The Hustle of Sistah Ant

I am not pleased with the Fed’s rate cut today, and here’s why:  I want my savings to grow as fast as it can.  I don’t want inflation to affect my income and expenses.  This rate cut will affect how much interest I get for my savings, and it may also make what money I do have worth less than it’s worth now.  Since I’m trying to save for a down payment for a house in the coming year, none of that is good news.

So even though it’s nice for people with variable rate debt, it’s not nice for savers.  I’m very close to not being one of these people with variable rate debt that’s affected.  My old credit card debt will paid off soon, and my only other variable rate debt is a small student loan that is tied to LIBOR, not the Fed’s rate.

The only good news I can see coming out of this for me is that if this holds, I may be able to get a cheaper mortgage down the line, and perhaps, if the market goes up, my 401K will perform better than it otherwise would have. 

I’m not an economist.  So maybe my dissatisfaction with the Fed’s decision to cut its rate is misplaced.  They do this for a living for the whole economy.  My interests lie completely within the parameters of my personal goals.  Perhaps they’re right, and we need to be more concerned with recession risks than with lower-yielding savings and inflation.  But hey, I can economize my behind off - of course I’m not worried about a recession, ‘cause I can eat rice and beans until it’s over, and I have the discipline to save either way.  No wonder all I can think about is myself.

Not the birds and the bees talk, the "Baby, how are we going to handle our money?" talk.  Now that my honey and I are living in the same apartment so that we can save more easily for our future, we had to decide how we were going to pay expenses fairly.  Those of you who have ever bought property may be familiar with a HUD-1 settlement sheet, which is the form that helps sellers and buyers of real estate to account for expenses at closing.  That form was the inspiration for the spreadsheet I created. Click it to see a sample in full detail.

This sheet first itemizes what we each have paid in the course of a month for each of the expenses we are jointly responsible for.  The second part of the worksheet takes the total amount paid for each expense and splits it according to how we’ve agreed to split the expenses - for example, we’ve agreed that my honey will pay only a quarter of the storage fees, since most of the stuff in our storage space is mine, and I’ll pay for most of the gas, since the car is mine.  After the spreadsheet formulas calculate how much we should have paid, then we can actually see who has paid their fair share and who has not at the bottom of the sheet.  In this sample worksheet, I have paid $21.25 more than my fair share of the expenses.  This means that at the end of the month, my honey would give me $21.25 to make it all even.   We’ve both reviewed the sheet and approve of the splits and this method of keeping things straight.

I personally think that money is the last thing a couple should be fighting over.  It should be simple.  Since I am more anal about money than my honey, he is gladly giving responsibility for stuff like making spreadsheets to me.  However, I make sure he sees, understands, and approves of decisions I make.  He likes that, and he trusts me.  Perhaps this spreadsheet is more complicated than what some other couples may go through every month, but it works for us.  The work is already done - the formulas do all the math, and all we have to do is plug in the numbers once a month.  (After reading this paragraph to him, my honey has asked me to add, "And we’re a technologically savvy couple."  Bless his heart.  LOL!) 

Yesterday I took my transportation vouchers to SEPTA to get my bus tokens.  Every paycheck has a certain amount withheld tax free at my request, which is earmarked for transportation vouchers.  I like it because it eliminates the need to budget for tokens and it’s tax free.

I have $50 withheld for vouchers each month.  However, the actual amount I need to purchase my tokens is $58.  If I had $60 withheld, SEPTA wouldn’t give me my $2 change.  So I pay the remaining $8 with my debit card.  After what happened yesterday, maybe I should use a credit card instead.

I gave the cashier my vouchers and debit card, and paid for it as "debit."  Then she charged my debit card $58.  I left the window with my tokens.  Notice anything?  I didn’t.  I wasn’t paying enough attention to the receipt to see that she’d overcharged me by $50, directly out of my checking account - she was only supposed to charge me $8.

A blessing for me is that the cashier noticed it herself and called me back to the window to give me a cash refund, which I can deposit into my checking account today.  She would have reimbursed me directly if the card had been used as "credit," but since I chose debit, I have an extra errand today.  Can you imagine how hard it would be to fix this if she hadn’t caught it at the window?  I’d have been so mad at myself if this wasn’t caught until I got home.  

Lesson learned?  PAY ATTENTION!  WATCH IT!  WARNING! CAUTION! CUIDADO!  ACHTUNG! …at the register.  Always. 

Some thoughts of note regarding my current financial situation:

I may be making good progress towards paying off old debt and moving towards saving for my house, but I still only have about $100 in my checking account to last me for almost the next two weeks, since I am using my money to pay my obligations aggressively. 

