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The price of a vice

by Jana 16 Comments

Here’s a fact about me: I hate coffee. Like really, passionately hate coffee. There is nothing about coffee that I find enticing or desirable. It smells bad, it tastes bad, it gives you disgusting breath. It is a vile, awful drink.

My hatred of coffee is not arbitrary. There’s a real reason behind it. The reason? Is my 11th grade math teacher. He had the worst coffee breath of anyone ever. And he always had putrid coffee sitting in a mug that never looked quite clean enough. And I had the good fortune to sit right in front of his desk, during first period, at 7:30 in the morning when the smell was nice and fresh. Every day. For an entire school year. Needless to say, it traumatized me. Traumatized me to the point that I never, ever drink coffee. Ever. (I also have a severe hatred of anything orange smelling/flavored but that is another story for another time). In fact, no form of coffee is acceptable. Unless it’s a Coffee Crisp. Those are totally acceptable.

My aversion to coffee got me thinking. When someone is trying to cut expenses, what is one of the first suggestions? Make coffee at home. I understand the suggestion. Typically, when you make something at home, you spend a lot less money than if you get it somewhere else (clarification: this applies mainly to food. Usually. There are circumstances where food in a restaurant is cheaper than making the same food at home). I would assume that this applies to coffee as well. Or does it? Let’s examine (admin note: these numbers come from my mother. I love her but she is not the most reliable source for prices. And, as always, prices fluctuate based on brand, location, amounts, preferences, etc. The prices used are Long Island prices).

Scenario #1: Purchasing coffee from Dunkin Donuts. From my understanding (read: information from my mother), a medium coffee from DD costs approximately $3. Assuming one coffee per day, 7 days per week, someone would spend $21 per week. Average monthly cost: $84 

Scenario #2: Making coffee at home. Again from my understanding (again, information from my mother), a pound of coffee costs around $10, filters are $2 for 100, a standard coffee maker is around $35. A reusable coffee mug (’cause if we’re saving money, we’re going to save the environment, too) costs around $10. That’s a total of $57 just to get started. Based on my scientific research (Google search), a pound of coffee  lasts roughly 2 weeks, so that’s 2 pounds of coffee every month. Then let’s assume that you need one of those fancy flavor things (because I can’t imagine even wanting to taste coffee without some enhancement). So that’s what? An extra $4 per week, or $20 per month. I won’t factor in milk or sugar since you’d probably buy those anyway and the amount is nominal. Average monthly cost after start-up costs: $42

The monthly savings is around $42 for making coffee at home. That’s a pretty hefty difference for someone trying to make ends meet or trying to meet a savings goal. $42 can go a long way and represent a big surplus in a budget.

Obviously, there are a ton of variables at play: how much a person drinks, how big of a size coffee is purchased from DD, if the coffee is bought from somewhere other than DD, the brand of store bought coffee that is used. These will all affect the net savings. But the point that making coffee at home is, overall, cheaper than purchasing coffee from DD or Wawa or Starbucks is not lost. Mathematically, it makes sense. And if you’re struggling or need to free up extra money, this is a good place to start.

Of course, I advocate that everyone gives up coffee altogether. Because when I rule the world? That will happen.

Coffee beans are the root of all evil

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?

 

Ignoring the red flags is a bad idea

by Jana 5 Comments

I’ve mentioned before that I am a government employee and have been for over 7 years. I fought hard to get this type of job for all the perks I’ve discussed–guaranteed pension, health insurance, 37.5 hour work weeks, limited options in my field of choice. In fact, I spent 18 months interviewing over and over again for the first position I had with the government. When I got the call that finally offered the job, I actually did a dance at the job where I was working (don’t get me wrong, I was grateful for that job. But the commute was awful and the pay was low). I didn’t care that it was only a $3K raise–I was gaining a whole lot more than just money.

