Are you really saving?

Today’s guest post comes from Miss Lizzy Lucy. Here’s a blurb from her: I’m just a NoVA based girl that likes to run, has always known how to make money, but is just figuring out how to be responsible with it. You can follow her at www.missylizzylucy.tumblr.com

“look at how much I saved” vs “look at how much is in my savings account”

Like Ninja, I am sexist. I believe that in general men are better with money than women. I remember getting an email with something along the lines of this in it: men will pay $2 for a $1 item that they need, while women will pay $1 for a $2 item that they do not need, then proclaim that they just “saved” $1. I am, or should say was, one of those women.

I am horribly emotional when I shop. I shop when I am happy, sad, excited, whatever. See my problem is I can rationalize any purchase. I can find something to waste money on at any store. Believe it or not, one of the biggest offenders in money slipping through the cracks is 7eleven. And what do I buy at 7eleven that damages my budget so much? Drinks and chips – in small packages that cost more than their grocery store counterparts.

This whole ‘financially responsible’ thing is still super new to me. It was just last year that I was looking at receipts where I had spent over $200 on junk (clothes, girl stuff – things I liked but didn’t need) proclaiming “look – this says I saved $357!” In reality, I hadn’t saved anything. My savings account never grew, my checking account dipped down around $100 right around the time for each direct deposit.

Finally something clicked in my head – when you’re spending money, no matter what, you are never saving that money! They only way to save money is to not spend it! All of my life my parents had been telling me “pay yourself first” and “put 10% of each paycheck into savings.” But it’s only now that I really get it. Sure, I can buy $170 jeans for $40, but I haven’t saved $130, I’ve spent $40. I guess – if I had budgeted $170 and then threw the surplus $130 into my saving account then I would have ‘saved’ that money – but who does that!?

So its not really that I don’t know how to save, it’s that I lack the self discipline to plan my spending and then save the surplus when I get things for a good price. My solution that I have come up with is to place myself into a shopping detox program of sorts. I am going to go cold turkey wasteful spending! For the next 30 days, I am putting myself into shopping rehab. I am leaving my credit cards and bank cards at home for one month and only making planned purchases: groceries – bought from a list made the night before, gas, bills, and already planned purchases.

The trick will be, after rehab – how do I start shopping without wasteful spending? Any ideas and advice is welcome!

MissyLizzyLucy

Personal Finance…not anymore!

Today’s guest post comes from a good friend of mine MattyIce. He has been seen commeting on my blog from time to time and is an all around good dude. I twisted his arm a good bit and finally convinced him to hook me up with a guest post. Here it is…

Personal Finance is no longer personal in my life. I got married a year ago on August 16th. Over the past year my wife and I have gone through many learning experiences with money management. We have struggled to combine our own personal spending, saving, and budgetary habits/desires into one common goal….

A little about me…Ninja and I became friends in September of 2009. Girl Ninja and my wife had tried to get Ninja and I to hangout for over two years, but guys need time, they can’t just force a friendship. We finally went and played tennis one day (I got killed by Ninja) and I started asking about his hobbies, and what he does in his spare time. He told me about Punch Debt in the Face and his deep interest in Personal Finance. This common bond connected us and spurred a conversation that continues to this day. My wife and I live here in San Diego, CA and we are still newlyweds trying to become one in all aspects of our lives, including our finances.

Since September I became obsessed with personal finance, due to the help of Ninja and the rest of you Personal Finance bloggers out there. I wanted to learn everything I could about how to be wealthy in the future. If I was this passionate about Personal Finance when I was single, life would be easy. I could tell my money exactly where I wanted it to go, and it would go there. I could make homemade bean and cheese burritos every night for months until my debt was paid off. However, I cannot do that. My wife is one of my responsibilities now and her opinion and desires matter. Throughout this year we have had a few fights over money, and it was because both of us had very different financial goals. My goals were to pay off all debt with any extra income we made. For my wife this was her first year out of college and she was making decent money, so she wanted to enjoy it. She loves to shop and thankfully she always shops for a good deal, however those good deals start to add up. Although I would rather pay off our debt as fast as we could, she has every right to want to buy clothes and home décor with the money she makes. Money is a stressful topic and if you do not communicate your financial goals to one another it could ruin your marriage.

