30 second video: protect your emergency cash like a chess match queen May 22, 2008

New shoes, new iMac, & old cash worries:
It’s fun spending cash reserved for emergencies.

Even more than fun – it’s bloody easy!

It’s easy to break discipline & access those dollars meant to protect from rainy days. But since that approach has made my family more vulnerable financially, it’s time to rethink. The short-term benefits of a change are clear.

Emergency cash reserves & chess: create the pawns

After 7.5 years of marriage, these prove true:

• if we have only one stash of cash, we’ll spend it. It matters not if it’s reserved for emergencies. We’ll spend it on non-urgent desires. Do these desires help us be more effective sometimes? You bet. But occasionally our compulsion runs rampant.
• it’s time to view emergency reserves like a chess queen and find ways to protect her.
• thus it’s time to create the ‘chess pawns’ in our personal finance life.

The Pawns are the soul of the game. -Francois Philidor

For the past few months, I’ve tested a new strategy. And it’s producing positive results for Sean and me. The goals are two-fold: truly learn to reserve emergency funds for unforeseen, urgent cases; and next, create a system to enable that habit.

Here’s what we did:

• set-up (10) online sub-savings accounts via ING Direct, in addition to our main emergency cash reserves account. These are metaphorically ‘chess pawns’ protecting the emergency cash ‘queen’. In the past, we dipped into cash reserves for these reasons; so we decided to designate sub-accounts to ideally prevent future dipping.
• each month, monies direct to these sub-accounts i.e. medical/dental; clothes/dry cleaning; annual visit to parents; pet care; computer/tech; family gifts; books/education; condo; Alaskan trip for parents by 2012; relocation expenses.
• each pay cycle, 12% auto-deposits into emergency cash savings with app. 3% funneling to the sub-account buckets. And so far for one business quarter, the emergency bucket has stabilized and steadily increased since we use those other sub-accounts for spending choices. Hooray!
• Note: at least so far, we don’t necessarily spend monies each month that were allocated to those sub-accounts. Yet if for example my husband needs Ruby on Rails books for his coding library, he has accessible, dedicated funds for that decision.

Pawns, marriage partners, & the psycho-summary:
It’s just another way to budget. But the tangible existence of these ‘pawn’ sub-accounts has helped us stay on track with building emergency cash. And it’s helped to clarify spending priorities.

It’s working too from a psychological perspective aka it’s less stressful in the guilt department. In the past, I’d mentally beat up on my husband and me for dipping into emergency reserves for play or even basic needs like new shoes (…to replace that broken heel). Footnote: guilt drains marital trust and fun for sure!

More from:

• Housewifery & another whacky point along our rainy-day cash quest;
• The Simple Dollar’s tact to emergency reserves;
• Emergency Preparedness Tips & your cash (use the freezer?);
• MSN & the ever frank Liz Pulliam Weston on learning financial flexibility for tough times;
• Millionaire Mommy Next Door & her fantastic approach toward tailoring a budget & recognizing spending values.
  

beckoning budgets & cursing like a turk September 24, 2007

Yikes it was a tough call — listening to that inner budgetary voice vs the call to wander lust.

For a few weeks, I planned on going with Sean to Istanbul and producing a few live Web shows like Jonny Goldstein does each week.

Yet the truth is, we already savored Hawaii this summer – an opportunity brought about through Sean’s work as well. My expenses for that were out of pocket too, like Istanbul would’ve been.

I’m not sure what tipped the final call not to go…except going to Istanbul felt like it would undermine this year’s financial goals. And the husband doesn’t need the wife going everywhere with ’em, eh?!

Ah but we’ve tested the Web cams for live overseas chats during his trip!

More from:
Get Rich Slowly offers an encouraging post on living debt-free (…a key reason why Istanbul was let go; wow could I sound more pathetic?!);

renting vs buying e.g. can you still afford pet food with a mortgage? August 29, 2007

I live in downtown Washington, DC with my husband where we rent 600 square feet & love it. We long sold the car & we both walk to work (…I endure a hefty commute from the bedroom to my home studio 15′ away).

After scoping out properties with an agent – we’re delaying home ownership, despite the market stats.

I sometimes get defensive on this issue, esp with friends who’ve owned for some time. I let my self-concept get all out of whack, thinking my man & I are somehow less adult for not owning property in our 30s.

The truth is, I believe buying now makes us financially vulnerable no matter how much home price tags decline. To get into a 600 square foot home in this area, we’d:
-have to relinquish our emergency cash reserves toward down payment & closing costs;
-retain a minimum monthly mortgage of $2k for 600 square feet at a conservative purchase price of $230k;
-that leaves minimal to zero monthly margins for unforeseen expenses or increased contributions toward retirement.

Granted, we’ve chosen to live in pricey downtown near work for simplicity of living. Walking to work is addictive, especially that welcome by-product of zero car payments and insurance.

