baby crap. At the beginning of the month, we’d divide the money into the envelopes according to our budget spreadsheet. If we used a card for anything, we’d take a matching about of money out of the appropriate envelope and put it in a box to get reconciled the next month.

Ugh. Almost 2 years later, it has turned into too much work and too much nagging about everything either of us put on a card.

We decided to simplify the system a few months ago. Now, we still have a budget. It’s even a zero-based budget, but we ignore it. We only look at it if something changes for the worse. If something changes for the better, the extra money just gets automatically rolled into our debt snowball, so there’s no need to worry about updating the spreadsheet.

Instead of envelopes, we kind of eyeball it. We budget $450 per month for groceries, so we aim to spend $100 on our weekly grocery run. That leaves some room for losing track of how much we are putting in the cart, or a last minute addition to the list. It also leaves room for our secondary grocery trip to buy bread and milk later in the week. We do go through a lot of milk at my house. We budget $55 per month for diapers, but the deal we are currently getting with Amazon Mom is only costing us $30.79 for 6 weeks of diapers. We ignore the difference.

This—and our heavily automated bill pay and savings—lets us keep our finances on track, without stressing over every dollar or fighting over every little thing that comes home unplanned. I used to fire up Quicken and balance the checkbook every week. Now, that happens at the beginning of the month, usually. If I forget, it doesn’t matter. At the beginning of February, I balanced the checkbook for the first time in almost two months and we never came close to exercising our overdraft protection account. In fact, we had some extra, so that got sent directly to our debt.

Overall, it’s been good to test out a new system. We have almost no financial stress and managing our money takes about a couple of hours per month instead of per week. It’s all win.

Avoid Getting Ripped Off On Ebay

Finance

My son, at 10 years old, is a deal-finder. His first question when he finds something he wants is “How much?”, followed closely by “Can I find it cheaper?” I haven’t–and won’t–introduced him to Craigslist, but he knows to check Amazon and eBay for deals. We’ve been working together to make sure he understands everything he is looking at on eBay, and what he needs to check before he even thinks about asking if he can get it.

The first thing I have him check is the price. This is a fast check, and if it doesn’t pass this test, the rest of the checks do not matter. If the price isn’t very competitive, we move on. There are always risks involved with buying online, so I want him to mitigate those risks as much as possible. Pricing can also be easily scanned after you search for an item.

The next thing to check is the shipping cost. I don’t know how many times I’ve seen “Low starting price, no reserve!” in the description only to find a $40 shipping and handling fee on a 2 ounce item. The price is the price + shipping.

Next, we look at the seller’s feedback. The feedback rating has a couple of pieces to examine. First, what is the raw score? If it’s under 100, it needs to be examined closer. Is it all buyer feedback? Has the seller sold many items? Is everything from the last few weeks? People just getting into selling sometimes get in over their heads. Other people are pumping up their ratings until they have a lot of items waiting to ship, then disappear with the money. Second, what is the percent positive? Under 95% will never get a sale from me. For ratings between 95% and 97%, I will examine the history. Do they respond to negative feedback? Are the ratings legit? Did they get negative feedback because a buyer was stupid or unrealistic? Did they misjudge their time and sell more items than they could ship in a reasonable time? If that’s the case, did they make good on the auctions? How many items are they selling at this second?

[ad name=”inlineright”] After that, we look at the payment options. If the seller only accepts money orders or Western Union, we move on. Those are scam auctions. Sellers, if you’ve been burned and are scared to get burned again, I’m sorry, but if you only accept the scam payment options, I will consider you a scammer and move on.

Finally, we look at the description. If it doesn’t come with everything needed to use the item(missing power cord, etc.), I want to know. If it doesn’t explicitly state the item is in working condition, the seller will get asked about the condition before we buy. We also look closely to make sure it’s not a “report” or even just a picture of the item.

Following all of those steps, it’s hard to get ripped off. On the rare occasion that the legitimate sellers I’ve dealt with decide to suddenly turn into ripoff-artists, I’ve turned on the Supreme-Ninja Google-Fu, combined with some skip-tracing talent, and convinced them that it’s easier to refund my money than explain to their boss why they’ve been posting on the “Mopeds & Latex” fetish sites while at work. Asking Mommy to pretty-please pass a message about fraud seems to be a working tactic, too. It’s amazing how many people forget that the lines between internet and real life are blurring more, every day.

If sending them a message on every forum they use and every blog they own under several email addresses doesn’t work and getting the real-life people they deal with to pass messages also doesn’t work, I’ll call Paypal and my credit card company to dispute the charges. I only use a credit card online. I never do a checking account transfer through Paypal. I like to have all of the possible options available to me.

My kids are being raised to avoid scams wherever possible. Hopefully, I can teach them to balance the line between skeptical and cynical better than I do.

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* Weaponized Syphilis