I took on the responsibility of paying bills in the beginning, because I felt like it was my responsibility as a “Man” to plan for our future. Our first big fight consisted of my wife feeling restricted and controlled by my money management. I checked the bank account frequently to watch every purchase, and then follow up with my wife to see what she bought. She had no freedom to buy anything with the money she had earned. This was our first conversation about each others financial goals. I learned, through this argument, that we had very different financial goals in mind, and we needed to communicate more. Since this conversation we have created a few helpful ways to talk/develop common financial goals.

1. Find out each others goals/ desires– Find out where your spouse wants to see their money go.

2. Figure out areas of compromise- This could mean that your spouse gets $100 dollars a month (cash) to spend wherever they want. This idea came up in our first fight, because then I couldn’t see where the money was being spent.

3. Set up plan together (budget) – Create a plan based off of these new compromising ideas. Consider each others Financial desires and then see what your budget looks like.

4. Implement new goals- Follow that new budget if it works for both people. If it turns out that it is not working, sit down and start at step 1.

My wife and I are still learning and growing in our marriage and will continue to look for better ways to communicate about our finances. To all you married couples, or very wise single people out there, what helpful solutions did you discover when Personal Finance was no longer personal?

Surviving a Short Sale

Today’s guest post comes from Trina. She is living the dream as a stay at home mommy to twins and looking forward to holding another sweet babe again in late fall. In between baking macaroni and cheese, reading fairy tales and folding laundry she tries to balance the budget for her sweet family of four and daydreams of a real meal in the shadow of the Eiffel Tower with her amazingly busy husband…someday.

Here it is, the true story of a short sale survivor.  I fully realize that this post will not make me many friends and some readers may feel that my husband and I bowed out of a financial commitment.  But I just wanted to share the ins and outs of what happens during a short sale, that it is not a decision made lightly and it does affect the homeowner on an emotional and financial level before, during, and after the sale is made.  I’m hoping that no one else here has gone through one and maybe my sharing can help you (or someone you know) avoid one in the future.

So, flashback to spring 2006.  There we were, two DINKs loving life and thrilled about my husband’s big work promotion and transfer to California.  We were living in Washington at the time and had been living in our WA home for almost two years (purchased in 2004).   We had actually been thinking of buying a second home in WA as an investment for about a year and had our financial ducks in a row.  Our debts were our mortgage and my husband’s car (which we had planned to pay off by 12/2006).  So when the job offer and transfer to CA came up, buying instead of renting seemed like the right thing to do.  We found a beautiful home in Northern California and found excellent tenants for our WA house.

Fast forward to summer of 2007, my husband completed his ‘training’ 15 months early and was offered another promotion…only this time, back in WA.   Hmmm, what to do?  After living in CA and working at his current position, we realized that this stint was pretty transitional.  We had literally just gotten the news that I was pregnant…with twins, and the big decisions seemed to be coming at us fast and furious.  We decided for him to move back to WA asap, literally 2 weeks later, put the house on the market and I would stay in CA for another 2 months to finish out my teaching position and finalize everything will the sale of the home.   Or so we thought…

The CA house went on the market in May of 2007.  With no offers til November of 2007:  the offer was $75,000 less than we had paid 18 months earlier and our realtor never mentioned a short sale (we did not even know what that was at the time).  We decided to take it off the market and have a property management company rent it out.  Our twins were born on Christmas Eve of 2007 and we heard days later that a family would be moving in for the New Year.  Things seemed to be looking up.

2008 was interesting.  Becoming parents was a learning experience (to say the leastJ), using the rent money and then some (ok, a lot) every month to cover the CA mortgage was more than a little stressful, and learning how to budget for a family of four on one income was also a new skill we were trying to master.  By late summer, looking at the bills we began to realize that something was going to have to give.  Food on the table and diapers on our babies’ bums became priority over the mortgage payment on the CA house.

