Breaking up with my favorite restaurant

Wish me luck, I am staying away from my favorite restaurant for this week. I'd like to be able to choose to go there occasionally instead of going regularly out of habit. I'd liked to be not so hooked on restaurant food and drinking soda. From a financial perspective, I'd like to spend less money on food. I bought myself some soda for home so I don't fail because I feel deprived (I usually only drink soda in restaurants).

Three weeks ago I decided to break my fast food habit. Since then I've only had fast food once (and it wasn't as good as I remembered) and I think I can go three more weeks.

I am taking gradual steps to change my food life the same as I did for my financial life. It helps to have a goal! My financial goal was to get out of debt, my food associated goal is to not be overweight at my sister's wedding this fall.

Have any bad habits you decided to break? How did that work out?

Financial Housekeeping

I am a list-making person. Lists not only help me keep track of things I want to do, just making them helps me organize my thoughts and priorities.

Here is my to do list for this week:

1. Take my vacation and clothing cash stash and deposit it in the bank. (DONE)
2. Open ING savings for vacation and clothes funds. (DONE 2/11, only I didn't go with ING)
3. Send $1000 of my tax refund to my first mortgage principal. (DONE)
4. Monthly checkbook balancing. (DONE 2/9)
5. Change my W-2 withholding so I don't get such a huge refund next year. (DONE 2/10)
6. Increase my 403(b) contributions so I can max it out.
7. Start a tracking worksheet for credit card purchases.

Credit card purchases are the rabbit hole of my finances. I pay the balance off every month, but I am often surprised by how much it is. What am I buying, besides gas? How did it get to over $400? I really don't like the tedious process of looking at my spending that closely but if I want to find more money to save then I have to do this.

Stupid tips to get a refi

I recently read this asinine article on MSN (byline Bankrate.com). The headline on the MSN main page, "How to refinance when bank says 'no'", caught my eye. The actual article was titled: Want to refinance but can't? 3 tips.

I thought, "Could there really be a way to get a refi on an underwater mortgage? I have to check this out!"

Um, not so much...

Here are the three tips:

Tip Number One:
Problem: Inadequate or negative equity (oo oo, that's me! *breathless* What can I do?)
Solution: Reduce principal (but how, by magic?)

The article advises: "A lump sum can be applied from a savings or retirement account, sale of another asset, income tax refund or bonus." (No s#!t, why didn't I think of that? *slaps forehead* Hey, Bankrate, if I'd had an extra $200,000 lying around don't you think I would have used the money to pay off my second mortgage!?) NOTE: $200,000 is what I'd need to get to 80% LTV in the current market.

Tip Number Two:
Problem: Inadequate income or excessive debt (not me, but a problem for a lot of people)
Solution: Earn more, pay off debt
The article advises: The most obvious solution to a troublesome DTI (debt to income ratio) is to earn more income through a better-paying job, pay raise or second job. (In these troubled economic times, with rising unemployment, I'll just step out and get a better job. I should be a CEO, I'll start applying on Monday.)

Tip Number Three:
Problem: Credit score is too low
Solution: Pay bills on time (That works? I never knew!)

If those tips are new to anybody it is no wonder they are in trouble. Sorry for the rant, but I am tired of all the lowest common denominator type news stories. How about some useful tips and information? There's much better information in the PF blogs than in the news.

Makin' due not buyin' new, and starting out right

Just because I am frugal doesn't mean I don't like to look nice or have nice things. Of course I do! Every so often I try to do some upkeep on me and my stuff so I feel good about myself and my lifestyle. This list isn't all-inclusive, it is just stuff I have done recently or plan to do soon.

1. Polish my shoes. My favorite shoes are a nice pair of Danskos that cost over $100 but have classic style, a little bit of a heel, and have lasted for years. The occasional polish keeps them looking near new. Many times people throw things away that are serviceable but look shabby.

2. Clean out my car. My car is only a couple of years old but if I take care of it'll look new for longer. Even my old 1983 Corolla looked spiffy when it was all clean and polished. I kept it longer than I otherwise might have because it still looked nice.

3. Home spa. Do maintenance on you! I feel better about myself when I feel like I look good, and when I feel good I make better decisions. It is a pleasure to pay someone to do facial, hair and nails but it is expensive! In between major hair service I can keep my color fresh on my own (I use the same products because I have access to the wholesale professional supply stores).

4. Polish metal. The sink fixtures, towel racks and chrome stove top all look their best with the occasional polish. Every once in a while I like to bring out the Brasso.

5. Clean the windows. The world looks a bit dingy when viewed through a year's worth (or longer) of dust and water spots on the windows.

