Working Backwards

So where have I been? Certainly not online. My family and I have traveled along the edges of the country in the past few months, yet I have not written about our adventures here. Why not?

This is the question I ask myself as I sit down to get this blog and this budgeting project back underway.

I see now that the urge to get our home finances in order may have had roots in deeper places than, even, financial freedom. I think it might have been rooted in some personal things that have nothing to do with money: reaching “adulthood”, cultivating responsibility, acting from my will, having the courage of my convictions, overcoming fears, and, finally but perhaps most importantly, integrating my adult financial life with my husband’s adult financial life (which, given that we married in our forties, has some complexities).

Somewhere along the way, March or April, I began to realize that all the little steps forward I was making and writing about were illusionary. They were not really moving my project closer to my overall goals. Yet I couldn’t figure out, or was in denial about, what was keeping me from making progress. With some thought, and time, I now realize that I ran away from doing the hard work required to make leaps instead of small steps. But, more importantly, I understand that I hadn’t considered the need to work backwards before I started moving forward.

When my sister and I started this project, I gave only a passing thought to those deep-rooted issues I listed above. Those very character issues led me into my loosey goosey financial situation in the first place. Can I simply follow a financial formula to get me past them? Maybe. Yet, how did I expect to just start keeping copious, accurate financial records without a tool and a designated time or method of doing so? How could I fully integrate my financial life with my husband’s if we didn’t take time to strategize how to do it? Not even 10 minutes worth of time? How could I hope to maintain the courage of my convictions if my husband and I weren’t on the same page?

My plan to move forward involves addressing these lacks — because I will move forward, however slowly.

I’ve decided instead of giving up — or just going to therapy — I’m going to face fears, of financial shortcomings, of character flaws. I will try again to get my financial life in order and build on the small steps I have made, such as creating a joint bank account, tracking expenditures and creating a needs/wants/savings balance sheet.

The first nine months of this project haven’t been a complete wash. I have learned that when it comes to personal finances, numbers are not the only things that matter. Gone are my delusions I’d have my financial life in order in 12 months. Ha! Silly me.

To really move forward, I now realize I need to incorporate other aspects of my life into this spreadsheet, as well. Blood, sweat and tears are involved and I must go there. All the way there, by first working backwards. Two steps back – three steps forward.

That is my plan.



Tough Love

Ever have someone really hold you accountable? You could squirm and make excuses and wriggle, but he or she would just steely eyeball you and insist you persevere? Get it right, instead of just good enough?

Tough love, some would call it. Some might just call it tough.

One such person comes to mind for me – my violin instructor. He would say, “Close only counts in horseshoes and hand grenades.” Somewhat gruesome motivation to share with a 7th grader, to be sure, but from it I intuited that my poorly practiced attempt at Beethoven wasn’t going to cut it. I would double down, focus and work harder, hoping to hear some less critical phrase at our next lesson.

Well, when it comes to household budgeting, I’m living the tough love chapter of All Your Worth at the moment. Elizabeth Warren and her daughter, Amelia Warren Tyagi, dish it out in Chapter 3, In Which Reining In “Must Haves” Spending Is Enforced. They describe this step as the key to financial security, so no fudging allowed.

While folk wisdom may have trained us to think a penny saved is a penny earned, the Warrens wisely point out that a dollar saved is a dollar earned, and a hundred times faster than that little ole penny. When you spend the time to spend the dollars to their best effect, the financial picture improves much faster than if you saved cents by comparison shopping for shampoo, or whatnot.

The Warrens say that if we can keep “must have” spending at or below 50 percent of after-tax income, we will gain control over finances. This control will provide flexibility because there will be more money for savings and wants. It will also begin to provide security, because we can build up long-term savings.

As I mentioned in my last post on Needs or Must Haves, our household spends about 63 percent in this category. After figuring it, I realized whittling that number down is going to be a huge project. Thank goodness I have this blog and the Warrens’ book to keep me accountable.

When we started the blog last month, I’d imagined I’d have my balance clearly defined and be living the savings by now. Hah. As I crawl along finding time here and there to read, consider, and act on the book’s advice, I can tell I’m in the doghouse and I’ve got to get busy!