January of 2009 our CA renters moved out and we missed our first ever mortgage payment.  I literally cried.  I am a rule follower to the T, and deciding to bail on this huge financial commitment was so far from the people that we were…are, that it felt so wrong.  Looking back, we know it was the right decision for our family….however difficult to make.

The next month our two credit cards were bumped from their $5,000 (personal card) and $10,000 (work card) limits, both of which had been paid in full every month for the last 10 years, to $500 limits on each.  Our mortgage company called each of us at least 3 times a week for approximately 3 months asking us to make a payment.  The calls were never ugly or rude, however my husband and I are pretty polite people and we obviously realized that we did owe the bank money.  We had to tell and retell our story again an again about not living in the house any more and the tenants moving out.  By July the bank agreed to a short sale and our realtor was able to put the house on the market again.  This time for $125,000 less than we paid.  We got a couple offers immediately but the bank did not agree to the terms.  Accepting or not was not our decision at all, the bank is in complete control and has (I think) up to 90 days to accept the offer or not.  Finally in September there was another offer, this time for $186,000 less than we paid for the house.   It was accepted and two months later, the day after Thanksgiving, we signed the papers that we no longer owned the home.  It was a day of rejoicing that the nightmare of trying to sell our house had finally ended 2.5 years after we first put it on the market and it was a day of great sadness that our financial life had struck such an unbelievable low point.

Ninja posted a while back about a ‘financial timeout’ and that is what we are in right now.  Two months after the sale was final we got a call from our credit card company stating that both of our cards have been cancelled due to our ‘high risk’ financial history.  That was definitely a low blow to our self esteem, but I completely agree with the bank’s decision.  Also, I think our credit score is in the gutter right now, we actually have not checked.  We don’t feel the need to since we are not planning on obtaining credit anytime soon.

Lessons learned:  Don’t buy a house in CA in 2006 and move in 2007.  No, seriously, this has been a huge eye opener for us.  I can honestly say that before the purchase of that house in 2006 I thought we were two financially savvy young adults who managed their money very well.  Now, we are a little bit older and lot wiser.  Our priorities are still investing in my husband’s retirement accounts, aggressively paying off our WA home mortgage (yup, the first one we bought in 2004), and paying cash for everything…including the MBA my husband in currently working on, a new car for him next year (I’m hoping that will be in time for his graduation), savings for our kids’ college fund, and travelling the world (a girl can dream right?).

My hope for this post was to share my experience with a short sale and that people who go through this can learn from their mistakes.  This decision was in no way an ‘easy way out’ for us…it was the right decision for our family and we have definitely, definitely, definitely, learned our lesson the hard way.

Any questions, I’d be more than happy to answer.  It was a bummer to live through, but we made it and came out stronger and smarter.

-What is your experience with a short sale?

-Have you heard of it (we hadn’t before this whole process got started)?

-Any family or friends going through this?

What to do with extra cash

Today’s guest post comes from Melanie. She is a Human Resources professional in the Toronto area who is married, with two young children.  She blogs about financial life as a family of four and the challenges that come with it at Finance For Four.

I know – it’s hard to feel bad for someone when they tell you that they have extra cash, and they’re not sure how to spend it.  If someone had presented me with this scenario while I was paying down all my consumer debt, I would have had a hard time trying to keep a straight face while trying to help them with their tough “scenario”.  And if I was still paying down my debt, the answer is that it all would have gone straight to the debtor of choice!

But, fortunately, now that I have paid down all of my consumer debt, and my husband will be receiving his annual bonus from his company, we are faced with that very question – what to do with the extra money.  Both of us agree that it cannot be absorbed into our regular cash flow.  But we are unclear as to what we want to do with it.  A big part of us wants to spend something on the house – we desperately need new couches, we would love to replace our ripped linoleum kitchen floor with ceramic tile (and add a backsplash while we’re at it), and we were so strict while we were paying down our debt that we hadn’t been spending anything to improve the inner appearance of our house.  But the other part of us feels that we should be acting “responsible” with this money, and choosing to either pay down the mortgage, or invest the extra cash.  We could also do a combination of both the reno and the responsible part.  But how to decide?!