The thing to remember here is that although my net worth has increased $10,000, I am no more wealthy than before.  Less than zero is still less than zero, even though the deficit might be smaller.  I don’t say this to be depressing, I’m just trying to keep it real.  Debt repayment does not build wealth because it does not increase assets.  That $10,000 I put on debt (actually thousands more, because interest cut into some of my progress as I was making payments) hasn’t added to my assets at all.  In fact, I have less money now than I did when I started this journey.

Debt repayment is like a primer coat when you’re painting a wall.  It’s preparation for the real deal.  So, to frame my accomplishment in the proper perspective, I have made really good progress putting primer on my wall so far.  As I add assets with savings and retirement, I’ll add color to my wall (something bright, like yellow, because this part of my journey will be the most fulfilling).  I can paint my wall in color by adding assets as much as I want… but it’s not going to look satisfactory to me unless my wall is totally primed and the debt is all gone.  Don’t get me wrong, I think savings and retirement are serious priorities which are not to be ignored or postponed.  But debt that accrues interest will always literally be a liability until I get rid of it.

Mentally, the key for me is to balance my perspective.  I have to balance optimism regarding my progress with realism that recognizes that I still have a long way to go to get out of debt and build assets that will place me in a good position to retire one day and provide well for myself and a family.  Without balance, I might lose focus on what’s important, or get lazy about improving my financial situation.

Ten thousand dollars.  Well, roughly ten thousand dollars, and if my old landlord gets me my security deposit by the end of this month, definitely ten thousand dollars.

This month marks the anniversary of the beginning of my hard core journey.  I’d been trying to pay down debt before, but not with the same drive and intensity that I acquired in October 2006.  I’d just started my current job, making more money a year than I ever made before, and I knew, from calculating how much I needed to get by, that I would be making much more than I needed to survive.  I vowed to not spend everything I made, and I decided to go for financial counseling to get a road map of what do to.  Before meeting with the counselor, I thought it would be a good idea to calculate my net worth.  Following the example in Black Enterprise, I calculated my assets and liabilities and then got my net worth.

I knew I had debt, but I didn’t know I had $87,271 worth of debt.  It blew my mind and scared me to death, considering how much money I was making.  The bulk of my assets was the value of my car, which I’d just purchased six months earlier, and I owed more than I could sell it for.  Seeing these numbers was a defining moment.

The financial counselor told me to bulk up my savings, consolidate and kill my high interest debt, and postpone investing (I wanted to start a retirement fund at the time) until after I got these first two tasks accomplished.  I walked and drove from bank to bank that Saturday, trying to find a loan to consolidate my old credit card debt on a fixed rate installment loan to no avail.  No one wanted to give me that much money.  So I turned to Lending Tree, where I found a line of credit that would cover both my credit card balances, give me a lower interest rate, and provided I paid the minimum on time every month (a habit I’d already perfected), a guaranteed payoff in six years.  I had no intention of waiting six years or paying the minimums, but I signed on and got to work.  My first few payments, starting in January 2007, were erratic, because I was still getting my finances straight - I’d just moved, I’d just gotten the job, and I was unemployed before then, so my savings were low and times were tough.   But once I got into a rhythm, things picked up.  I think I may have this thing paid to zero by January 2008.

Where does the ten thousand dollars come in?  Well, before I really pushed hard on paying that line of credit, I had to get my savings up to at least $1,000 for my own peace of mind so that if I had an emergency, I would hopefully not have to use plastic.  I also streamlined my expenses.  I trimmed all the fat.  I took Single Ma’s advice and adjusted my tax withholding so that I’d get more take home income.  I quit eating lunch out.  I chose not to pick up cable, internet, or a landline phone.  I killed my cell phone text messaging package and changed my car insurance.  I took public transportation.  I didn’t go shopping much at all.  I passed on (most) must-have CDs, and vowed not to buy another book until reading all the ones I already have.  I kept current on all my other bills.  And I used windfalls and "extra paychecks" wisely.  Studying for the bar exam (if you were almost $90K in debt, wouldn’t you try to increase your income?) kept me from going out so I saved money that way, too.  All extra money went directly to paying debt.

Blogging has helped a lot.  My behavior is actually influenced by how much I want my NetworthIQ graph to shoot up, and how far I get to push my progress bars to the right - looking at the numbers is a great motivator for me.  I’m also influenced by the lessons I learn and the lessons that are reinforced by other bloggers.  Thank you guys for your help and encouragement. 

So far this October, I’m $77,561 in debt.  That’s a $9,710 difference from this time last year, and I’m owed $645 by my old landlord, which will go towards paying my debt, for a grand total of $10,355 in progress thus far.  My net worth has gone from -$71,211 to -$61,706 (also a $10K positive difference once I’m refunded my security deposit).  I realize that over the past year, I’ve lived on less than $20K of my salary, which makes sense, because I lived on even less than that when I was in college making much less than $20K annually. 

