financial zen

Mrs. Zen and I have long been battling the decision of a dual income, or having her be a stay at home mom. As much as I’d love to be a stay at home dad, I’m the main bread winner – her income is basically pure profit, free to spend as we desire (and mind you, it’s going towards debt reduction). We recently traded in my 1996 Honda Civic for a 2005 Honda CRV – mainly because we had the extra income to do a large down payment, and trips to Grandma and Grandpa’s with packed bags, stroller, and dog in tow. Once in the Civic was enough – and with a dual income we could more than afford a new(er) car.

As was pointed out – the after tax and childcare income is about 13k. But let’s make some adjustments:

Our childcare is about $2,340 due to our baby-sitter service. We only use them for one day a week – for now. If Mrs. Zen becomes full-time salaried, that will change, but no matter how you look at it – her additional income is after all bills are paid.

Let’s tackle their considerations:

• Career Advancement Goals – There is *always* more to a career than money! What about happiness? Mrs. Zen desires a career in paramedicine – she enjoys staying at home, but she also loves her work (as do I!)
• How to Return To Work? – I can’t really argue this one – leaving for eyars ad coming back in – that’s potentially ‘resetting’ your career unless you continue your work part-time.
• Extra Expenses – I’ve got to agree – working has expenses, just as staying at home. If no one is home, the heater/AC is off, less electricity, and at work you may have “job functions’ – happy hours, lunches and the like (I *DO* consider these essential – I owe my current job due to lunch-time networking! And pizza.)
• Breadwinner May Become Workaholic Career Freak – C’mon, really? This is a personal thing, and if you can’t balance your career and life, you need to reassess your values.
• Coupon Clipping – I’ve got mixed feelings here. My brother-in-law works from home (ebay business) and is an excellent father and cooks, while also shopping at night. He’s thrifty and is business than some other people I know. Coupon clip, regardless, I say.
• Schools – This is something I’m still looking into. I moved into a certain area for its reknowned public schools – you can send your kids to a private school so that by the age of six they know three languages and a head start on other students. Do you really want to make your kid go through that? You’ve got to focus on your kids being kids and not being “intellectual geniuses” or “young athletes” – they’re not here to live out your dreams. Do what you can to provide, but don’t force your kids to be something other than children.

Now the stay-at-home parent conundrum is an interesting one – I’ve talked to work-at-home, stay-at-home and day-care parents, with plenty of pros and cons. Your children need you to be their parent, but htey also need to develop social skills and learn to go out on their own – not developing an attachment on you, needing you for everything. I’m a parent, and the wife and I are working on him not developing separation anxiety, but I’m still reading on the psychology of it all (which is a never ending quest!)

I’ve read across a few finance blogs that have been talking about prepaying mortgages or not – a lot of people seem against it, saying that the money would be better spent putting into various investment vehicles for “in theory” greater returns on the investment.

In researching this idea, I’ve gotten a good grasp on what seems to be the going concern – what debts are being paid off first?

In thinking about prepaying the mortgage, we’re laying out the debt that takes interest – i.e. credit card debt, which we will have paid off this month (as we do every month).

Our debt consists of:

• 0% credit cards (used for appliances, setup to be paid off one month before they expire)
• Student loans (for me, still in school).
• Mortgage

That’s the extent of the debt – Mortgage, Student Loans, and credit cards. What is charging the most? Our mortgage!

I’m contributing to my company’s 401k to the match, so I’m not losing any money, and with my wife working that gives us over a grand extra disposable income per month! The plan is to take this money and apply it towards our debts AND the mortgage principal – paying the principal (by sending a direct check notated that it’s for the principal) will cut down on insurance, as well! I do not look at it as “a return on investment” with our prepayments do to the recent volatility of the housing market. If we prepay the mortgage and sell the house in – say five years – we’ll have paid down $30,000 on the mortgage, plus the built up equity, meaning we could potentially have a huge down payment for the next home – all from the money gained from our home!

It’s still something I’m looking into, but I will be paying some extra down on our mortgage while paying down all other debt – while reaping the tax benefits of interest paid on student loans and our mortgage… :)

In fighting debt, one thing you should always do is establish an emergency fund.

Of course, in my venture, I’ve got a mixed response:

• I’ve got a built up (and building) 401k retirement account.
• I’ve got an emergency fund (albeit, a small one).
• I’m two months ahead on my mortgage payments.
• I’ve paid ahead on bills!
• I’ve got debt!

This is kind of a “no-no” – why wouldn’t it be great to be ahead of some bills, especially my mortgage?

It’s showing that I’ve lost track of my finances!

I’m overpaying when that money could be better cycled into paying down debt! To fight this, I plan on taking some of my emergency fund, my extra cash from my mortgage gap, and my wife’s income (all of it!) and paying down debt. Basically, my excess influx of cash goes – debt/mortgage principal. Back and forth. Pay down the big one and hammer away at the rest.

One small step at a time, but as I get things in order I’m slowly moving back in track.