Currently we are “between” financial advisors.  With two small children, I have neither the time nor the energy to learn how to manage my own investments on an active daily basis.  This doesn’t mean that I don’t know what’s going on with our financial picture – but I don’t have the knowledge to actively invest our dollars on a daily or weekly basis.  We have been asking friends to recommend their financial advisors and going through sort of an interview process to determine which one best fits our needs, and can help us maximize our savings potential.  This is a question that I love to ask them to see what their response is.  I don’t think that there is necessarily a right or wrong answer – but I really like to see the reasoning behind the answer that they give.

The argument towards prepaying the mortgage is pretty obvious – pay extra towards the principal on your mortgage, and you save a boatload of interest. Especially true in the first five years of paying down a mortgage, when you are primarily paying interest rather than principle (Usually I need to have had at least one glass of wine before I venture to look at my annual mortgage statement!)  However, there are also many who feel that paying down the mortgage versus putting the money in your RRSP (read: similar to 401K but Canadian Style) is not the best long term investment.  Depending on the return that your investment can achieve, over the course of the next ten years, this extra cash may work harder for me in an investment capacity.

In some ways, I have to think: What Would Ninja Do?

After some serious pondering, we decided to spend about half of the bonus on our house.  The new leather couches are awesome, and the kitchen renos, as you can see below turned out amazing….

Now we have about half of the bonus left and are leaning towards going with the mortgage payment this time around.  Since this is an annual salary, maybe we could split it up – invest one year, prepay the mortgage the next?  I will leave it open to Ninja’s wise readers to provide their input and opinion on what they would recommend.  Have you faced this situation before? Which did you choose? Which would you choose if you had the option, and why?

The importance of positive role models

Today’s post comes from my homegirl Sandy. She blog’s at firstgenamerican.com. She loves reading about personal finance and frugal living. Her frugal side comes from her immigrant mom who definitely falls into the camp of the frugal extreme.  She currently goes by Sandy L in my blog comments. Here’s her post….

I have two children now, so I’m often thinking about how not to screw their lives up.  I’m also wondering what they will be missing out on by not having things as tough as I did growing up.

Looking back, I bet my mother was wondering the same thing.  She grew up during WW2 in Poland and was often malnourished, hungry and cold.  She did have a roof over her head but had no electricity, no running water, limited education, and limited heat in the winter.  I often complain to my husband about how our electric bill is 3x what my mom’s is. He quickly retorts: “It’s not fair comparing ourselves to someone who grew up without electricity.”

So, the question is again, what’s more powerful, a positive role model or a negative one, or do you need both?  I see people who have positive role models who turn out a mess and vice versa…so in the end does anything you do really matter or is it all genetics?

For years, I had little empathy with the people in the hood who would cry their sob stories about how bad their lives are and how they’ll never get ahead, etc, etc.  It just sounded like my dad..and I knew he had opportunities.  He just chose not to pursue them. I also knew there were 8 million scholarships out there for poor people because I got lots of them.   I always thought: I was poor and I got out.  It’s your own fault that you are still destitute.

My perspective all changed when I did grand jury.  They ushered in a young teenage boy for drug dealing.  I soon learned that his entire family had a record.  Everyone he lived with was a convicted drug dealer. His parents, uncle, cousins, siblings, grandfather.  No one in his family ever worked a real job. How the heck are you supposed to know there is something else in life that is meant for you when you have no perspective?  How do you make a future for yourself when you have a record before you even get out of high school?  How do you get off welfare when that’s how everyone else you know gets by?

That’s really when I realized that all people need a lifeline, a ray of hope, a success story to cling onto.   For me, the main one was my mom. For all intensive purposes she was the breadwinner of the family. We lived in an almost condemned apartment building that my parents paid for in cash and fixed up as they got money.  They sent me to private school, I went to college, I always had a roof over my head, I was never hungry. When my mom got laid off about 15 years ago, her gross income was ~$15K/year.  She maintained a lush garden, sewed a lot of my clothes, worked 40-60 hours a week, cooked, cleaned, and did laundry. My mom was very sleep deprived.   I knew that hard work and creativity could at least get me fed and housed.   By most American standards we were poor, but to her, we lived in a house with running water and electricity. It was a giant step up from where she had come from.

