Check Your Financial Accounts Regularly - It Matters!

My mortgage company ate my principal payment for January. I looked at my account online and my $1000 additional principal payment was credited as if it was a regular payment, only early. About half went to interest! And now, because I "owe" so little for my February payment date, the bank is only going to debit $8. Ugh! Arrrgh! I was almost below $127,000 in principal and I wanted to see the number move!

It is so close to the regular payment date that reversing the mid-month payment may not affect the amount set to debit next week, leaving me with a missed payment. According to the nice lady on the phone my best option at this point is to let it ride until the monthly debit is done ($8 instead of the usual $1004), then use the rest of the $1004 I had for the payment and make a principal payment. According to the lady on the phone the difficulty arose because I have a fixed rate equity loan (my second mortgage) and they are "tricky". Sheesh. Everything about banks is tricky!

During the conversation, the phone rep told me that there is a separate address for principal payments and the best way to make sure that my principal payments are indeed credited towards principal is to mail them to this address. I wish somebody had told me that in the beginning!

She also showed me how to make payments online using my account at a different bank. That was neat! I can make free payments at any time. I think that this is how I will make principal payments in the future. When I get paid I pay bills and put money in savings but I put money towards savings in even hundred amounts, usually leaving me with less that $100 that I just roll over into next payday's budget. Instead I could send this money towards principal payments and help my debt snowball. Sweet!

The Games We Play: Hiding Money From Myself

When looking for ways to save more money, use whatever works. Mind games are bad for relationships but they can be helpful with money, sometimes.

I hide money from myself.

Instead of spending coin, I save it and only use bills for most of my transactions, putting the coin into my piggy bank. When my pig is full I take it to the credit union where they have a free coin counter. The money goes to my vacation savings which I keep in cash.

In order to have access to the free coin counter at the credit union I have to have an account there. I once thought to make that my primary bank but their service was terrible so I never did but I kept the account. Not just for the coin counter but also because they have an ATM at my work that allows withdrawals in increments of $5. I hide my new car fund there. I paid my last car off in six months but next time I want to pay cash.

I made a fake withdrawal in Quicken to create a cushion so I don't accidentally overdraw my account (although linking my checking to a savings is the real overdraft protection). It is enough money for a minor house repair so that is my "minor house repair" fund. I've been doing that for so long that I really don't think of that money as real money.

Years ago, I started saving for a new wardrobe, in cash. This was supposed to be my reward for dropping a size. I did the same thing the last time I dropped a size but I have stagnated at that size so long the clothes I bought are worn out/wearing out/getting unfashionable. I have the $1500 sitting in an envelope but I think I should just put it in the bank so at least it can earn a little interest.

I am a union rep for my work area. Every month we have a meeting for which I am paid $40, less than my regular hourly wage but it is still money. I save it up in my "buy something frivolous without guilt" fund. It is cash in an envelope.

My mom gives me cash for birthday and Christmas. I used two years' worth of money to buy a little iPod stereo but I have another year's worth sitting in an envelope, in cash.

Notice anything here? That's a lot of CASH! Given inflation as a constant, actual cash money is a depreciating asset. The $1500 I put away for clothes 2 1/2 years ago doesn't have the same buying power now (current economy driven sales notwithstanding). If I had put it in an ING savings at 2.4% I would have an additional $92! That's a nice pair of shoes!

When I was financially very immature, running up credit card debt and impulse spending, I needed to hide money so I wouldn't spend it. Hiding money was part of the beginning of my path to changing my financial behavior. But now I am thinking that I am beyond games and that I am financially grown up enough to stop hiding my money. So now I am thinking about how to go about it. More on that in a later post.

Sharing Saves - Having a Roommate

When you want to save money, having a roommate can be a big money saver. Count the ways:

✪ Money - The rent money is additional money you can use to pay down debt or increase savings. This is making the difference in enabling me to pay extra on my mortgage without having to eat ramen. Ramen is yucky.

✪ Shared costs are less for all - the fridge has to be on all the time no matter if it is holding food for one, two or ten. The electricity and water bills will be more expensive but the average cost per person is still less for utilities.

✪ Less is better - the more space you have to put things, the more you will buy. Having a roommate means one less room to fill with extra junk. Reducing your possessions means living more simply which makes it easier to spend less. I had to get rid of a lot of stuff and found that I was happier when I did. I have to be careful when I shop because if I buy something there has to be a place in the house to put it.

