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Living life from cover to cover

Concurrent planning for your finances

by Jana 11 Comments

In child welfare, there is something called concurrent planning. It’s part of the Foster Care Independence Act, and it mandates that workers plan for both reunification and adoption of a child in foster care. In other words, the worker is mandated, by law, to make arrangements for the child to go back home to his parents or to have the child permanently removed from the home. It’s a kind of CYA method of planning but it’s still important because children’s lives are at stake.

When you’re in the midst of a separation, like I am, it is imperative that you have concurrent planning for your finances–as a single person and as a married person. You need to know where your money will go in each circumstance and it is important to CYA for a few reasons:

  • You need to know if you can support yourself and any dependents
  • If you can’t support yourself without your spouse’s income, it gives you the opportunity to figure out how to generate more income or cut expenses
  • You need to decide if it’s a good time to make large joint purchases (it’s not but each person must decide that for him/herself)
  • It’s essential to prepare for future expenses such as college/private school, retirement, vacations–anything that will cost a good deal of money–so you know roughly how much you’ll personally be responsible for
  • You can adjust your savings and debt payoff goals as necessary

Should my husband and I remain married (we are in intensive counseling. I figure there’s no harm in it, especially if the only thing that comes out of it is learning effective communication skills for our daughter’s sake), I know exactly how my finances will look. I know exactly how much money I will contribute to household expenses, child expenses, retirement, debt repayment, and, if I’m lucky, I’ll be able to cut my hours back at work to pursue my crazy dream of writing full-time. I’ll still have health insurance that, until next July at least, is free (then it goes up to $25/month. I know. I’m very fortunate). I know how much money I’ll have for other expenses like my pets, clothes, groceries, gas, etc because our budget will stay exactly how it is now. My household financial situation will not change because my marital status will stay the same. Knowing that I’m financially secure and stable is comforting. The plan? Maintain status quo.

However, I also need to plan for supporting myself. Although I’m getting a very small raise on January 1, should I get divorced, my taxes will change. My health insurance will no longer be free (it’s a benefit only for married couples who are both state workers). My dental and vision insurance contributions will change to just me and my daughter. All of these will affect my take home pay. I’ve made sure to run some rough estimates so I can formulate a budget based on that number. I now know roughly how much I’ll be able to pay for the major expenses–housing, transportation, utilities–and how much I’ll be able to afford for the other necessities as well as savings and retirement. The husband and I have discussed how we’ll split the profit on the sale of the house as well as who would assume which car payment. We haven’t yet discussed schooling and child care but we know we need to. Having these numbers has allowed me the comfort of knowing what I can and can’t afford, as well as knowing where I need to make adjustments. I have not taken into account any child support or part-time income. I want to know what I can afford on my full-time salary only. The plan? Do it by myself.

I do believe that when you’re in a situation like I am, it’s good to practice your financial independence. Try living on just your own income (even if this means you split bills, a la a roommate agreement. But not like Sheldon’s. A normal person roommate agreement). A monkey wrench gets thrown into the plans if you’re in my situation–still married financially. In every sense of the word. As it stands now, my husband and I still manage our finances together (well, as together as we can. Day to day finances are my job). Both of our names are still on all joint purchases (mortgage, cars) and our paychecks are deposited into our joint account each payday. We still have a joint debt payoff plan (since we incurred the debt together). We still discuss major purchases and are planning on how we can afford to send our daughter to private school should she not win the charter school lottery (our public schools are horrible. Seriously–we live in the documented worst district in the state). We still have a joint budget. It’s hard to exert financial independence when you’re tethered to someone else.

But that doesn’t mean you shouldn’t try. We operate on a his, hers, and ours banking system so there are certain things I’m trying to afford on my own (like my vacation in the spring). If you don’t have your own bank account, open one. Get your own credit card. Make a list of all your joint expenses and research what it takes to get your name off of some of them. Create a loose budget based on your current and potential income. (For some great single parent money tips, check out So Over Debt’s Single Mom Budget Series. It’s chock full o’ information)

It’s scary to think about supporting yourself. Believe me, I know. I’ve been sharing finances with the same person for over 11 years. I never thought I’d have to consider this aspect of my life. But knowing where I stand financially is important. It not only lets me know where I’m succeeding and where I’m deficient, but it makes me think critically about my future goals and plans financially and professionally.

I’m not sure what’s going to happen with my marriage but I know that I’ll be able to take care of myself and my child regardless of which path I choose. Concurrent planning made that possible.

If you’ve been in a similar situation, did you use concurrent planning? If you found yourself in a similar situation, is this something you would do?