I remember when I graduated from college and my job included relo. The woman who lived downstairs from my mom saw the guys packing my stuff and told me I was “so lucky.”   LUCK??  I call it 5 years of sleep deprivation by going to engineering school and working 30 hrs/week. For her, it was easier to look past the hard work and zero straight to the result.

So what did I get from positive role models?  I got a lot of hope and a little bit of an instruction manual.

  • Hard Work, not Luck is what makes you get ahead.
  • Don’t look to others to make your life better, look inward to yourself
  • If you see someone’s success, don’t forget about the steps it took for someone to get there.
  • Always keep Goals
  • Save part of your paycheck
  • Don’t buy anything you can’t pay for with cash.
  • Sacrifice is required to make big gains in any situation.
  • There are no get rich quick schemes. Most wealthy people I knew spent a lifetime to get to where they are today.  (Now perhaps I would think differently if I knew many young entrepreneurs).

I’m curious to hear who your positive role models have been. Do tell!

My kid is worth the cost

Today’s guest post comes from a personal friend. Janell. Here’s a little blurb I asked her to write about herself…

My name is Janell. I met Ninja through my husband, who is in the same line of work as him. I am a married, twenty-six year old mother of one. I work part time from home, where I also spend my days with my little girl. I was a writing major in college, but don’t have a job where I can exercise my passion, so I recently created a blog to serve as my creative outlet. Feel free to join me as I write about everyday adventures, family, children, and crafts at emptyinkwell.com.

I’m a new mom; my daughter is seven months old. Too often, I hear from acquaintances—even random people—that they’d love to have kids, but aren’t ready for the financial responsibility. The look on their faces as they say this suggests something along the lines of: you look way too young to be a mom… are you sure you know what you’ve gotten yourself into? And to that, I have a few comments:

One. Something my mother taught me a long time ago is this: you will never be “financially ready” for any life-changing event.

I’m not saying it’s a bad idea to set some financial/personal goals before making a life-changing decision—I think it’s even wise to do so—but you can’t be one hundred percent prepared for something you don’t yet know about, like getting married or having children—they aren’t things you can save up to buy or set a budget for before experiencing them firsthand. Having children is full of the unknown… you learn, adjust and make-do with what you have, one day at a time.

Two. Kids don’t cost as much as you think (or I thought) they would—at least not right away.

For starters, having a baby shower will pay for the kid’s first six months of life—seriously. Kind of like how a wedding shower will practically fill your kitchen cabinets, bathrooms and linen closets, a baby shower will clothe, clean, and diaper your kid for quite a while before you end up spending any noticeable amount of money.

My husband and I didn’t buy a pack of diapers until our daughter was two and a half months old. We were given enough clothes to fully stock her wardrobe for the first six months of her life. (Of course, we bought a few outfits here and there just because we couldn’t resist how adorable they were.) We never needed to buy bottles, towels or washcloths. We have yet to buy baby bath or baby lotion. And all of the big-ticket items (crib, stroller, etc.) were also given to us as gifts.

Like I said, I am a new mom. I’m sure a lot of you parents out there are thinking… just wait ‘til your daughter gets older. And I totally agree… kids get more expensive as they get older. First they start eating real food (not free mommy milk or 90 cent jars of baby food). Then they’re in school—they need school supplies and lunch money and fieldtrip fees. They go to birthday parties and to the movies with friends. Then they’re driving and need gas money and insurance. College tuition, books. I get it. But as a child’s expenses increase, I’m guessing that so does the family income. My husband and I certainly don’t plan to be making the same income when our daughter turns ten, or twenty, as we do now.

Three. My kid is worth the cost… no matter what.

Having said all that, I’m not encouraging anyone to pop out a kid (and definitely not more than one) if you truly are in a bad financial spot (i.e. you live on the streets, don’t make enough to pay for the bills you currently have, only weigh 100 pounds because you can’t afford to eat, etc.). But assuming you have a relatively “normal” (whatever that means) lifestyle and a decent handle on your finances (and if you read PDITF, I’m assuming you probably do), you’re in as good of a spot as the next for a kiddo.