✪ Many hands make light work - Ideally, all members of a household contribute to keeping it clean. There are more dishes to wash and the bathroom gets dirty faster but if everyone is helping it is easier. No housekeeper or gardener needed! My roommate cleans the shower, I do the rest of the bathroom. One of us always remembers to get the bins out on trash day. We all work in the yard. I like to clean the kitchen, she likes to clean the floors. It's great to not have to be the only one cleaning the litterbox!

How I ended up with a roommate

If someone had asked me to consider having a roommate I would have said "No, way!" I paid extra in college to have a single dorm room, then got an apartment by myself. I have always been shy, private, and found pleasure in solitude. Why would I ever agree to have a roommate, stranger or friend? Never!

A few years ago my BF and I decided to live in the same city again which meant we had to find a place to live. The small, dark, unheated "hobbit hole" I was living in at the time was totally unsuitable for the both of us (or even me for that matter). We lucked into a great rental: a 3 bedroom 2 1/2 bath house in a decent neighborhood for only $2000/month, a fantastic deal in the Bay Area.

After we signed the lease, however, my BF was offered a six month tour in Kuwait. He was going to have to look for work when he moved to live with me so it was a great opportunity for him to make a nice chunk of money to pay off his debt and pay the bills while he looked for work. Six months alone with three bedrooms seemed silly to me. A friend I have known since high school was looking for a new living situation at the time so we decided that she would stay with me. She and my BF got along really well so when he came back she stayed. The house was plenty big enough for all of us.

Then I bought my own house. We went from three bedrooms to two, 2 1/2 baths to one, and less storage. But by this time I had adjusted to having people around and knew I could tolerate it. In fact, I actually like it a lot. I also liked the money. With the gigantic mortgage I was taking on having some extra money seemed like a good thing. So my roommate came along. (BTW, my roommate is the one who gave me the nickname "K-money" because she knows how much I like to save money. Even my BF calls me K-money sometimes. Sheesh!)

How my sister ended up with a roommate

My sister was renting a tiny two bedroom house (about 700 sq ft) and had credit card debt. She didn't want the long term roommate situation I had but was willing to part with some of her space and privacy in exchange for cash. We lived not too far from a major university at the time. Lots of students go to this university for internships, etc that are only a semester or less. My sister rented out her second bedroom to a student for a couple months, then to another student for a few more months. The extra money helped her aggressively pay down her debt and the short term rental meant that she wasn't locked into having a roommate indefinitely. If my roommate ever left I would consider this option, definitely.

My sister and I both work in health care so we know that there a lot of travel nurses who need a place to live. Their employers provide an apartment or stipend but some of them would rather take the housing stipend and find someplace cheaper to live so they can make even more money. It is another short term opportunity to make some extra money.

Not everyone has enough space that they are able to get a roommate. Not everyone will luck into finding a person to live with who they completely get along with, either. But the idea has potential and is worth considering if you need/want extra money.

Do I want to climb the CD ladder?

When I was building my emergency fund I just focused on having the money, not how I would take care of it once I had it. As my fund grew bigger, I started to think about where I would keep all that money. It is for emergencies so it has to be pretty liquid and accessible. Interest rates for savings are so low now that I almost might as well keep it under my mattress. Right now I am making 1.01% - it's laughable! The solution I came up with was to put one month's expenses (my E-fund is bases on four months of expenses) in a six month CD. Two months later I put another month's expenses into a CD. In another two months I did the same again. I am keeping one month's expenses in the savings. Every two months a CD will roll over, this month that is happening for the first time. The short term on the CD means that while I don't get as good of an interest rate as a longer term CD I still get more than with the conventional savings; also I won't have to wait that long if I anticipate needing the money in the near future.

Recently I heard about CD laddering, where you take a bunch of money, divide it into five portions, and every year you buy a five year CD. After a few years you have a CD maturing every year. Because the five year interest rates are higher the return is better but some of the money is accessible every year. I think that is a good idea but I'm not sure I want to do it, at least not with my emergency fund. Maybe with some other money. But the idea has given me something to think about.

Sidenote: I used to work as a bank teller in the early 90s. I remember looking at the rates for a 20 year CD and they were 12%. I think 5 year rates were around 7%. Thinking about that and looking at today's rates makes me want to gag. If I could have cobbled together $1000 back then how much money would I be looking at the end of 20 years? I don't even want to calculate it, I might cry.

When Mr. K$ is away, Miss K$ likes to play

Every so often Mr. K$ has to go out of town for his job for a week or two. For some reason, every time he goes away I want to make changes at home. I'll change things, do a big house cleaning, rearrange the furniture, etc. I think it is fun to make improvements and surprise him, unfortunately Mr. K$ does not like surprises.