 

Automating with a credit card?

by Jana 18 Comments

In my house, I am the one responsible for paying bills. The bills come to my email address. I keep track of how much is due and when, and on payday, I’m the one that logs in, makes the payments and then balances the checkbook. I figure out how much we’re going to need for cash expenses each pay period. I pay daycare. I submit the dependent care reimbursement form. I track our savings and, when we were deep in debt, I tracked our payoff schedule. I call the bank when something is off. In short, when it comes to our day-to-day finances, it’s my job.

My husband is fully aware of everything that happens (despite all that is going on, our finances are still intertwined. More about that situation on Friday). He knows how much all the bills are, what expenses we have coming up, how much cash we need–nothing is a secret. He just chooses not to participate beyond having “budget meetings” with me. This is actually a blessing for two reasons–1) his method of balancing finances makes absolutely no sense to me and 2) I have control issues so me being in charge is comforting. He is also extremely disorganized and, while I know all bills would get paid, I don’t fully trust that everything will get paid on time. So, having me manage our money makes total sense.

Except I’m exhausted from keeping up with everything. Having to manage and remember 12 different passwords and making sure everything gets paid on time and that all the bills make sense and balancing the checkbook and making sure all the EFT payments process correctly is tiring. And with the ever increasing amount of responsibilities I’ve been assuming, I’m starting to get a little forgetful (fortunately, nothing is late but I have forgotten to write down a bill or two and luckily caught it in time). Given all of this, I’ve been trying to think of a way to streamline the process and I just keep coming back to one method. Using a credit card.

I’ve heard that there are people who can use a credit card responsibly. I’ve heard that there are people who use it and–gasp–pay it off every month. I’ve heard that there are people who earn rewards from credit cards. I’ve heard that, contrary to popular opinion, credit cards are not inherently evil. I’ve always been a bit leery of these people (since I have a proven track record of not being one of them) but, being involved in the personal finance world, I’m learning that they’re not that scary after all. In fact, they’re quite smart. And they clearly know something I don’t.

So I’m starting to think that maybe automating my bills that are not already scheduled for EFT via a credit card may be a good thing to do. Here’s my plan:

  • Track my bills so I know how much I’m spending per month
  • Pay those bills with a credit card
  • Set the money for the bills aside so that when the credit card statement comes, I can pay it in full
  • See my stress decrease

That’s it. That’s the plan. It would simplify things in that I’d only have one main bill to pay every month. I learned the hard way what happens when you don’t pay off your credit card every month and I have no interest (pun not intended) in ever doing that again. There are certain expenses, like clothes, groceries, daycare, toiletries, and pet food, that I would pay for in cash (because I cannot be trusted with a credit card around those items. Also, I refuse to pay the extra 3.5% for using a credit card to pay for daycare) but my utility bills and car payments would be paid via credit card.

I like this idea because it’s a lot less remembering for me. On payday, I’ll have to set aside the total amount paid on the bills to ensure that there’s enough money for the credit card payment but I won’t have to remember anything else like due dates or passwords. The downfalls, of course, are failing to pay the credit card off and/or potentially overusing it. I know myself well enough to know that I won’t do that but you never know.

I am not a fan of change.  I’ve been paying bills the same way for years. But I’m frustrated with feeling like I’m always dealing with day-to-day finances. It’s a tough call.

What do you think? Do you use a credit card in this way? Am I a fool for contemplating it?

The questions you never want to ask

by Jana 10 Comments

This is the first post is an ongoing series about how to handle financial matters in a relationship that is close to, or has gone over, the edge.

Recently, I have been having lengthy conversations with a friend of mine about her marriage. She is unhappy, her husband treats her like dirt, she has to deal with her stepdaughter’s mom (with whom she has a very contentious relationship), and they are mired in financial difficulties. In addition to the stepdaughter, they have 2 boys and she cannot afford to support them on her own. While she still loves her husband and wants him to change, he refuses to take any action to work on himself or his marriage. In the meantime, my friend is getting more and more depressed and angrier and angrier. Needless to say, this is not a healthy situation for anyone involved. On more than one occasion she’s mentioned separation and/or divorce.