6. Launder carefully. I line dry my more fragile items so they last longer. Eventually I plan to get a clothesline in the back yard so I can line dry most of my stuff then just fluff in the dryer. Also, when I put sheets and towels away I put the freshly washed items on the bottom of the stack so that everything gets rotated. This keeps any one towel or sheet getting faded and worn while the rest of the set looks new (especially important for dark colors). When they are all worn out I'll buy all new together.

7. Start with quality. We've made hundreds of smoothies over the years. In the beginning I bought a cheap blender. Then I bought a slightly better blender but it still couldn't crush ice like the restaurant blenders. We didn't like our homemade smoothies as much as the store bought ones because they weren't as smooth, and we were spending a bunch of money buying multiple inexpensive blenders and store smoothies. Finally we decided to buy the expensive restaurant quality blender and we now make smoothies we like as well as or better than the store and the blender is going strong after nine years. The cheap blenders lasted less than one. I also replaced my cheap sander with a nice sander. If you start with quality in the beginning you can save in the long run over multiple replacements for cheap items. I may never need to buy another blender or sander as long as I live.

Being a Saver who loves a Spender

Thanks for the comments to my last post about what to do with the big tax refund I inadvertently set myself up for. I have a couple weeks to think before I get the Fed money and who knows when I'll see money from the broke state of California. I may decide to just hold on to the Fed money until California pays me and think about it.

Dog Ate My Finances had this interesting post about merging money with a significant other. Funny she should post about that as I was drafting a post about a related topic: How to cope when one of you is a saver and the other is a spender?

I don't have a definitive answer to that; it's a thorny problem that has no doubt doomed many a relationship. The solutions will vary between couples but no matter what they should be grounded in each person having respect for the other. We all came to our current financial habits through life experiences that have shaped us and are tied to emotions. Getting to the bottom of our reasons for why we spend/save the way we do may help us to understand each other and find common ground where we can meet. It is easy for the saver to feel like she has the moral high ground but nobody likes to be condescended to by the self-righteous. On the other hand, a caring partner does not let her S.O. ride his financial horse off a cliff.

Here is my situation: I used to have a spending problem; I accumulated lots of consumer debt in addition to my student loans. When I finally decided to break free of my debt I went at it with a vengeance, working a second job and holding off on major purchases and elaborate vacations. Now I live below my means and am saving for the things I want: comfortable retirement, my next car, a vacation, a new wardrobe, etc. I put most of my extra money towards savings and paying off my mortgage early.

Mr. K isn't much of a saver except for his 401(k). We have a joint account for paying utilities and common bills but otherwise keep our money separate. He has a checking account only, no savings. He would like to eventually buy some property and build us a house but he can't afford it because he doesn't have enough money set aside. I would like to encourage him to open a savings account and stash some money away so that when he spends the money in his checking it won't be everything he has. I don't want to run his life but I think he'll be sad eventually when he realizes that he wasted a lot of life and money on things that aren't important in the long run and has less to show for it than he hoped. I know I felt bad about all the time, money and energy I wasted on buying and paying for junk instead of doing things with my life that I feel proud of; I don't want him to go through that.

If I had my way, Mr. K would be on a strict budget, putting money in savings, paying off debt, and no more spending. He would plan for major purchases in advance and not make any until he is debt free. There is no way this is going to happen. Besides, I don't think I would even want to control him like that. I would like him to take the tiny step of opening a savings. I think that when he sees it start to grow he will want to save more and he won't spend as much. Then someday he'll have the money so we can get his dream land in the mountains.

What to do with a windfall?

Last year when I did my 2007 taxes I received a refund but I made mortgage payments for a partial year only. I wasn't sure about how 2008 would work out because it was going to be my first year of making payments for a whole year so I was conservative with my withholding. I didn't take into account how much my interest payments would reduce my income, putting me into an entirely different tax bracket. I was thinking I'd get about a thousand dollars back.

Um, oops...

My combined fed/state refund is going to be about TWELVE THOUSAND DOLLARS! (Cash from Fed, I.O.U. from State)

Holy cow! What am I going to do with all that money?!

First of all, I need to change my withholding. I am not maxed out on my 403(b) so I am going to increase my contribution at the same time. I will still be a bit conservative with my withholding; I know the argument about giving the government a free loan by overpaying, but I always use my refund to pay down debt in a big chunk and it makes me feel happy. It's one of those emotion-based financial decisions, but one I can live with.

Second of all, what to do with the money? As much as a new steam washer/dryer are calling my name I already have a serviceable set and I don't really need them. Here's the tentative plan: $10,000 on the second mortgage, $1000 to the first mortgage, and $1000 undecided. My original goal for the year was $10,000 paid to principal of my second mortgage, now I can double that amount this year. Whoopee!!

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!