The time I took a sledgehammer and tore down the decrepit, ugly dirty brick BBQ/fireplace in the backyard (it was on our eventual to-do list) did not go over well, nor did the fact that I had all the old bricks and debris hauled away. But it was so fun! I would love it if I went away for two weeks leaving the house a disaster and returned to find the house sparkly clean and a major bit of work accomplished, but that is just me and not him. I make pouty face about it but I understand and am trying to be better.

So now that he is gone again, what am I to do? I have all this energy! I think I feel this way because I like the idea of a short term goal with a deadline. I really work better with a short deadline. My best work in college was started the day before it was due. Thinking about how my extra payments will pay off my second mortgage in only TEN YEARS instead of thirty, while a very good goal, just isn't as fun.

So what did I decide to do while he is away? Purge my stuff, as I mentioned in my last post. I know that purging only my stuff won't bother him at all. My goal is to have so much stuff gone that I actually have room for new stuff. I'm not planning new stuff, just breathing room. Credit card receipts so old the ink is faded away? Gone! Books I can find at the library if I want to reread them? Gone! Materials for craft projects I'll never get around to? Going! Rearrange the living room? Yes, that too, but at least I warned him this time. I'll have to empty out the drawers of big furniture pieces before I move them so I'm sure some of the contents of those drawers will land in the giveaway pile. Why do I have a huge collection of gift wrap when we don't give lots of gifts in my family anymore? I could pare it down to 20% of what I currently have and still have enough to last for many years. It's going! Why do I have four identical spools of thread in odd colors I am unlikely to use? I'll keep one and get rid of the rest.

I am having a FABULOUS time cleaning out my junk. My trunk is packed with stuff for Goodwill, there is open space visible in my basement, and I don't have trouble shutting any of my dresser drawers. I'd like to have the trunk of my car filled a second time and the recycling bin full by the end of the weekend. Once upon a time I had so much extra stuff that the big house I used to live in wasn't big enough and I had to store many many boxes with my parents. I keep having these periodic purges and I don't buy nearly as much stuff any more so I have less and less stuff and feel better and better about it. I don't store anything with my parents now and soon I will have all my stuff stored in drawers or on shelves, no more piles in closet or basement. Next I want to get rid of so much stuff that I can get rid of some extra furniture that I use to store the extra stuff. I already banished one bookcase, can I get rid of an extra desk?

Cleaning out the White House and my house, too.

Here is to hope and a new presidency! I am cleaning out closets and my basement in honor of cleaning out the White House ( well, it is actually a happy coincidence). Five bags of usable (just not by me) items sit at my door waiting to depart tomorrow with more to come.

New web address

Welcome to the new Three Rooms and a Path! I decided to make a new blog and use the title of my blog as the web address to make it simpler and more logical. I should have done this when I first started but I was lazy so I am doing it now before I have too many posts to move over. If there is a better way to do this then just copying and pasting every post and comment I am not aware of it so it looks a bit awkward but will be better in the future.

Frugal living made better (and greener!) with Traditional Skills, but where can you learn them?

Among the ways to live a greener and more frugal lifestyle are growing food to eat and making things for the home.  The home garden can cost a lot less than organic produce from the store. Homemade or repaired items for the home can also save over buying new.  Recycling unwanted or broken items into new is green, too!  One problem that many people nowadays have with this concept is that they lack what were once common skills necessary to grow or make things for themselves.

How many of the following things can you do?

*grow vegetables
*canning/preserving
*cook
*make perfumes/essential oils from plants
*compost yard waste
*sew simple household items (curtains, napkins, pillows)
*sew, or at least alter, clothes (can you hem pants?)
*knitting, quilting, embroidery, crochet
*shine shoes
*build furniture or basic woodworking
*metalworking, including forging, welding, soldering
*basic plumbing
*car maintenance and repair

Many of these skills, if not learned in the home, used to be learned at school.  Middle and high schools used to have home ec, wood shop, metal shop, auto shop, and crafts class.  In my area and I'm guessing nationwide, many of these programs have been eliminated due to budget cuts and new requirements to teach technology and Leave No Child Behind.  Even where they exist kids are often pressured to skip shop in favor of classes that are better for getting into college.  I sure was.

Now that I want to use them, where do I learn these skills?  There are many places!  I now know where to learn most of these skills in my area, where did I find them?

1)  Local adult education programs teach a wide variety of skills.  I've taken classes in stained glass, calligraphy, manuscript illumination, flower arranging, altering clothes at home, picture framing, woodworking and metal shop.  I live in a large metropolitan area that contains many smaller cities and towns, all with unique offerings.  I just Googled for adult ed in every single town in my area.  They are also usually pretty low cost.