Last week our discussions turned to the idea of having a financial escape plan. In other words, we talked about how she should be starting to set herself up financially in case their marriage keeps getting worse and she can’t take it anymore. I am not an advocate of making rash decisions especially when money and children are involved so I encouraged her to ask herself the following questions:

  1. What is my net income each month? How would it change once I change my marital status?
  2. What is the cost of my insurance for just me and my sons?
  3. What will my expenses be? Who will pay for child care?
  4. How much rent/mortgage can I afford? How much do I need to save before I can move out of the house? How soon can we sell the house? Will he let me buy him out?
  5. Is there anything I can do to increase my monthly income? Where would I need to cut?
  6. How should we split our joint savings? How much is in my individual account?
  7. Should I get a credit card with just my name on it?
I suggested that after she had answers to those questions that she take the the following steps:
  1. Establish an amount of money to save
  2. Set a target date for having that money saved.
  3. Research apartment rates and house prices in her school district.
  4. Gather information on how much a divorce would cost (court fees, lawyer, paperwork, parenting classes, etc).
  5. Write out a budget on her full-time income only.
  6. Figure out what skills she has that would allow her to earn extra money.

I ended the conversation by letting her know that no matter what she decides, she needs to do what’s best for her and her boys whether that’s ending her marriage or keeping after her husband to attend counseling to improve their marriage. She seemed a bit dazed with all that she needs to think about but she seemed focused at the same time. I was proud of her for even having the conversation; she is uncomfortable thinking logically and critically about money.

For the record, I despised having this conversation with my friend because this is an awful plan to put together and no one should ever need to think about it. Believe me, I never thought that I did. You see, 7 weeks ago, I found out that my husband cheated on me. It was a huge, crushing blow to every aspect of my life. And quite frankly? I feel like shit. Whoever said time heals all wounds obviously never had the person she trusted more than anyone in the world sleep with someone else and then lie about it. Hard as I try, I will never understand what possessed him to choose to do this. He took every insecurity that I have and exploited it for some girl whose name he claims he can’t even remember. Infidelity is quite possibly the most horrible thing one partner can do to another and as a result of this, I am left feeling duped, worthless, unattractive and stupid. I am left feeling as though nothing I have to offer is of any value. These are not good qualities to have when you’re trying to decide how to proceed with your finances and your marriage. So I did the best I could do. I took a deep breath and took a step back.

Setting aside my feelings in the aftermath, I know there was nothing I could have done to prevent what he did. But what happens afterwards is totally in my control.  After I found out, and the blind rage subsided long enough for me to form a rational thought, one of the first things I did was figure out what I needed to do financially (I also employed strategies outlined in the Guide to Financially Surviving Infidelity). Once I realized that I was not financially stuck, it was easier to make some other decisions.  Knowing that I was not forced to stay with someone for financial reasons was liberating. Money shouldn’t control the decision to remain married or not but having a handle on the reality of my finances afforded me more choices.

I understand that no one enters into marriage with the intent to leave that marriage. Unfortunately, things happen. I’m all for working on your marriage and not immediately jumping into divorce. But if things are irreparable, having a plan doesn’t hurt.

Note: I appreciate any and all comments. However, if you are going to comment on this post, please make sure that you are respectful and not attacking, even if you disagree with me or another commenter. I will remove any comments of that nature. 

Small changes make big differences

by Jana 5 Comments

I was driving recently when Alter Bridge’s “Ghost of Days Gone By” came on the radio. I adore this song. The more I hear it, the more I like it. It’s such a great song that I forget it’s really by Creed minus Scott Stapp. In other words, Creed sucks but when the singer is replaced and the band is given a new name, it magically makes all the difference and it becomes something awesome. Which got me thinking.

Finances kind of work the same way. You can plod along, doing what you normally do, and no matter what it’s just not working. Your budget fails every month. Your debt repayment plan gets derailed. You’re constantly behind on bills. You’re slashing expenses but other expenses keep rising. You start to fall into a self-loathing, self-pitying stream of self-beratement until you collapse on the floor in a messy drunk heap (or was that just me?). Then, one day,  you make a small change and instantly everything clicks.

I’ve actually experienced this type of change twice. The first was finally getting on a budget. Finally getting all my expenses written down and figuring out where my money was going each month made managing my money a whole lot easier. I was no longer frustrated by questions like “how am I going to afford this” and “good Lord, is this bill really due again” and “where the f*ck is all my damn money?” I had an idea of where my money was going, how I was going to afford everything and even attempt to plan for things in advance. One thing that I did during this time was withdraw $500 every payday (my bank’s daily withdrawal limit) and fit all my two-weeks expenses (minus bills) in that pot of money. Unfortunately, after weekend #1, there was only enough money for gas and the next week’s groceries left and I would have to use my debit card to fill in the gaps. It was frustrating for two reasons 1) I hate balancing my checkbook which I would have to do each time I used the debit card and 2) I couldn’t understand why I was running out of money. After all, my expenses were budgeting and planned. Right?