I don’t have car loans, so I don’t need to decide whether to sell a vehicle, (both our cars were purchased used, and paid-in-full). At this point, I don’t have to examine whether I need to relocate, get a new job, or any number of other difficult questions the book’s authors ask. The lifestyle choices I face now are not as emotionally charged as they might have otherwise been. Yet principles and politics did still pop up in my decision-making process.

Since all the items in the Must Have list are important to quality of life, attempting to reduce them will not be the matter of a few minutes work. Mortgages, car loan payments, student loans, insurance of various types are all complicated financial and legal documents that will all need to be reexamined. But assessing them in detail, the book says, is time well spent because a refinanced mortgage, done correctly, can save thousands in one year.

As I look at our Must Haves, I know what we have to do. I must refinance the mortgage on my old house (aka The Barnacle) – my home before I was married almost 5 years ago. We must shop around for cheaper car and home insurance. We must find out if refinancing my student loans is possible.

I’ve made strides on the first task.

The situation: The Barnacle is currently a rental property because I can’t stomach selling the place in this bad market. The mortgage interest rate (8.5 percent) screams at me – Refinance me! I also have a bunch of equity in the home, which I bought in 1997 for an extremely low price.

So far I’ve checked with two financial institutions: my credit union and the current mortgage holder, Chase, which bought out Washington Mutual, which bought out some small bank in Jacksonville, FL, that originally held the loan. I had a great experience with the credit union. The representative was personable and patient with my questions. Chase, not so much.

Aside from offering me a great rate, my credit union is willing to offer what seems to me to be a great deal. They would refinance and roll in my student loans to the mortgage — another loan on which we pay 8.5 percent interest. Of course, they would pay off my student loans and I would then owe that money to bank.

The move would increase my overall home loan amount, which the authors forbid. The authors don’t want readers to take risks with the roof over their heads, which is why they say no to second mortgages, or home equity loans, or taking out more debt to pay other debt by “cashing in your equity” on a primary residence. I think because this will not increase my overall debt, but rather combine my debts at a lower rate it makes sense though. I will research this more before deciding.

Anyway, I got a great rate at the credit union on this business property, 3.95 percent, even though slightly higher than I would have been offered if this were my primary residence.

Chase’s rate was more like 5.25 with much higher closing costs and fees then the credit union, even though they currently hold my mortgage and would take on no extra risk to refinance. Here is a picture of Chase on its old log house:

At this point my prejudices are confirmed: I would really like to move my mortgage to a local credit union for political reasons as well as financial ones. Nice to know my politics are being supported on the ground by better service at the CU.

Because the authors require five quotes before signing on the dotted line with one bank over the other, I’ll check with a competing local credit union and Bank of America, which holds the mortgage on our primary residence (I know, hiss). I already know I want to move my mortgage to my credit union, but, I know, this is not an emotional decision, it is a business one. So far the credit union is offering the best deal hands down.

Next, car insurance: USAA covers our newer car (the one that took us to Texas) and coverage is comprehensive. I need to dig into the ins and outs of the plan, but for what we get, we pay about $200 month. We have another, older car that runs well but that doesn’t get the same level of coverage and costs $283 every six months to insure with Geico. I’ll shop both those plans.

Obviously, I’m going to have to get back to you on this stuff. Whoever said this was going to be easy? Well, I might have. Now I know it isn’t and that I’ve got to dig in and keep going.

Thanks to the blog for keeping me accountable, and thanks to the Warrens for the tough love to make me double down, focus and do a better job.