It feels good.  Especially when I think about the times people told me my penny pinching would get old - fast, and that I would get tired and quit.  Today, I’m more energized than ever.  2008 is going to be a very good year.  This is just the first ten thousand dollars.

(By the way, this is a special double-post day, so be sure to see my other post about retirement, below.) 

I was expecting to see retirement withholding in my paycheck this week.  It wasn’t there, and I was really disappointed.  I asked our accountant about it and she said, "It’s not in my system."  I told her that I registered, and it should be in her system.  She manually put it in while I sat there watching.  Then I asked, "Is there a way to make up for this check’s withholding in my next check?"

This woman said, "Is it that important?"

Hold. my. mule. 

I took a breath before explaining to her that I was looking for the withholding this check and was disappointed to find it not there, so it would be great if we could account for it on my next check.  She said she could make that happen for me.  Great!  Thanks!

Is it that important?!?!?!  Yes!  It’s THAT important.  I feel behind as it is, and I don’t want to be eating dog food in my golden years and I know the power of compounding so I don’t want to lose any more time and whatdoyoumeanisitthatimportant!!! 

Relax, relate, release.  I’m okay now.  I’m definitely going to be okay when I get my paycheck next month and it shows retirement withholding.  Anyway, that’s the story of why I still don’t have any money in retirement, and why I just better have some next month.

Sistah Beginner called me the other day because she had a revelation.  She’s heard people say that they learned how to be financially responsible by following the example of their parents.  Well, Sistah Beginner’s mom has excellent credit.  So how did her credit get so messed up?

Sistah B says that all she can remember getting from her mother was, "Don’t go getting a whole bunch of credit cards."  That’s it.  That’s all. 

I shared with her that my dad did have a talk or two with me about interest rates, minimum balances, etc.  My mom did explain a little about mortgages and liens.  And I regularly saw my mom go through a stack of bills while scribbling columns of numbers on the back of an envelope before writing checks and putting records in her check register (which is pretty much how I pay bills today, except she uses stamps and I pay online).  I picked up what my mom showed me pretty well.  But the stuff my dad told me about credit… well, I understood the concepts he was trying to explain, but it didn’t stick in my adolescent mind, partially because I didn’t have access to credit cards or bills and couldn’t see how credit card debt worked in action, which I think would’ve made the lesson he was trying to teach me come alive.  Then, in an orientation program in college, I attended a workshop where an upperclassman ran through the fundamentals with us, warning us about the cards we’d be offered, explaining how foolish it would be to not pay balances in full or worse, continually make only the minimum payments.  It was a good follow-up to my dad’s primer, and it really did help me to understand why it wasn’t a good idea to use plastic for eating out.

Sistah Beginner didn’t get any of that.  When she first started getting cards, she got a bunch of store-issued cards, the ones with the worst interest rates, ran ‘em all up, and then lost her income.  Then the delinquencies started happening.  She says she never knew why a 23.9% interest rate was bad.  People would shake their heads, but not explain how interest rates like that could affect her ability to repay a loan.  And she never asked.  It’s something she understands now, almost ten years later, after her credit has been tarnished.  She’s in the process now of learning the factors that FICO uses when they calculate your score.  To her, it’s confusingly contradictory.  Sistah Beginner believes we don’t have practical consumer education in schools because the consumer product industry and the credit industry want us to be ignorant regarding credit and finance.  And to her, it seems that the whole system is designed to make people hit pitfalls.  I told her that if we learn the rules and adjust our behavior accordingly, we can work the system instead of the system working us over. 

Sis B wants to go to school to learn what she should have been taught about credit and homeownership before now.  I want her to learn how to work the system, and will help her find a class - there are free seminars for adults being offered all over the place.  I think it would be really smart for parents to send their teens to seminars and classes like these before they leave home.  And maybe I’ll bring her with me on the way to the homeownership seminar my credit union has invited me to attend.

I’ve had my gym membership for about two months now.  I chose my gym because it’s a short walk from my job, and it’s easy to get home from the gym.  Yesterday,  as I was leaving, I noticed a sign: "Sorry for the inconvenience, but this location will be closed November 6, 2007."  As in my gym will no longer exist.   I have committed to a one year membership, and they’re getting out of dodge?

Oh hades no.

Now I have to get on the phone and flex, because they are not getting another dime of my money.  You can’t tell me they didn’t know two months ago that they were going to close.  They shouldn’t have taken new memberships if they were going to close.  I am so annoyed by this.  Time in my day lost to unnecessary drama, and on top of that, I have to find another way to work out.  Grumble.

Update: I called.  All is well.  They will not attempt to charge me past the closing date for the gym, and they’re sending me a letter in writing to that effect.  Now where am I supposed to work out, and how much is it going to cost me?

I can usually go for several days, or even a whole week, without spending any money.  It started out as this thing I used to do in college so that I’d be able to have food to eat or keep my electricity on.  As certain things became habit, I came to not even realize that I was doing things with the express purpose of not having to nickel-and-dime my bank account throughout a day, or week, or month.  As I say all the time, every little bit helps.