Turns out, not so much. I never bothered to do an itemized calculation of what I was spending each month on things like toiletries, household expenses, clothes, pet expenses…all of those little expenses that would just seem to crop up unexpectedly even though I knew that I needed to pay for them. The other mistake? Was letting my bank’s limit dictate how much money I had in my budget. I realized that I needed more (sometimes, way more) than $500 every two weeks especially when gas was teetering on $4/gallon. Once I realized this, I was astonished with my own stupidity that I hadn’t thought about this before. That was when I called our first family budget meeting (this meeting involved only my husband and I as our daughter is 4 1/2 and the dogs lost their ability to have input after they ate my underwear). I printed out Dave Ramsey’s budget forms and together we went line by line, discussing and deciding how much we do spend, should be spending and should be saving. We arrived a total amount for each category that we need to budget monthly. And instead of taking out the $500 and making it work, I write a check and one of us cashes the check, giving us exact amount of money that we need for those 2 weeks. If there’s money left over, it rolls over into the next pay period/month (like rollover minutes but with money instead. Brilliant, right?).

The second small change has made the most significant impact on my budgeting. I now only have to balance my checkbook once a week, or sometimes only on payday, and now there’s always have enough cash for expenses each pay period rather than a cash/debit combination. It has been such a relief to start making my bank work within my constraints rather than the other way around. It was such a small change that I can’t believe I didn’t think to make it sooner.

Kind of like Creed didn’t think to replace Scott Stapp sooner. That guy is a douche.

What small changes have you made that have had a significant impact?

Dependent Care: How we do it

by Jana 10 Comments

When my daughter was born, one of the first things my husband and I did was enroll in the Dependent Care benefit option at work. For those of you not familiar, Dependent Care works similar to a Health Savings Account or a Flexible Spending Account. You contribute money, pre-tax, and then draw on that money to offset child care expenses. There is a $5000 limit for one child and a $6000 limit (total, not per child) for two or more children. However, unlike an FSA or HSA, you cannot draw on money you have not contributed; you may only draw on money that is in your account. This can make things a little tricky at first especially if you’re not paying attention.

When we first started paying for daycare, we had no idea how to use our DCA effectively. It took about 8 months of confusion, moving money around and manipulating the checking account until we devised a system that has worked splendidly for the last 3 years. It works so well, in fact, that at the end of the year we wind up paying only 1 week out of pocket!

Before I explain what we do, let me break down what it costs and how we pay (and why). We currently pay $165 per week for our daughter, which should be $660/month, right? Wrong. Why? The owner is an idiot and does some sort of complicated formula where she calculates that daily rate and the actual number of days in a month and then makes that the monthly rate (OK, fine, it’s logical but the owner is still an idiot. I stand by my statement). Rather than paying the monthly rate, we pay weekly; rather we pay bi-monthly. Each payday, I write out a check for the upcoming two weeks for $330. Why don’t I pay by debit or credit? Because she tacks on a 3.5% fee for that privilege. So I’ll write checks instead. Fine with me–it makes her have to do some work.

Now for the dirty details. Let’s do a list:

  • Of that $330, $165 comes out of our pockets and $165 of our DCA contribution is used
  • Our DCA contribution every two weeks is $192.30 ($5000 max benefit/26 paychecks)
  • We are left with a balance every two weeks of $27.30.
  • Every 3 months, we have 1 week saved
  • By December, we have 3 weeks balance remaining in our DCA account

This extra 3 weeks leftover means that we only have to pay 1 week in December, or if we do have to pay, it’s a nominal amount. Having that extra money available in December is great because we get absolutely slammed financially that month: Christmas, Hanukkah and our daughter’s birthday (yes, I know we should be planning and budgeting for this in advance. We’re working on it).

Our system, while seemingly cumbersome, actually is quite beneficial. Besides not having to pay in December, it also helps offset the out of pocket cost each month, spreads the money out over the year instead of concentrating it in one part, and, yes, we still get to deduct the difference in total amount paid and the $5000 on our taxes. The only pitfall in this plan is the fact that on payday, I have to remember to fax a completed form with information like my daughter’s age, the name/address/EIN of the provider and signed by the assistant director or owner and my husband to the company. As I am a forgetful Jones, I have a hard time remembering this. But I combat the problem by leaving a little note on my computer that says “Dependent Care”.

While I wish I didn’t have to pay for daycare at all and I dream of the day she starts kindergarten and childcare expenses go away, maximizing our Dependent Care benefit has paid off.

Do you use a Dependent Care Account? If so, how do you structure your payments to maximize the benefit? 

 

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