Frugalicious February

Everyone knows that the real New Year starts in February, right? January is just sort of a warm up. Maybe you brainstorm about various resolutions and plans. Maybe you just kinda get started and are working out the kinks. It’s practice. But February is for reals: you can’t say you just got back from vacation or you’re just getting over the holidays – that stuff is done. February is like 4:00 a.m. – nothing is going on.  It’s just you and your whirring brain, saying, “Are you going to make this year work – or what?”
And so it’s the perfect time to get started in earnest with the 30 Large Project. No more excuses. No monkeying around. But I’m not worried. It won’t be hard – like climbing Mount Everest or running for president. This is just being responsible. No biggie.
Throughout the month of February, we pledge to only spend money on “needs” (as defined by our guru Elizabeth Warren in her book, All Your Worth), such as food, gasoline, and things we are contractually required to pay, such as mortgage, cable, credit card balances, etc.  We will also keep track of every penny spent, so as to begin to get a crystal clear picture of where the money goes, even when we are really thinking about it and being on our best behavior.
When it comes to our (historically) monstrous food budget and my Whole Foods addiction, I expect to keep to my budget of $100 a week, not including our delicious weekly CSA box. This is going to be the tough part for me as I think a significant portion of our food – that is in excess of our $100 weekly limit – now comes from the “wants” column.  Expect to see lots of cheap recipes from Nerdhaven West in February!
We will report back on the blog each week with a summary, describing the ups and downs and what we have done and learned.  We will not publish a spreadsheet (although we have had requests to do that!) but we will try to get to the details as closely as possible so you can feel our pain . . . um, I mean responsibility . . . no – I mean our frugaliciousness.
P.S. Who says frugaliciousness isn’t all that photogenic? All the photos in this post are of free things around my house. And because you have made it this far in the post, I will reward you with a video of chickens arguing over string cheese. Click here: LoudMo

Fresh and Exciting

So we are doing taxes and financial aid forms for colleges ($55K a year for college!  Really? Just in case there wasn’t enough of a divide between the 99 percent and the 1 percent . . . sheesh don’t get me started). We are up to our eyeballs in money talk these days. So for a minute or two I am going to put off the actual hard-core analysis of breaking down our finances and skip to healthy, simple (and cheap) food, which is what I’m trying to work on every day, anyway.

I’m trying the basics: Living my life responsibly and making my own stuff, when I can – and trying to learn something new every day. Recently, I learned that I can make yogurt. This is not trumpets-blaring news, I know. But it’s exciting for me . . . I finally did it after wondering about it for, like, ever.

Folks have been making yogurt – in a zillion different forms – all over the world for generations upon generations, probably as long as mammals, bacteria and humans have co-existed. (I’m picturing the first moment of yogurt – some suspicious wife passes some old, curdled milk toward her husband and says, “Taste this – is it still good?”) I am happy – okay, proud – to now be part of the flow of the history’s yogurt-making peoples.

I can’t believe it took me this long to try yogurting myself. This is easy, tasty and cheap – just like they did it in the old country. It is really a testament to the power of marketing that we all go out and buy this stuff when it is so easy and soooo much tastier to make it at home. This yogurt does not resemble the typical grocery store kind at all.  It’s more like what you’d get from Greek yogurt – but the flavor is not just tangy, it’s delicious. Maybe because it is made so fresh.

Adapted from Milk: The Surprising Story of Milk Through the Ages by Anne Mendelson (Although the recipe is all over the place, I like to cite a reliable source.)

If you and/or your family are not yogurt freaks, like we are, you could just cut this recipe in half. It works just fine and heats and cools faster.

1/2 gallon whole or 2 percent milk
3 tsp. plain unflavored yogurt with active cultures

2 quart-sized glass jars
Gas oven with pilot light (or not, see Note below)
Candy thermometer (or you can just eyeball it)

1. Heating/Cooling: Pour the milk into a heavy saucepan.  Attach the candy thermometer, if using. Heat to 180F (until it’s just about to boil). Take the milk off the heat and cool to 110 º F (not quite hot to the touch). You can put your pot in a larger bowl with ice water to speed up the process to 10-15 minutes or so. Or you can just let the milk cool on its own (while you watch the Daily Show, for example) for 25-30 minutes or so.

2. Inoculating: Put 3 Tbsp. of store-bought yogurt in a small bowl and stir about 1 cup of the milk into it. Then stir this mixture back into the pot of milk.

3. Incubating: Pour the milk into the two quart-sized glass jars. Gently place the two jars in the oven – no need to cover – and then do not disturb or jiggle or bounce or jounce or anything for 6 -7 hours. My routine is to make this overnight – the kitchen is quiet, and I get to cook while I sleep. Nice.

4.  Waking: In the morning, shuffle into the kitchen to find two containers of yogurt in the oven! I save one to use in smoothies (awesome – although what will I do without that constant stream of 32 oz. plastic yogurt containers coming into my life?). With the second container, I move onward – and upward – to step 5.