And Stephen Pollan chimes in:

Today when young clients come to me to discuss real estate, I tell them to buy their second home first. I tell them to steer clear of “starter houses” they’ll eventually outgrow, and instead buy the kind of home they would have stepped up into after selling a starter house. I tell them to plan on buying a house they could be comfortable in for the rest of their lives. If that means waiting longer to buy, so be it. That will give you more time to save money, …more time to separate your needs from your wants. The result will be a more intelligent buy.

So right now, I’m glad to help our landlord with his property ownership & tax benefits. As his renters, we’ll keep chins up while investing in our fiscal balance and discipline.

More from:
–CNN’s cost of living calculator (knocked my socks off when my cousin in Tulsa, OK said we could live in a 4 bedroom, marble kitchen estate for what we’d pay for 600 sq ft in DC);
—Rent v buy calculator which assesses whether buying a home (or renting & investing the would-be mortgage payment) would be best per your current stats;
–Pollan’s book Die Broke offers frank, reasonable insight to personal finance

marital money mantra #2: protect what you can’t afford to lose August 26, 2007

Sweet cash kitty

We learned a lot from our own cycles of incur-credit-debt-yet-not-build-savings. We still have credit card debt (from mis-calculating last year’s tax payment); yet we’ve for the first time built a cash kitty, four months of expenses, with plans to secure one year’s worth since we function on a single steady income.

It’s tough changing one’s perception of what is or is not a valuable financial habit or philosophy. I heard throughout life about debt-is-bad-pay-it-off but not as much insistence on building cash reserves aka rainy day protection. I realize saving philosophies have certainly been around for ages; cash reserves (and truly reserving them for emergencies vs a Mets game…) — just weren’t emphasized as much in my personal community.

After six years of marriage, four cats, and $6k in pet surgeries it became clear viewing a credit card as an emergency cash plan lacked….prudence. Emotionally we couldn’t afford to lose the various cats & financially, we decided we couldn’t afford to personally finance continual debt cycles.

Thus dedication to building cash reserves began as did researching pet insurance(!).

More from:
-ASPCA offers diverse pet insurance plans & good customer service;
–All Financial Matters says it well: Emergencies will come whether we are prepared for them or not.

marital money mantra #1: overt & unified approach August 23, 2007

HUSBAND-WIFE ROLE PLAY:

During the first years of marriage, our conversations on spending splurges went down like this:

The husband likes books – admirably. And sure I’m addicted to eating out with friends & travel.

With books though, Sean’s a read-it-once-learn-it type of brain & is a strong visual learner. Books are his friend. It’s a learning style that differs heartily from my own. I love a good Edith Wharton novel & a few graphs from business books. But I just did not appreciate his relationship with books as they related to his well being.

But more than that, his book buying irked me because deep down, I knew our family finances were shaky with our unclear financial philosophy convincingly…unclear.

Once we took actionable steps toward more stability, my emotional freak-outs eased considerably. It helps that my husband owns a really laid-back demeanor toward home finances a.k.a. “That sounds good baby!” — his reply to many suggestions tossed out for discussion.

Our facilitating questions on the topic:
–Do we agree that saving for present & future is worth it? …get mutual buy in first; establish tactics later.

–In what ways does money affect your sense of self? …sounds corny but ask. Do they want 100% control? Do they care if you do? Do you feel like a ‘less-than man or woman’ with someone else handling the bills? In what ways do you crave financial autonomy or partnership?

–How do you like to play? e.g. books, tech, travel, hobbies

–If saving & investing for your overall health is the driving goal, what are you/we willing to financially modify – or not – toward the play stuff?

I’ve heard of spouses going out of town for the weekend with the other spouse staying home. Upon return, there’s a newly purchased car in the driveway. That actually happened with my parents. Yikes that was a cherished family moment in Mustang, Oklahoma; and looking back – there were power struggles & self images at work, all tied up with money.

If at all possible, make all that overt…with some flexible conversation on what’s the healthiest, happiest shared value on money that you can agree on.

Bottom line, if all this becomes open, then spending becomes all the more fun & relaxed. …since you’ve as a team asserted responsibility toward your driving financial goal.

More from:
1) Gerri Willis, clear, straight shooter;
2) Kiplinger & financial unions;
3) Women Today mag & couples (I like what’s said about learning what constitutes a major purchase).

Savings fable + financial planner says his clients spend, spend, spend August 16, 2007

Stunned I say, stunned!

10 second video: how much his clients overspend per a DC-area financial planner

What drives that spending itch?

In a meeting with a financial planner this week, I asked him how much a higher income impacted one’s success at saving.

He then shared this story that knocked my socks off:

He generically referenced two of his clients — one was a grounds keeper and one was a leader at a university. Their retirement financials were similar; each wanted to retire in a year. The grounds keeper was overjoyed at the financial planner’s feedback: due to his conservative spending and aggressive saving habits, the grounds keeper could live comfortably on Social Security, with his retirement savings as buffer & as help for his grandchildren’s college costs. Yet the university leader, with a considerably higher income, agonized over his retirement nest egg. The financial planner said due to his over zealous spending habits & reluctant savings plan, he (the university leader) would not be able to maintain his living standard in retirement years. Or the other prospect was he could continue working and cut back costs.

…I promptly refrained from a Starbuck’s visit walking home.