I’ve mentioned before you should have an emergency fund – and I hit one of those snags that shows how important it is to have one. We have two cars (both Honda Civics) which both needed major repairs – timing belts, water pumps, and exhaust work. My car – the old beater – was less than $400 (which also goes to show – find a trustworthy mechanic! I was quoted $600 at the first place I went to!)

The nicer, newer car? Nearly $1000. Needs a new exhaust manifold. That, needless to say, was a shocker. With the new baby, I really hate having only one car available at a time, and “exhaust leaks in the front of the car” cause me some concern when I’ve got a growing boy in the back seat, so of course I had him fix it (and I use this mechanic repeatedly because he’s always straight, never lies, and has been a friend of my wife’s family for years).

Luckily, we’ve got nearly $5000 set aside for emergencies, so this will greatly offset any ding that it would’ve otherwise caused. See how important an emergency fund can be when you’re prepared? $1400 is more than my mortgage payment – which means if I wasn’t prepared, this would go onto a credit card, which I couldn’t pay off immediately, giving me interest charges for the next few months (more than likely!)

Because I was prepared – I can pay off these charges right away, without worry! No worrying about not meeting any bills, no worries about “how can I handle this” – a true moment of Financial Zen. My wife was taken back by my tone when I initially told her – and through no fault but my own she was concerned. We try and talk weekly about our finances, but with the baby being born it’s sidetracked us both – but because we are prepared, it’s a non-issue.

Whew!

So SmartMoney is running an article – Private Colleges Can Be Just as Affordable as Public Ones – showing that Private Schools can be as affordable as public ones. How can that be so?

Private Universities tend to be a bit more open with their pocket books, so to speak.
Why a pricey private school could be cheaper
1. Privates have more money to give
I’ve seen this time and time again, with a few friends and relatives going to a private university – and having bills substantially lower than their in-state public college.

2. They meet a bigger percentage of need

3. They’re more willing to consider special circumstances
Private colleges basically are more friendly and understanding – and I’ve definitely witnessed this with my sister’s dealing with the financial aid office, and my repeated problems dealing with public universities.

4. Your child may graduate sooner
As a fact – my sister did. The relatives in public schools? We’re still trucking towards the five-year (or longer) route.

The point is – never rule anything out. You have to try before you can fail, and be told “NO” in writing before it isn’t an option. If you don’t try, you’ll always fail!

This has been posted about, and I thought I’d throw in a quick note stating, yes, I am back. I start classes next week (with personal finance, and others as well!) so I’m hoping to get posting three times a week.

With our newly purchased house, we’ve encountered some surprising expenses, and some not so surprising.

First off, we had to buy a refrigerator, a washer, and a dryer. We also has some of these costs factored into closing costs/our offer, as you know appliances aren’t cheap! Luckily we landed a good deal for two years with 0% interest (which should be paid off in a year). A pain, but this will give us some flexibility.

Secondly – cleaning supplies and “decorations.” We ended up using the majority of our cleaning supplies when we moved out, so it’s time to restock. We also needed to pick up some wall hangings and some large curtain rods (the ones from the apartment were too short). Nothing major – but we also purchased a ladder (tall ceilings!).

We expected the utilities, but the desire to decorate and add to the house were definitely unexpected (for the most part).

Enough for now – I’ve got a wedding to attend this weekend, and will have a few more posts to flesh out next week!

No doubt if you’re involved with Personal Finance, you’ll have figured ways to reduce your bills by some.

“Ways You Can Decrease Recurring Household Bills” from the Real Estate Journal brings it up but I think they’re missing a few key points.

They are working on cutting their bills down – but it seems they also went for more bang for their buck! They didn’t reduce prices, they allowed themselves to be upsold on their cable and internet. They didn’t look to decrease their bills, they looked for more for what they were paying.

It’s not that getting more for less is bad, but when your goal is to reduce spending, keeping bills at the same levels is detrimental and counterproductive. So you get ten more channels for the same price – great! Now you have more to watch instead of doing something with your life. Maybe that’s a bit too harsh, but do we really need 100+ cable channels when you know nothing is on that is going to satisfy you?

At the end of our test we racked up a net savings of $323 a year. Not bad, but we hoped for more after negotiating through the tangle of phone trees and inscrutable pricing plans. We actually let ourselves be talked into paying more for an upgraded service from one provider and struck out completely with two others. On the bright side, we’re no longer completely in the dark about our electric bill after hearing a clear explanation of it for the first time.

I think that one line (emphasis mine) is the saving grace. They got a better explanation of one of their bills – my problem is why didn’t they do this sooner? You should very clearly understand every bill you are paying – if not, why are you paying it? Why are you getting that bill? Will you pay my bills if I send them to you?

I’ve found an effective way to help my budget is to sign up for the budget plans with the utility companies – I’ve done it with gas and electric. They give you an estimated bill monthly, and after a year’s time they reevaluate it – I saved a ton going this route, although I initially overpaid, at the end of the year my next year’s bill was much cheaper – but I monitored my usage and made sure I wasn’t abusing the system. Personal Responsibility!

