The Hustle of Sistah Ant

The last time I had a big money goal, it was to pay off the last of my old credit card debt.  I worked on it for many months.  Sacrificed for it, planned for it… scribbled on the backs of countless envelopes…  I came so very, very close.  I had even started to save a little bit of money from each paycheck towards My Own Home.  And then I was laid off from my job. 

I didn’t panic, even though part of me wanted to do exactly that.  Instead, I took my entire severance pay and put it into the My Own Home account, but I didn’t do it with a lot of enthusiasm.  I figured that since I wasn’t employed, there wasn’t any point in getting too attached to the money, because financial need might make me have to raid the account.  In case you were wondering, that’s why I put the word "tentative" next to this blog’s My Own Home progress bar.

Here I am, seven months later, making more money as a temporary employee than I’ve ever made before, and saving at a faster rate than I ever anticipated before I was laid off.  I am blessed.  Today, I am 94% of the way towards my down payment goal, and given my prospects at work, I can reasonably anticipate that I will meet my goal by the end of this month, enabling me to move on to beefing up my Emergency Fund.  I am in awe - I’m on the cusp!

But I did have these fleeting thoughts:  What if my project ends earlier than I think it will?   What if I have to dip into my savings?  Last time I got soooo close without actually finishing - what if it happens again?  Maybe I shouldn’t get my hopes up too high, too fast.

Guess what?  I can’t afford to do this to myself.  I have to stay positive and not get pushed around by fear.  When I was laid off, I wasn’t able to pay off the last of that debt for another two months, but that wait didn’t kill me!  When it was all said and done, I did eventually reach my goal.  If for some reason I’m not able to save any more for a while, I’m still 94% of the way there.  And even if I wind up having to dip into the account, it can be replenished when (not if) I’m able.  What’s to fear?  Only a negative attitude.

I’m just going to continue to push and push enthusiastically until that progress bar gets all the way over to 100%!  That’s where my head is at.  And that’s where I’m going to keep it.

Last night I sat down with my receipts and added up my trip costs, balanced my checkbook, and made a plan for today’s paycheck.  Everything is doing just fine!  I have a tendency to get a little nervous when I haven’t crunched my numbers in a few too many days, so I was nervous about how my balance would come out when I finally sat down at the table with the receipts.

I did spend $50 dollars more than I had planned on spending on the trip - it was the second tour on my New Orleans trip that put me over the edge.  But, seeing as how I left myself a buffer in my general spending account, that extra $50 didn’t put me in the poorhouse.  In fact, so far as paying bills and saving for the house are concerned, I’m not even breaking my stride.  But when I was on the trip, away from home, not checking my bank balances on the internet, and not sitting still long enough to go through my receipts, I was dependent on a loose tally I was keeping in my head.  I thought I was doing worse than I actually was, and that kept me just scared enough to keep from spending too much more money when I thought I was running low.  There’s still some cash in my trip spending account.

I am not advocating this approach to personal finance.  I think that it’s better when someone knows what their balances actually are so that they can make informed spending/cash flow decisions.  Mind games are not the way to plan.  But I recognize that there are certain circumstances (like when someone is traveling) that make it less likely that someone will keep up with every penny, even though they may find themselves in decision-making positions.  I think it’s better, when your information is limited, to err on the side of caution instead of throwing caution to the wind and spending too much.

Anyway, I’m back on the grind.  I’ve still got a house to save for.  I still haven’t invested my Sharebuilder money. And, I need to figure out what purpose I want to bestow on the balance left in my New Orleans spending account.  Perhaps it should be the seed money for Christmas?  It’s about that time to start saving if I don’t want to go into debt around the time of the holidays…  I’ll keep thinking about it.

I can’t let the month fade out without taking note that I started this blog, The Hustle of Sistah Ant, about a year ago.  I have really had a good time writing this blog and reading others’ blogs.  If you look at my net worth chart, you may notice that although I was already making financial progress before starting this blog, there is a marked difference in the speed of my progress after I started this blog.  It has helped me very much, in various ways.  For example, my self-inflicted mandate to write at least four days a week has forced me to be more reflective on the state of my finances more often.  Also, having the progress bars in my sidebar has been helpful, because I would actually be more aggressive in paying down debt and saving money just to make the progress bars move faster.  Another perk has been getting feedback from commenters - thank you so much for reading and commenting!  It lets me know that I’m not just talking to myself, and it’s helped me to learn and get various perspectives.