2)  Libraries often host workshops or have a bulletin board with advertisements for local offerings.  My nearby library hosts a FREE weekly knitting class and a rug making group.  They have advertisements for other classes such as gardening.

3)  Community centers often have classes.  I can learn pottery, guitar, and Tagalog at mine.

4)  Newspapers, especially neighborhood papers, often have listings for activities.  Gardening and cooking classes are common.

5)  Local nurseries often offer free or low cost workshops on such topics as pruning roses and trees, composting, growing native plants, the water wise garden, and more.

6)  If you have an interest, look on the internet.  Either Google it or look for a society or organization that focuses on your interest.  Pottery, calligraphy, art societies and others often have a link to places you can learn locally.  That's how I found out I could learn blacksmithing in my area.  I also found a drop-in workshop for learning to paint traditional icons using hand made paint just like the Old Masters did.  I sure couldn't learn that from art class in college.  There's even a group that builds robots and another focused on building things powered by steam!  Who knew?!

7)  Craft stores usually have workshops.  My local yarn store will teach you how to knit using hair from your pet.  That would be extremely green!  Michael's and other chain craft stores have classes in picture framing and cake decorating.  I refined the quilting skills learned from my grandmother at a fabric store.  My mom took cake decorating when we kids were little and as a result she was able to make the most amazing cakes for our birthdays for very little money.

8)  Many community colleges offer short courses, or even semester length courses, in basic skills such as basic home repair and auto repair.

9)  Churches will sometimes host classes.  An Episcopalian church near me hosts monthly art and language classes.  I study icon painting at an Orthodox church.  You don't have to stick to your own faith when it comes to attending life skills classes unless you find that morally intolerable.

10)  The internet is a resource for learning skills.  I personally find it hard to learn that way but if you are so remote there is no other option, there is that at least.  Check out YouTube.  Many videos are posted with demonstrations of skills; that's a bit better than following written directions or drawings.

Now before you complain that you live in a small town and only big cities have that much variety, I will admit that is true.  Yet many smaller areas still have a good selection of classes.  Several of the classes I mentioned above I took when I lived in a city of less than 100,000 in the South.  A couple were offered where I lived in Wyoming (and that is pretty isolated!).

These skills can also be used to benefit others and create a stronger connection to society.  As an example I once solicited donated money to buy materials that I used my sewing skills to turn into a basic layette set for every baby that was born at the hospital where I was working for an entire year (it was a small hospital, with many low income patients, but I still had to sew over 300 sets!).  There are also groups that make quilts for child victims of natural disasters.  Or how about donating your produce to a food bank? My neighborhood hosts produce exchanges in harvest season.  I trade things from my garden for things I don't grow.  People who don't garden can buy produce with proceeds going to a particular neighborhood beautification project, and everything left at the end of the day goes to the food bank.  The options are limitless.

Making things yourself is often cheaper than buying new, and when it isn't cheaper it is still good to know you are not using something made in deplorable working conditions with questionable materials in some foreign country. There is also a strong sense of satisfaction that comes from having skills and using them to make your life better.

POSTED BY K-MONEY AT 10:00 AM

COMMENTS:

Miss M said...
My old work had a bullpen style office (almost no walls/cubes) and all the guys around me were Filipino. If I stayed around much longer I would have absorbed Tagalog, they chattered away all day long. It was like the Far Side cartoon what dogs hear, blah blah blah sit blah blah...only it was blah blah blah Washington Redskins blah blah blah! They'd usually be talking sports, or at least that was my guess. I wish I were stronger with foreign languages.

Nice list, I can do a few of those things but I'm leaving the welding to Mr M!

JANUARY 17, 2009 3:23 PM

Is My Home Worth Keeping?

THURSDAY, JANUARY 15, 2009

Apropos to my last post, today's front page on MSN.com had a link to this article by Liz Pulliam Weston titled "Is Your Home Worth Keeping?".  In the article she discussed how even a renegotiated mortgage payment may be so high that people can only afford to make it if they don't save for retirement and struggle with financial hardship, especially if they have child care costs or other debt.  She says that no more than 25% of gross income should be spent on shelter but most loan modifications set a goal of 38%.  Even worse, the home will likely not recoup its value for several years, locking a person in to a hardship scenario for years, making present life and future retirement very difficult.  