I worked that job for 3 years. I did manage one pay raise but I went through a location change to an hour south of my house. During that time, I had a child and the thought of having my newborn commute 2 hours a day was ridiculously unappealing. So I applied for a job closer to home, still with the government, and was fortunate enough to get it. It was wonderful working closer to home but since it was a lateral move, there was no pay increase (except for the gas savings which was now canceled out by daycare). I still made too much money for it to make sense to quit work all together, and we were now in the throes of paying off debt. I needed to make more money. There was only one option–figure out a way to reclassify my position at a higher level or find a new job.

Since I really liked my job, I worked my ass off to reclassify my position. I did all the necessary paperwork, got it approved by my supervisor, passed it on to her supervisor and then…nothing. My supervisor’s boss sat on the paperwork for too long and the window of opportunity had passed, especially with the fact that my state was heading into a deep budget crisis. The option became clear–get a new job that paid more money.

To do that, I would browse the available openings on a daily basis. I eventually found one that seemed perfect–it was 3 paygrades higher (an almost $9K raise), was on the same grounds as my current position so no commuting change, and it combined both my education and work experience. Needless to say, I applied for that job as soon as I could. Then a miracle happened. I was called for an interview! And then a second interview! And then, I was hired!

I could not have been more excited to have gotten this job. The timing was perfect, too, since I was offered the position on the last day that positions at that paygrade were allowed to be filled without special permission from the governor’s office or an act of G-d. However, in my delirious excitement, I missed several red flags that this job was going to be less than desirable:

  • When I went to my second interview, the supervisor gave virtually no notice. I was called in the afternoon and told to come in the next morning (yes, told. Not asked if it was a good time). During the second interview, while answering the question, she interupted me with this statement “I don’t want a personal example. Just answer the question”. Red flag #1:She has no respect for other people’s time nor does she care about what others have to say.
  • When she offered me the position, she called at 8:15 AM and told me I needed to get to her office right now to sign the offer. I was a bit put off and told her that I needed to resign first but there was no one in the office for me to resign to (I wound up doing it via email). She told me that I could always resign later.Red flag #2: She is only concerned about her interests and does not care about extending professional courtesty. 
  • When I was finally able to resign and get to her building, I was told that others in the division might be angry with me for getting the job since it was between me and someone else who already worked for the division. Red flag #3: She likes to foster paranoia.
  • While we were talking more in-depth about my responsibilities and what I would be doing, she told me that she had lots of projects in mind but wasn’t sure how she wanted me to start on them or which ones she wanted me to work on first. All she knew was that she was “going to give me a lot of work” and that everything would be ready to go once I started (it was a brand new position so I had no workload to assume) but she was really excited for me to start because I was going to make her life a lot easier. Red flag #4: She has no ability to plan, schedule or manage projects unless it directly affects her in a positive way.
  • On my first day, I had no work, no computer access (you have to be granted new access each time you switch divisions), no formal welcome or introduction to anyone else in the unit and no (for the record, it was about a month before I had any real work to do). Red flag #5: She’s doesn’t follow through on anything she says.

I wish that I had paid attention to these red flags and the other ones that presented themselves so clearly. Her behavior made me apprehensive about starting the new position but I was so blinded by the monetary increase that I neglected to pay attention to all of the other factors that go into a job. I took the job and spent 3 years in a miserable pit of despair. My boss was mean (borderline abusive), plagiarized my work, threw me under the bus so many times I have permanent tire marks, and lied. She abused her authority over me because she knew I have a small child and had to work.  She was moody, gave poor directions even when clarification questions were asked, pitted workers against each other, withheld information that would have made projects flow correctly and consistently interrupted each and every project I was working on with her whimsical, poorly thought out “new” projects. She was dismissive of input yet refused to make a decision; she didn’t want the accountability of her decisions.  And, it was only after I took the job, did I find out that absolutely no one likes working with her (for most of the reasons listed above).

My mental health suffered so much during my time in this job that I was borderline clinically depressed.  I couldn’t sleep or eat properly. I gained weight because I stopped working out and from stress. I stopped laughing and having fun because I was so miserable at work and it impacted my daily life that much. But I stayed. For 3 years. I stayed because I didn’t think I had any other options. I stayed because the money was too good to pass up. I stayed because it was comfortable and scared that no one else would hire me. I stayed because I was finally able to pay down debt and get ahead. I stayed because I didn’t think I deserved a better working environment. I stayed because I kept hoping the job, and my boss would get better. But after almost 3 years of this, I finally decided I’d had enough. I applied for other jobs and was blessed to land in the one I have now. And I know how lucky I am.