And, since I’ve already directed you to my net worth chart, let’s talk about it.  Since June 2007, here’s how far I’ve come in my progress:

Total difference in net worth over the past year: $25,942

I have this aunt.  I love her to pieces.  She’s a nice lady - a giver.  If something means a lot to her or she sees someone who is in need, she will make a way to do what she can for the cause.  She’s got several brothers and sisters, and among them, she and her family have the biggest house in the nicest neighborhood and drive the newest cars.  She keeps her hair and nails professionally done.  Sometimes she hosts barbecues and has family over.  They are truly blessed.  She figures that among her own family and her in-laws, people are jealous of her possessions, and that is the reason why their relationships with family members aren’t better than they are.

I personally think that if that is true, she and her husband are partially to blame.

I like to visit my aunt - she’s like my favorite aunt.  But I don’t see her and her husband’s behavior through rose colored glasses.  They might not realize that they are doing it, but they say things that are off-putting.  They talk about things they do and how much they cost.  They talk about things they have and how much they cost.  They accept compliments on new things they acquire… and comment on how much they cost.   They complain about how much the things they bought cost them.  They talk about the cost of things that they are thinking of acquiring.  In fairness, sometimes they don’t talk about the costs… but they talk about the possessions or activities anyway, knowing that the mere mention of these things without numbers will still get their point across.  Other times, they lend family members money and then complain to other family members about how long it’s taking so-and-so to pay them their x-amount-of-dollars back.

I am not jealous of the things that they are able to do with their money - they work hard for it and have been working hard for years.  I’m happy when they get stuff they like.  But another reason why I’m not jealous of them is because I can get my own stuff my own way in my own time.  Yet another reason I’m not jealous of them, or other people who have nice things, is because sometimes, with the big-ticket items, people think about the stuff without thinking about the debt people got into to get that stuff.  Somebody can be jealous of my car if they want to be.  But I bet they’re not thinking about my car payment - if they were, maybe they wouldn’t be so jealous.  When I move into my house, someone can be jealous of my house if they want… but I bet they won’t be jealous of my mortgage.  I am actually more concerned with the financial security I can attain than with the amount of nice things I can get.  So until I’m debt free and I’ve got a great retirement savings, there are more important things for me to be concerned with than what someone else has.

All these things aside, I think that the standoffish behavior that my aunt experiences is due in part to rudeness.  I don’t think that it is necessarily rude to talk about the things you have, or even how much they cost if you’ve been asked.  However, if volunteering that information every time you spend money is how you relate to people, you can’t reasonably be surprised if they don’t want to hear it - especially if they have less stuff than you and you are constantly reminding them of it.  And if they get jealous, it may be due in part to how much people think you have based on what you tell them.  In that case, the problem isn’t your substance - it’s your style.

What sense would it make for me to talk numbers with friends?  Sure, people who know me know that I’m doing okay, but if I talk about money with others, we talk about the stuff we have in common like debt, savings issues, budgeting issues, motivation issues, work issues, and dreams for the future.  I’m not going to put my relationships in jeopardy by annoyingly bringing up how much I have all the time.  Despite the substance I am in the process of acquiring, I try to stay conscious of my style of handling it.  Maybe I’ve learned what not to do from my aunt.

I did all the stuff I had planned to do.  I put a super-sized deposit into the My Own Home fund.  I started a Share Builder account.  I gave to folks who need help.  I left myself an allowance.  And then, I went to get gas.

I usually fill my tank once it gets to the 1/2 mark, in order to keep from eating too much into my allowance.  However, I haven’t put any gas in my since I was on my roadtrip down south, preparing to come back home.  I’ve barely been driving at all in the time since then, and even though I had less than half of a tank, what I had left has been enough for the last three weeks.  But once again, when I decided how much I would leave myself as an allowance, I didn’t take account for how much I would need to fill up my gas tank.  Certainly, I could have only put a 1/2 tank of gas in when I went to the pump, but I would rather fill it at the current price, knowing that the price may go up and that if I don’t fill up now, I will eventually - might as well get it done.  I paid $3.93 cents for each of my 12.21 gallons for a total of $48.11.  I charged it to my credit card, which I’ll pay off at the end of the month.  That way, I’ve preserved my cash flow, which is good to have in case you need it.

I think of cash flow as cash-on-hand, which allows spending without incurring debt.  If you don’t have this, and you find yourself in a situation when you need to spend money, you will either use credit to get by or cut into your emergency fund (if you have one, and you should).  And of course, if you cut into your emergency fund, you’re in debt to yourself.  If you don’t replenish the dollars that come from your emergency fund, it will dwindle and not be enough for you when you really need it, which may lead to - you guessed it - using credit and getting into more debt.  (I’ve been there before and I don’t want to go back.)  I think of my "allowance"/"cash flow"/"spending account" as the fund before the emergency fund.  I can use it for spending, and the better I budget how much my allowance should be after dealing with other plans and obligations, the lower the danger of having to either use my credit card, like I just did for gas, or cut into my emergency fund.