Obviously, if I am working to pay down my mortgage instead of banking the cash I have decided that my home is worth keeping despite losing $90,000 in value.  I could walk away, stalling the foreclosure process for as long as a year and living in my house during that time without making payments, saving the money instead.  I'd have over $50,000 saved if I did that, more than enough to convince a landlord to rent to my  with my now awful credit.  Then I could save for a couple years, another $50,000 at least, and pay 20% on a $500,000 home.  My debt on my current house won't be down to $400,000 three years from now unless I win the lottery. Staying is not the best decision from a financial standpoint.

What about the other costs of foreclosure?  The hassle of dealing with threatening letters and phone calls about being behind, the time and trouble spent maneuvering to stay in the house a little longer, the knowledge that I am bringing down the value of my neighbors' homes?  That is a huge cost in emotions and stress.  Then I have to find a rental place that takes pets and bad credit, and three years from now go through the lengthy and stressful process of home shopping.  This time around I will have a foreclosure on my record so I won't be getting the best interest rate, even if rates are still low three years from now.  As an added bonus I will be paying much higher income taxes for the next three years because I won't be deducting mortgage interest.  Yikes!

There are other intangibles that make staying worth it to me.  I love putting work into my garden, and a really nice garden develops over years.  I'd be delaying that by a few more years if I left my house.  I enjoy making things but put that off because I didn't know what type of house I'd end up in.  It seemed silly to build furniture and do metalwork for my dream Tudor Revival home only to end up buying an Eichler and having to start over.  Now I have a Spanish Eclectic house and am planning a whole houseful of furniture to build.  It takes time to do that and go to work, I don't want to waste several more years.  I'm in my mid/later 30s and time flies.

Last year I spent about 42% of my gross income on shelter, including my extra principal payments.  That is way over what I "should" be spending in order to not be in hardship.  Yet I put 10% of my pay towards retirement and put several thousand dollars into savings.  How can that be?  Three things: no kids, no debt, simple living.  The biggest thing I have going for me financially is that I have no kids.  Then I'd be facing a world of hurt with my mortgage.  Kids are expensive!  Also in my favor is that I have no debt; money I would have spent servicing debt went into savings and enhanced my lifestyle instead.  Lastly, I do not spend large amounts of money on clothes, shoes, shopping, vacations, etc.  Eating out is my biggest vice, but knowing I can afford it makes me feel rich.

I'd love to hear from other people in house poor situations.  What are your options, what are you doing, and why?

POSTED BY K-MONEY AT 9:46 AM

3 COMMENTS:

An iMperfect wIfe said...
Remember that foreclosure ruins credit for 7 years. So, if it takes 1 year to even complete the foreclosure you wouldn't be house or car shopping for at least 8 more years. Foreclosure is not the answer!

Good luck, I'm enjoying your blog.
JANUARY 16, 2009 12:49 AM

Miss M said...
I think sense of obligation falls into the mix as well. Sometimes the right thing to do financially is the wrong thing to do personally, I took this debt on and I'm not going to walk away. We are similar in ways, no kids, low debt (currently - I used to be drowning), and fairly frugal. Our mortgage is 28% of my income, Mr M doesn't earn much but we're still in safe territory.
JANUARY 16, 2009 6:11 AM

K-Money said...
@iMperfect - yes, it would be a bad thing to have credit troubles for so many years. So why is this only true for individuals and not corporations?

@MissM - that pesky sense of obligation! I get something intangible for sticking with something.
JANUARY 16, 2009 11:24 PM

NEW PERSONAL FINANCE CHALLENGE!!

WEDNESDAY, JANUARY 14, 2009

Seeing my savings goals written down made them seem much more tangible.  I realized that I had a long-time goal within grasp:  finishing my emergency fund!  After I posted the last post I went to my bank online and transfered the last $1000 to my emergency fund.

MISSION ACCOMPLISHED!!

Now, onto bigger and better things.  I felt so inspired that I decided to challenge myself.  As previously posted, I have a second mortgage that was originally $138,000 on which I now owe $128,000.  This second mortgage is part of how I financed my house - I did 100% financing with an 80/20 loan.  I thought I was doing pretty well with paying down this loan, but $10,000 in twenty months doesn't seem good enough.  Now that I am free of needing to put money in my emergency fund, I feel light, happy, giddy, and ready for a new challenge.

NEW CHALLENGE:  Pay off another $10,000 of the loan by the end of 2009!

I think I can do this!  I am already increasing my monthly principal payment to $500 (that is $6000), plus part of my regular payment goes to principal (about $140, equals $1680 for the year).  That means I only have to come up with another $2320 by the end of the year.  I still have $500 left from my extra January paycheck, now I only need $1820 of unplanned money by year's end.  No problem!