5.  Draining: This step isn’t necessary if what you are want is a yogurt to use in smoothies, or if texture is not a big deal to you. But if you want a hauntingly delicious yogurt to eat with honey or preserves, or to use in a dip or salad – you really must drain it. Once I tasted the drained yogurt – I couldn’t get the taste out of my head. I wanted more . . . Here’s the step: Line a strainer with a bandana (see fancy orange bandana in photo above) and place it over a bowl deep enough to catch 4 cups liquid. Then pour the yogurt into the strainer and let sit about 3 hours. Turn the yogurt out into your storage (or serving) container and stir until smooth. Serve yourself some yogurt right away, spoon some honey on top and . . . prepare to have your mind blown. Enjoy.

Note: Denise has joined the yogurt-making flow by making yogurt without a pilot-lit oven. You go girl! Just use a hot-cold plastic container, or wrap the jars in towels and put them in a cooler. Whatever it takes to keep the incubating yogurt cozy at 110 º F. If the temperature drops below 110 º F, the yogurt will be thinner or take longer to set. But as long as you have the active starter and a peaceful place for the yogurt to incubate – yogurt will happen.

P.S. Making yogurt at home is also – big surprise – cheaper than buying it at the store.  Two quarts of this yogurt cost me $3.00 to make (I used 1/2 gallon of organic milk, which I buy at Trader Joe’s for $5.99/gallon). While the price for one quart of organic yogurt at TJ’s is $2.99. So I am getting two for the price of one by making my own.  True – when I don’t buy the yogurt at the store I do not get the quite useful plastic tub it comes in . . . but I will trade the tub out for being that much closer to saving 30 Large.

P.P.S. Did you like my old-school yogurt photo? I took the photo on my phone and old-schooled it on this cool Japanese site. I’m going there now to make all my photos old.

Rainy day accounting

Rain. Slow, steady, glorious rain. Florida desperately needs it. I didn’t realize how much I needed it. The sound helps focus and calm me. The pervading damp gives me permission to postpone my many outdoor tasks. Rain removes the excuses that keep me from planting my rear in the chair and writing about budgeting. I’m not resistant to writing itself, just to the hard work of examining our expenditures that I must do first.

Number crunching is not my strong point. So why am I taking on the 30 Large Project? Because I want to continue to grow and learn, because what one focuses on becomes stronger, because of the platitude “ignore it and it will go away” also applies to money.

My DH may, or may not, agree, but it seems to me we spend on whatever we want, whenever we want it. Denial is not in our vocabulary.  Although our income is fairly secure, it is certainly not exorbitant. Hence, I am in the early chapters of All Your Worth, preparing for the worst.

Step One of the budgeting process in Warren’s book is to figure out how much we are spending on needs, wants and savings. I have decided to focus on the needs category first, and the rest should follow from there. To do this I first had to get a handle on where all the money is going, which for us, was difficult.

After a teeth-gritting, round-one look at the household income and expenses, with a look to how much we spend on needs (shouldn’t be over 50 percent of after tax income), I have been forced to realize there is no gain (in the form of a “lifetime money plan”) without a whole bunch of pain.

“Needs” includes certain types of expenditures that I decided to group two ways. First, I listed things we have a legal obligation to pay: student loans, mortgages, basic utilities, auto and home insurance, gym membership, cell phone contract, and preschool.

And, second, I included things we need to survive: medical prescriptions, health insurance, food, transportation, life insurance and retirement plan.

Even as I type this list of what I included, I see some things shouldn’t be in there – obviously the retirement plan should be in “savings”. Clara’s school should be in “wants,” since I am not working and we could remove her if we had to for a small fee. I need to refer to the book to see where life insurance should go. Also, I have found that our gym membership contract is up and we now pay monthly — so we can move that to wants. See — I was not expressing false modesty when I wrote I wasn’t good a number crunching. I found errors before hard math was required.

After shifting these items, I totaled the cost of our needs and divided it by our after-tax income multiplied by 100. I found we spend about 63 percent of our after-tax income in the needs category. Ugh.

A quick glance at what is left over and my worst fears are realized – it seems that the remainder goes primarily toward wants. Cable television is a want, after all.

So, what to do to bring our “needs” number down? Warren is no nonsense in her advice: basically, she says, get real.  She directs readers to assess the big-ticket items first, since those have the greatest impact on the bottom line. Leading me to my next assignment – slash, slash, slash. I’ll report back soon.