In this situation, I will still keep an eye on my cash flow.  As I spend money between now and my next pay date, I’m going to try to avoid spending $48 of the cash I have now, so that I won’t even have to depend on my next paycheck to pay my credit card bill.  Depending on your next check to pay for something is merely another form of debt to yourself.  The best way to stay out of debt is to pay-as-you-go, not pay-as-you-anticipate receiving future funds.

The problem here is not gas prices, my income, bills, or other obligations.  All of this analysis and spending restraint could have been avoided if I’d simply budgeted differently.  Discipline is important, but so is good planning.  This is a recurring problem area for me in my hustle - one that I will continually keep working on.

Mama Ant and I were talking about something that someone I know is going to buy.  She balked when I told her that they were going to wait until they had enough money to pay for it outright, and I agreed with that plan.  She said it would take forever to get it that way - why would they wait?  They could just get a decent down payment together and then the payments wouldn’t even be that high.  Before you know it, it would be paid off.

Wow.  I felt like we were speaking two different languages.

Don’t get me wrong - I think that credit can be a very good and useful thing.  I’m using it to pay for my education, my car, and I’ll soon have a mortgage of my own.  But those are pretty much the only things I think I really need to pay for over time, and I’m using "need" very loosely.  In fact, I told my mom last night about my plan to finish paying for my current car ahead of schedule and to pay for my next car without financing.  I also told Mama Ant that I anticipate not relying on credit to furnish My Own Home, and she listened patiently and approvingly.  But I think, from the tone in her voice over the phone, that she thinks I’m just being ‘extra’.

I explained my reasoning.  There have been times when I’ve been unemployed, and one of my principal concerns was how to keep up with at least the minimum payments on my credit card balances.  I never want to have that question again.  Also, I never want to stay in a job situation I don’t like because it would be too difficult to sustain my debt load.  It just makes too much sense to me to avoid debt and avoid having monthly payments as much as possible.  I love the way it feels to know at the end of each month that there is absolutely no balance on any of my credit cards.  Mama Ant could relate to that, but she said that she’s cleaned her cards off only to (seemingly inevitably) load them back up again.    At this point in the conversation, I felt like I was trying to convert a lost soul.

My mom is not a crazy person.  She is not stupid.  She even has her reservations about debt, and she’s no slouch when it comes to fiscal responsibility.   Yet I fear that she is far too comfortable with the idea of "Buy now, pay later."  It is as if "Save now, buy later" is no longer acceptable to her.  Why delay your gratification?  I don’t think that it’s a coincidence that I spent the first ten years of my adult life under the shadow of credit-card debt balances.  I’m not blaming my debt on my parents… but perhaps I got into some of that debt because of an aversion to delayed gratification that could very possibly have been learned at home.  I don’t know.  But to see my mom go towards her golden years with this attitude and hardly any retirement savings is simultaneously sobering and frightening.

I got a question from Ben yesterday in the comments that I wanted to discuss today - here goes:

"…[I]f I CAN do without, because clearly I can when I am broke, shouldn’t I ALWAYS be living like I am broke? And how do you make a budget around being broke?"

I think the answer is going to be different, depending on who you ask and who you are.  If you ask Moneymonk, she’d probably remind you that you can do income-producing things so that you can make more money to afford the things you want.  That way you don’t have to live like you’re broke.  If you ask Single Ma, she might remind you about how important discipline is (and how important it is to learn from and move on from your mistakes when your discipline slips).

I’m pretty good with the discipline.  I’ve been going without all kinds of little perks, trying to cut corners here and there, and it has helped me a lot because reducing the amount of spending always gives a budget more wiggle room.  I guess in that sense, I do live like I’m broke.  I decided which sacrifices I’m most comfortable with and committed to them:  I still don’t pay for cable, daily take-out lunches, clothes-on-a-whim, and other non-essentials.  But that works for me.  I guess some folks won’t do without cable, but they can deal with bagging lunch.  I think the key is to stay committed even after your means increases.  In my case, I’m netting about $1,600 a month more now than I did at this time last year. (This is where Moneymonk’s advice to increase your income comes in.) My approach to the increase wasn’t, "Oh - that’s $1,600 more that I can spend a month," but instead it was, "Oh! That’s at least $1,500 more that I should be able to SAVE a month."  Because I KNOW something is going to happen that’s going to make me want some money - an emergency, a layoff, a thing I’m going to really, really really want.  And when that time comes, I want to be prepared.  That means more to me than eating take-out for lunch everyday, or having MTV.  So I kind of think you answered your own question - just in words that frame it in a more negative perspective.  I usually don’t think about it as living like I’m broke - I usually think about it as living like I want to have some money in my pocket.  It feels so good to be facing unemployment knowing that if I need it, there’s a cash cushion in the bank with my name on it that will get me by for months.  I’m not a baller… but I feel like one.