Stay tuned for progress in the 2009 Mortgage Challenge!

POSTED BY K-MONEY AT 10:00 AM
LABELS: 2009 MORTGAGE CHALLENGE

2 COMMENTS:

Miss M said...
Here's to success! Some days I think I should try paying down the mortgage, then I remember what a money pit it's been and I decide to hold on to my cash instead.
JANUARY 14, 2009 7:10 PM

K-Money said...
Yes, I vacillate about this too. It sometimes feels like sending good money after bad since I am underwater. Realistically, I make enough money to pay the mortgage and have no hardship so I don't qualify for any current refi/adjustment plan. Like it or not I am going to stay in the house so I might as well pay it down.
JANUARY 14, 2009 9:02 PM

Having a Plan is Important, also know your Goals

TUESDAY, JANUARY 13, 2009

Some people write blogs as a living, others just for fun, many are somewhere inbetween.  I started reading PF blogs because so much of the subject matter resonated with me.  I want to be more frugal, live a better life, and save more money.  Being part of the PF blogosphere seemed like a good tool to help me with my goals.

I melded blogging and personal finance together to develop some goals.  I mostly had these figured out already, I just hadn't articulated them.

GOAL #1:  
More saving, less spending.

PLAN: 
1)  No more buying things I want then paying off the credit card every month.  Pay with cash and when I'm out of cash I'm done spending.
2)  Save up for big purchases ahead of time.  Forking over a big pile of dough all at once really makes me aware of how much I am spending.
3)  Read personal finance blogs to keep up my morale and reinforce my good feelings about saving money and spending less.  Also to glean good ideas.
4)  I've lived off a cash spending allowance for years, keep doing that.
5)  Work extra hours when available and put the money towards savings.  (currently sidelined by minor injury)

GOAL #2
Develop a new personal finance blog.  This will be fun and add an element of accountability to my financial goals.

PLAN:

1)  Start blog.  (done)
2)  Not only read other blogs, leave comments both because I enjoy the dialog but also so that people will look at my blog.
3)  Read posts about how to develop a blog.  Some of those people are really experienced and have a lot of info to offer.  No sense reinventing the wheel.
4)  Keep a list of possible topics and start draft posts ahead of time.   That way good ideas don't get forgotten and bad ideas get a second look before they become public.
5)  Practice writing.  Like so many other things, practice makes better.
6)  Consider allowing ads on my blog for a tiny trickle of extra revenue.  Multiple streams of income are good!

GOAL #3  Pay off my second mortgage.  I owe $128,000 on a loan that was originally $138,000 twenty months ago.

PLAN:

1)  Make monthly additional principal payments.
2)  Increase monthly principal payments when my income increases. (I just increased from $300 to $500/month)
3)  Finish funding my emergency fund so I can start funneling more money to principal.
4)  Send part of all of any windfalls to principal.  This includes my income tax refund (or the two extra paychecks a year I get since I am paid biweekly).

GOAL #4  Finish saving for my emergency fund.  My goal it to have a minimum of four months of expenses saved.  
My monthly expenses (including my cash allowance) are about $5500 which I rounded up to $6000, therefore my goal is $24,000.  I have $23,000 now.

PLAN:

1)  Put money from my extra paycheck this month into savings.  Then this goal will be achieved!
2)  Continue to implement my plan to earn interest on this money instead of having it sit there and be eroded by inflation:  I am dividing up the money, every month another month's worth goes into a six month CD, plus one month liquid cash in savings.  My bank pays 1.16% for savings, 2.3% for 6 month CD.  I can still get the money if I need it all at once or within a few months if I have warning about needing it.  The main purpose of the fund is for if I become unemployed or cannot work due to illness or injury.
3)  Increase savings goal to 6 months of expenses once the second mortgage is paid off.

POSTED BY K-MONEY AT 3:25 PM
3 COMMENTS:

Money Funk said...
Some fantastic goals you've got there! PF Blogging is a great way to keep track of your journey (& meet some neat people). And you sound like you are heading on the right track! I look forward to further posts. ;)

JANUARY 13, 2009 7:23 PM
Miss M said...
I agree, you've got some great goals and you've already made a lot of progress. I need an emergency fund like you. I have savings and investments, guess what happened to the investments. I'm trying to get to $15,000 cash by the end of 2009 and hopefully $25,000 the year after.

I have no idea how to build a blog, I'm a newbie myself! I have adsense but unless you have a big readership it takes a LONG time to earn anything. You have to earn $100 to get paid out, after 3 months I'm only halfway there. But it's easy to implement and not too obnoxious.