Have you had any experiences lowering your bills, or getting a better understanding of them?

(Note: My Personal Finances is calculated using my salary – not my wife’s income, so we’ve got a good idea what will happen after the baby’s born)

Our personal finances for the month of April – we went over by $146.11! – mainly because of our inattentiveness to our fast food fix! I’ve noticed my weight slowly declining since we noticed the unhealthy fast food trend. Our goal for this month is to keep our dining out to <$40 (I promised The Wife Sonic if we can manage our budget this month). We had a slight increase in clothing expenses - namely a couple prego clothing items (we buy mainly used - but we found a couple cheap garments we'd prefer new). We also bought sunglasses! Stylish and $10 from a mall kiosk (I love to haggle). A large chunk was dedicated to paying off bills (and knocking out some student loan).

Also increased! Medical bills! Who knew kids were so expensive? He's note even born yet and The Baby Logan is looking at a $2500 bill (possibly less).

Our gas intake is under control some - we're averaging about a tank a week (it's a long drive to the office - thank God we car pool!) My car should be back from our Friend the Mechanic this week - for a lot less then my first estimate (it was between $800-$1100). Thank God for Mechanic friends.

I’m moving to a new office closer to our home, but that could change in the coming month (I’m weighing a few job options – one is a lot closer, the other is right next door to my current location). This should effectively increase my budget – it depends on the location and pay.

Lastly – I’ve got a chart with the No Credit Needed Network! I’m anxious to update my progress – all in good time, I suppose! I’ve got a lot going on (hence my less than stellar posting) but I will not neglect writing! I’ve got a stash on incomplete writings I’ll try to have ready (and relevant) so I can hopefully keep this up every morning.

It seems so simple, but I know a few people that don’t, so perhaps it’s time to iterate:

You NEED a budget. You NEED to track your spending.

I don’t just mean read over your bank statement, or check your credit card bill.

Follow these simple steps:
Use this calculator and figure out your monthly income after taxes.(I got it from Miss Mini-Ducky)
Plug it into this calculator and get a rough budget.
Make an excel spreadsheet (or use quicken) and enter in ALL your receipts. I really mean all. Your coffee, your McDonald’s, your gasoline, your cell phone. Plug it all in. Categorize it (Food, Auto, Rent, Utilities, Pets, Kids – you can be as specific or as vague as you want -it’s *your* tool).

I suggest using the budget from the calculator as a guideline – use it to give you some rough numbers to guide yourself along and perfect your budget.

We did this for April, and it’s quite an eye-opener. It was on my “ToDo” for 2007 and I saw how horribly we were aware of our expenses – we ate out WAY too much, we put way too much on our credit card.

I ran through our statement, and I see why – luckily, the majority of the credit card was on computer parts (I built a system for Dad – he reimbursed me, the check was sent straight to the card).

One thing we did do this month – I have a UPromise Citicard. A *fraction* of every purchase (especially groceries and local establishments, including bars!) go towards my student loan. We’ve devised a system where we use the card to pay for groceries/food and when we get home, we enter the amount into our budget spreadsheet and I write a check through my online credit union to AUTOMATICALLY be sent that night to pay it off – the money is gone that night, the card is paid in full! So it’s win-win, I get a % to my student loans, my card gets used, and we pay it off!

Problems with our budget:

• I don’t account for external incomes. Side-jobs, ebay, my wife’s job, etc. aren’t included in our budget, which makes it much more conservative then it needs be (so if we’re over budget by $50 – it’s BAD but not HORRIBLE).
• We also discovered our eating out habits is responsible for a huge decline in income. We saw the effect one and a half weeks in and cut out dining out the rest of the month – much to our benefit! We also are starting to research local prices to see where we can get the best deals (who has the cheapest bread, eggs, milk, etc.)

Improvements to the Spreadsheet:
I’m looking for other’s spreadsheets before I post mine to incorporate others improvements. Ours is pretty simple – written in Excel Office 2k7 – with mostly simple layout and design. It’s my goal to have it be our one stop shop for budgeting, I still use Quicken as a “whole picture” view, but I’m finding it to be bulky and annoying – I haven’t given up, I just need to learn it more thoroughly.

Anyone else find a useful method for budgeting? Any “must-haves” or “good to knows” you’ve come across?

Related (via The Simple Dollar):
Tips on making a budget
Why you should make a budget

I came across this Spending Plan Online Calculator from Crown Financial Ministries which assists in setting up a budget – you enter your yearly salary, tithe, and taxes, and it spits out a budget. I came across this on either Google or another blog, sorry I can’t remember which!

An *excellent* tool in starting up a budget. I’m using it as a basis for a spreadsheet to help share the state of our finances with my wife (she’s the pen-and-paper budgeter, I’m all about Excel/Quicken – and possibly Mint, once the Beta opens up!)

It’s a very good *start* of a budget – it breaks it down by percentages. What I did was plug it into Excel and start comparing my expenses to it’s assumptions – I’ll update it the beginning of March to see how we did!

EDIT: Actually, there are quite a few good tools on the site! Visit and click around!