If there is a silver lining to that job, it’s this: I will never again ignore the red flags. I will never again sell my soul for a paycheck.

 

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?

Guest post: Why You Have No Excuses For Not Building Financial Skills in Your 20s

by Jana Leave a Comment

The following is a guest post from Martin of Studenomics. He has just released his premium guide on how you can Completely Conquer Credit. If you’re tired of spending all of your money on debt payments and want to see SERIOUS results, you need to check out this guide.

Jana recently responded to a post with her side to the story as to why she didn’t learn certain financial skills in her 20s. I had a chance to meet Jana a few weekends ago in Chicago and we got to chat about various subjects, with none of them being related to personal finance (Admin note #1: It’s true. We talked about nothing personal finance related). A few days later I was asked to respond to this specific post and here I am with my side of the story. I’m a 23 year old dude that has been blogging about personal finance since 2008.

I wanted to respond and share why you have no excuses for not building financial skills in your 20s:

We’re all going to be “old” one day. I won’t be old like Jana for another decade so it’s all good (Admin note #2: Thank you, Martin, for reminding everyone that I’m 34. It was sweet of you). The reality is that we’re all going to grow older (not grow up) so we need to keep this in mind. It’s easy to dismiss financial issues and tell yourself that you’ll deal with it when you’re older. The major problem with this is that you won’t just automatically improve your financial skills as you get older. There’s no guarantee that age=increase in financial wisdom. You need to get started ASAP. If you can’t save five bucks when you’re 17, you won’t be able to save $5,000 when you’re 27.

Figuring out money management is actually really easy. It really is easy to manage our own money (unless you’re a celebrity!). We just listen to too many delusional people that want to act like big time investors and share complex investing strategies with us. We need to bring it back to the basics. This is the same advice that I give my friends that are just getting into weightlifting. You need to keep it simple. With weightlifting you need to train hard, rest, and eat well. With money management you need to increase your income, spend less than you earn, and save the rest. You can get more complex and start debating the minutiae. All you’re gong to do is overcomplicate something when it should be simple.

Once you get more advanced you can worry about balance transfers, buying shares, and different investment strategies. As a 20-something you need tomake money, look to increase your income, watch your spending, and savewhat you can. There’s nothing else to it.

Parents are not the only role models. We all look up to our parents. This doesn’t meant that our parents should be our only role models when it comes to money management. Blaming on our parents for our poor habits is justifiable… in elementary school. Once you hit the age of 18 you’re responsible for your own decisions and you have nobody to blame. You live in the real world and sure your parents can
help you out. You just can’t rely on your parents for a bail out. You also can’t blame your parents for poor skills.

You’re on your own now. The beauty of life is that you really can do anything that you want to do. You can apply to any school for any program. You can start any business that you want. You can choose to save money or you can squander it all. We all have enough resources available to us. We just need to take advantage of them, find different role models, and stop blaming our parents.

You don’t have to be patient to save money either. I’m the least patient person in the world. I bought an expensive Macbook Air while travelling through Budapest, Hungary without much thought at
all. All this means is that you have to work with your weakness. If you’re impatient with your spending then you need to keep your money locked up! There are many investment vehicles and accounts where you can lock yourmoney up. If your account requires 3-5 business days to access your money that means you have a few days to think this impulse purchase over. We need to accept our weaknesses and work with them.

That’s my side of the argument. There’s no excuse that you can convince me of that you can’t build financial skills in your 20s. I can out drink most people on a Wednesday night and I like to have fun. This doesn’t mean that I ignore my finances.

If you enjoyed this post please don’t forget to pick up your copy of Completely Conquer Credit (Admin note #3: I had a chance to preview Martin’s book. It’s quite good and it’s definitely full of information I wish I had had in my 20s.)

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