JANUARY 14, 2009 6:30 AM
444 said...
Your goals and plans read almost exactly like mine (except the mortgage part, since I rent.) So there's a little comment for your blog; I bookmarked it, too. Leave a little comment and join my following, maybe? I'm brand-new and getting started, also. :)

JANUARY 14, 2009 4:01 PM

Self Reliance article

FRIDAY, JANUARY 9, 2009

I just read this article on MSN and enjoyed it.

self-reliance-in-3-not-so-easy-steps

The basic points are:

1. Go with cash
2. Be prepared
3. Train yourself in self-reliance

"Go with cash" is my favorite. I don't mean just pay off your credit card balance every month, but spend cash and keep the plastic put away. I used to be so proud of myself for paying off my balance every month yet I struggled to save as much as I wanted. I had no debt and was getting ahead a little, but I wanted save even more money. When I looked at how much I was spending I discovered that if I hadn't spent so much on the credit card I could have saved a lot more! What was I buying? Dinner out, things I didn't need, things I did need but could have waited a week until I got paid and bought with cash.

An experiment in life without plastic:

With the exception of buying gas, I basically stopped using my credit card for the month of November. Instead, I planned for big purchases like bulk buys of laundry soap, toilet paper, etc in advance. In order to buy something I wanted that cost $200 I put aside money from my paychecks and waited until I had the full amount, then paid cash. By the end of the month my usual rate of savings DOUBLED!

I let things slide a little in December. This month I am back on the wagon and looking forward to saving more money.

Utilizing small space to make the most of it

I added a picture of my house to the sidebar. It was taken last July when everything was green and lush. Amazingly, all that was planted in January and February of last year, from seed and bare root and mostly small plants. Before that the yard was a small expanse of grass. What we invested in was a rototiller rental and a truckload of fertilizer and mulch, that way we could plant small plants and get such amazing growth.

When one has a small space to live it is necessary to use every space as wisely as possible. Having a grass lawn seemed such a waste. It takes regular maintenance and doesn't serve much purpose. If we had kids or dogs we'd have them run around on the grass in the back, not the front. So I started thinking, how can we better use the yard? I also wanted the first project in our new house to be relatively inexpensive so we could learn more cheaply from our inevitable mistakes.

Some of the things we did:

1. Built three raised vegetable beds. Last year we grew a few different tomatoes, squash, and cucumbers. Now we have some lettuce. This year we will have more tomatoes as well as some herbs and other plants to be determined.

2. Planted roses. I love roses. One of the reasons I wanted to own my own home was so I could plant roses and they are part of what keeps me going when I think about how big my mortgage is. We bought bare root plants for cheap, planted them in good soil, and they did mostly very well. However, we don't have so much space that I will tolerate poor performers. We chose plants for looks and scent. The bushes that did not produce as advertised will be pulled and replaced with new bare root plants. I can get a free plant this weekend if I show up to help prune bushes at the local city rose garden.

3. Planted lavender. Walking the path to the house in summer smelled lovely and I had blooming bushes all year until just a couple weeks ago when a cold snap damaged the plants. Eventually I will harvest and use the lavender. It is one of my favorite scents.

4. Planted drought tolerant plants. This year we watered a lot to help the plants get established. Later we will be able to cut our watering way back.

5. Spread lots of mulch. This is good for plants, holds water in the ground and inhibits weeds.

The yard may look like it took a lot of work, and it did to get everything planted and install drip irrigation. Once everything was finished there was very little maintenance. I spent no more than two or three hours a month on average to keep the yard looking good, aside from the vegetables. It is so much easier than grass. An added bonus is the compliments I receive from passers-by.

Mistakes:

We started out buying topsoil and mulch by the bag before we discovered a local place where we could buy it in bulk by the truckload. This year we will buy more mulch that way.

We did not establish a compost bin. It will have to go in the back yard and we are going to tear the back apart this year or next so no compost bin this year, either.

We did not install drip irrigation in the vegetable beds. If we had the vegetable would have been as nearly maintenance free as the rest of the yard.

We bought more plants than we could reasonably plant right away. Towards the end we ran out of enthusiasm for planting and let the remaining plants die of neglect. That was a waste of money.