There are a few things I do day-to-day to keep from having to reach for my wallet.

I only use my car when public transportation or walking are too difficult or inconvenient, for example, if it’s raining, I have to carry something, or I’m traveling a long distance.  Since I commute by bus to avoid high parking fees, I don’t have to fill my gas tank often at all.  

I plan my breakfasts, lunches, and dinners ahead of time so that I don’t wind up eating out.  I keep healthy snacks at my desk at work, and healthy munchies around the house.  If I don’t get hungry, then I won’t make an impulse food buy.  This is HUGE.  Yesterday, I forgot to bring my lunch, and wound up spending $3 for lunch.  But imagine if I forgot my lunch 7 times in a month.  That stuff adds up.  I try to stay away from vending machines, and I’m not a coffee drinker (but if I was, I’d drink the free coffee at work).

I don’t recreationally shop.  I do recreationally window-shop, I’ll admit it.  But I’ve gotten good at not buying stuff on impulse.  If I think I’ll get tempted and/or if I think my money’s low, I’ll stay away from stores about 95% of the time.  (To see what happens in the other 5% of the time, see my immediate previous post.)

My thing is, if I have gas in my tank, paid bills, and food in my kitchen, I don’t have to spend money so I don’t.  This is how I’m getting through the next few weeks.  I’m going to stick to groceries, and gas if I need it.  This will help offset the spending damage I did during and after my recent move, and help to put more money into debt repayment than I would otherwise have had.  I’m allowing myself one exception.  If Sistah Beginner is willing to go see that Tyler Perry movie with me, we can go to the matinee.  As usual, I will eat before I go and pass on the popcorn and chocolate covered raisins.

I was sooooooooo bad this weekend.

Everything started out okay.  I spent some time Saturday afternoon reconciling my receipts to my accounts, checking my credit balances to see how much more I’m allowed to spend (if my credit card balances start to approach an amount at which I can’t pay the balance off at the end of the month, I have to stop spending), and doing stuff around the house, which was pretty productive, kept me out of trouble, and which set my mind at ease.

Then Sunday was a whirlwind of activity.  On Sunday I decided that I would finally go shopping for work clothes.  I didn’t spend the entire $80-$100 I budgeted myself, because I didn’t find enough clothes I liked and fit to spend that amount.  But that was the end of my clothes shopping for that session, and I wound up with a new jacket (which I really needed), a new blazer, and a new blouse.  Then I went to the laundromat, where I spent a nominal amount on an on-the-go lunch and getting change for the machines.  So far, so good. 

Two things happened next that made me spend more money than I thought I would:  First, I was invited, last minute, to a birthday party for my cousin’s daughter, so I bought her a few books (my signature gift to children is always the most fun books I can find).  These weren’t expensive, but they were unexpected, and I don’t like unexpected expenses.  I could’ve attended without a gift, but I really wanted to give this precocious three-year-old some new pages to turn.

Afterwards, on the way home, I decided to pick up some bath mats for the bathroom.  My honey’s bath mats needed to be replaced, and I was already sick of looking at them for a week.  I went to my favorite, Tar-jay.  There, I found the bath mats I wanted.  Great!  Problem was, I found some other stuff I wanted, too - slipcovers for my honey’s ugly couch, a kitchen mat (on sale!), bedroom pillows (on sale!) - it was great!  Until I saw the total at the register - $100.00. Arrggghhh!  But I wanted the stuff - all of it.  When I got it home, I was thankful for each and every purchase.  But it was still an UNEXPECTED, UNPLANNED FOR expense, which I could have postponed until after my next paycheck, because every little bit counts - all those little expenses and unplanned expenses add up.  Half the stuff was on sale, but it’s not like I really saved money because it’s money I wouldn’t have spent if I’d just bought what I went in there for and left, like I usually do.

The good news is I can afford to pay it off at the end of the month.  The bad news is, I could have used more restraint and I consciously chose not to do so.  The worst news is that this means I will put less money towards paying off debt because I spent beyond my allowance, which means I’ll pay my debt off slower and it will probably still be with me in 2008, delaying my jumpstart on saving for the house.  See how the evil snowball of debt works?

Let this be a cautionary example.  You can have all the planning and enthusiasm in the world… you can have a track record of stoic and championed restraint when it comes to spending, but you still have a choice to make every time you’re faced with the opportunity to spend.  One wrong choice, and you WILL have to deal with consequences.  That said, I forgive myself, right here and now as I type this.  Feeling guilty won’t do me any good.  I’m already dusted off and back in the saddle.  Let’s see if I can still push through to make my deadline - I might have to sacrifice something I wouldn’t have had to sacrifice before, but I still have a fighting chance!