If you have young children, do you ever get the “are you ready for that” comments or innuendos? If you have older children, any financial advice you can offer to help us newer parents plan for when our younger kids get older and more expensive?

Job Hunting Mistakes I REALLY Hope You Don’t Make

The following is a guest post by Crystal at Budgeting in the Fun Stuff.  Her blog covers living expenses, saving for your future, and the fun stuff in between.

Sometimes I come across articles that just are too funny to be true.  The Wall Street Journal post, Big Blunders Job Hunters Make, will hopefully astound you too.  If it doesn’t, we need to have a private chat about your job hunting strategies.

Here’s their list of mistakes, my choice of funniest examples, and my immediate reactions to them:

1. Entitlement syndrome.

…human-resources executive Pamela J. Sampel says she received an unsolicited résumé full of grammatical and spelling errors with a note asking her to have someone on the company’s staff correct them. “I’m sure you have people there that could fix them before they put it into your online database on my behalf,” the applicant wrote, according to Ms. Sampel.

SERIOUSLY?!  People like this make me feel like a genius…

2.  Behaving rudely.

…a recent candidate for an entry-level outsourcing job at Accenture Ltd. unwrapped a sandwich during an interview and asked the hiring manager if he could eat it since it was lunchtime.

HAHAHA.  I wish I had thought to bring a sandwich for my 5 houring hiring process…if I has just been warned, lol.

3.  Acting arrogantly.

Recruiter Peter Polachi recently met with a candidate for an executive-level marketing job at a midsize technology firm. In the middle of the meeting, Mr. Polachi says he suddenly heard Madonna singing—it was the ring tone for the candidate’s cell phone and the person took the call, which lasted about a minute.

Here’s what I think…uh, hold on…my phone’s ringing…I’ll get back to you.  🙂

4.  Lies, lies, lies.

Six months ago, a candidate for an editing position at Factory VFX Inc. told hiring producer Liz Crawford that he came recommended by an artist on staff at the Santa Rosa, Calif., visual-effects company. After the interview, Ms. Crawford says she called the artist so the applicant could say hello to his supposed associate. That’s when it became crystal clear that the two men didn’t know each other. “He admitted he had fibbed and walked out of the room,” says Ms. Crawford.

When I got hired, I had to sign a paper stating that I don’t smoke or partake of any tobacco in any way.  My employer recently announced that we were going to start being tested for nicotine as well as illegal drugs in our random drug screening since we are supposedly a nicotine-free company.  A good third of my coworkers are having a cow because this means they have to give up their weekend cigars or actual long-term smoking habits.  What?!  Did they not have to sign the same dang paper I did?  If they wanted to smoke, they could just work for the 99% of the companies in Houston that don’t care…

5.  Dressing down.

Last summer, Amy Demas says she was uncomfortable and distracted while interviewing a copywriter candidate for…Standard Time LLC. “She was wearing a t-shirt three sizes too small with bright red letters across her chest,” recalls Ms. Demas. “I couldn’t help but pay more attention to her breasts than her résumé.”

That’s like Interview 101 right?  No boobs on display.

6.  Oversharing.

Other things employers say that job hunters reveal—but shouldn’t —include comments about their health problems, details about their love lives and tales of their financial hardships.

I might have overshared in my interview with my current supervisors about my husband-to-be since I was getting married the following week.  Luckily, they thought I was a keeper anyway.  I would suggest that when it comes to personal details in an interview, less is more.

7.  Saying thanks with gifts.

…hiring managers say they’ve received everything from pricey tickets to sporting events to bottles of alcohol—all big no-no’s.

Nothing says, “I’m the man for the job” like a bottle of booze.  🙂

8.  Sporting a mom-and-dad complex.

Hiring managers say they’ve also seen moms and dads accompany their offspring to job interviews and try to intervene in salary negotiations.

I would love to see the meeting where my mom decides to give her two cents to my company’s President…that would be priceless if I was in the postion to retire already.

Do you have any funny stories along these lines?  Which was your absolute favorite in the list?  🙂