POSTED BY K-MONEY AT 3:46 PM


4 COMMENTS:

Miss M said...
I love your house, it's very cute. I like the garden in the front too, it's a great use of space and more "green" than a lawn. I confess my front yard is lawn, it's the dog's yard. I live on top of a hill and the back is steep and overgrown. I let the boys down there to play sometimes and they usually come back dirty and bloody from running through the brush. I keep my vegetables on the side of the house and my tomatoes in pots at the top of the hill. A drip system was the best investment I made, I'd lose plants from the summer heat and being too busy to water. I did a simple DIY system with parts from Home Depot, probably less than $100 total. I use a simple timer that runs on a 9V battery, set it and forget it!
JANUARY 10, 2009 8:52 AM

K-Money said...
Yes, we have a drip system for the rest of the yard, just not the vegetables. They went in last and we ran out of enthusiasm. Can you terrace your backyard at some point? A lot of plants thrive that way.
JANUARY 10, 2009 10:46 AM

Money Funk said...
Love the lavendar idea. It's such a nice smell. 

And I totally understand what you mean about the drip irrigation system. Would help 100%! I didn't install it last year. It really does make for more work. My other problem now... My cat... and a couple other cats... decided to make my garden a community litter box. So, I don't know if i will get planting this season as I must start anew. Hmph. Have any remedies for that one? :-)
JANUARY 13, 2009 7:59 AM

K-Money said...
Probably only the top 3-4 inches of soil are "littered". I think they will be OK to use later. I read about a composting toilet for humans and the soil was OK to use after a year, cat litter can't be worse than human. Just scrape it off and put it aside preferably in bin so they won't follow the smell and keep the pile "fresh". As for your vegetable area you could surround it with a couple feet of chicken wire to make it less easy access. Good luck with your garden!

Inspiration for a name

For months now all the economic news has been bad and everywhere I turn people are stressed out about it.  I have been reading personal finance blogs and wanting a blog of my own for some time now but wasn't sure what I wanted to call it or what type of tone I wanted to set.  Then I started thinking about something my grandmother said:

"People today talk about having a house with three beds and a bath, but I grew up in a house with three rooms and a path."

Wow.  Three rooms (rooms, not bedrooms!) for 11 people (two adults and nine children) with a path to the outhouse, in the middle of Nebraska.  Every time I think about that I feel so grateful for what I have.  Once grateful, my anxiety fades and it easier to think about what I can do to improve my situation.

Here's to a new year and working for a better life!

MY SITUATION:

I live in the SF Bay Area of California.  I bought a house in 2007 with 100% financing and a fixed rate mortgage that is worth about $90,000 less that what I paid for it.

Credit card debt: none (pay it off every month)

Student loan debt: none (paid off )

Car loan: none (paid off my 2007 car six months after purchase)

Retirement fund:  $80,000

Emergency fund: $22,000

Home Improvement fund: $1500

Money in stock account: $18,000

I've learned many important lessons about money and as a result made some good decisions that improved my position.  I've also made some mistakes which I will hopefully learn from and not repeat.  Here is an example of a good thing and a bad thing I did:

GOOD DECISION

I completed the general education portion of college at a community college.  At $50 a semester for tuition it was a bargain.  To finish my degree I chose a cheap university in an area with a low cost of living.  I also joined the National Guard so I didn't have to pay the full out of state tuition (making it cheaper than my home state).  I was able to graduate college with a manageable $15,000 in student loans and about $8000 in credit card debt (The trip to Europe I charged was worth every penny, the other stuff was not).  No place in my field hires per diem workers without a year of experience so when I'd worked for 11 months I started applying.  I put the money from my second job along with my yearly tax refund of about $1000 towards the student loans and paid everything off within three years.

BAD DECISION

I was living in a great rental house but planned to eventually buy.  I longed for a house of my own but realistically needed another 2-3 years of saving.  Then my father died.  I thought of all the things I expected to do but hadn't done and now he would never see them.  I wanted to go out and get started; I felt like I was wasting my life.  That was the impetus to buy when I did, after the housing peak but before the market went into free fall.  I knew intellectually what people were saying, that prices were going to drop.  I knew I didn't yet have enough for a down payment.  I let my emotions rule my wallet and now I am $90,000 underwater.

In future posts I plan to discuss other good and bad decisions along with whatever tickles my fancy about my underwater home, frugality, debt, gardening, and et cetera.

2 COMMENTS:
Miss M said...
I like the title, it reminds us how far our definition of need has changed in the last 100 years. My grandmother grew up on a homestead, I'm sure she never imagined the luxuries we have today. Our mistake is one of timing, we came in to the home buying age at the wrong time.
JANUARY 7, 2009 8:30 AM

K-Money said...
Yes, we sure did come in at the wrong time to reap the huge rewards of home buying. I try to view my life from the perspective of how much has changed between my grandparents and parents' time and now. It makes me feel tremendously better about my life now!
JANUARY 9, 2009 1:30 PM