Now, about making a budget around being broke.  As I get started, I pretty much think about the worst-case scenario: what is the least amount of money I expect to have in my hands?  Assuming that it will be all that I’ll get, then I look at my obligations and responsibilities and figure out when and how to take care of those things with (which means subtract those amounts from) my worst-case scenario amount of money, based on my priorities.  Like I did in yesterday’s post.  My priorities are shelter, food, maintaining my credit score, savings, then everything else.  That’s going to be different for everyone - back when I was a student it was shelter, food, everything else.  When I become a homeowner, it’ll probably be shelter, food, savings, everything else.  Either way, if you’re working with a limited amount of money, you don’t have to figure out how to make a budget around it - if you prioritize your needs, they will do your budgeting for you because your money will be spoken for when you get your paycheck anyway.  The only difference I find between budgeting when broke and budgeting otherwise is that the latter gives you more wiggle room (I eat lunch out more often now).  When your wiggle room is gone, it’s just gone.  You can’t spend money you don’t have if you’re not relying on credit.   There’s no budgeting required there, either.  Whatever’s left over after you pay Peter and Paul is your allowance, and when it runs out, it’s gone, so anticipate your needs, your spending triggers, and figure out economical ways to get around them so that you can make it to your next paycheck, which is the name of the game…  at least until you can take Moneymonk’s advice and get some more income.

I borrowed this word, "strategery" from our current Commander-in-chief, who’s really got a way with language.  I’m not sure if I’ll find this word in a dictionary, but I am sure that it describes my game plan for today’s paycheck.

Here’s the situation:  I’m losing my current contracting position, imminently, but I don’t know exactly when.  For all I know, the last time I KNOW I will get paid will be next Thursday.  The name of the game is to be able to take care of my monthly obligations without dipping into the fund I’ve been saving for My Own Home.  I usually budget each week’s check to cover the bills which are due in the following week, so that every week, I have money to deposit into my savings account to gain interest.  Since it’s getting harder with each passing day to anticipate when my income will end, I’ve decided to take care of as much of the month’s expenses as I can, while I can. 

Enter my strategery: I’m paying all of June’s bills with today’s paycheck, with the exception of my contribution to the household expenses and my July 1st car note.  This way, if my position ends this month, no matter when it ends this month, my bills for this month will be paid.  I will take care of my household expenses and car note with next Thursday’s check.  If I have any money left over after that, I can save it.  If next Friday is my last day (as I currently suspect it will be, though I have been wrong before), I’ll get paid one more time, have a one week waiting period, and begin to collect unemployment shortly thereafter while I continue to look for a new gig.  If next Friday is not my last day, then I’ll just save the remainder of this month’s checks in my expense checking account, ‘cause whenever I am finally laid off, I’ll need the money.

Yay strategery!  It got me through college.  It’ll get me through "real life," too. 

I haven’t been talking about my retirement savings much lately, but it has been on my mind…  I have a traditional IRA, mainly because I started a 401K at my previous job, and when I was laid off, I rolled the balance over into the IRA to keep from having to pay taxes on the money.  I couldn’t roll it into a Roth, so there’s my little bit of money in a Fidelity account.  I’ve been adding about 10% of my net pay into it - not always 10 and not every pay period, but most of the 10 and most of the time.  I know I should do better, but dangit, all I can think about lately is this house I’m saving for.  Besides, I’m kind of hoping that I’ll be able to catch up with my next 401K and matching.  All I can say is, don’t be like me - all the advice I’ve been reading says that the key to retirement savings is to save early, save regularly, and save with discipline.

Anyway, I want a Roth, for its tax advantages and for its flexibility.  It’s what I’ve wanted for a while, but I didn’t get around to it because I was so busy getting rid of my credit card debt.  By the time I got rid of my revolving debt, I’d already started and lost the 401K.  Now, as my rollover IRA is growing and approaching an amount where I’m comfortable putting less than $100 a month in it, as long as I’m also contributing a more substantial amount to another retirement account, I’m thinking that I might want to open a Roth with Vanguard…  I need to do some research.  Or maybe talk to someone.  I’m worried about whether or not I’m making my retirement saving situation more complicated than it needs to be, especially while I’m still looking for a job, saving for this house, and 401K-less.

When I checked my credit this weekend, I found out that I’m in less debt than I thought.

Over fifteen hundred dollars less debt!  I’m so simultaneously happy and embarrassed.

Happy because now, I know that I have fifteen hundred dollars less to pay on my car note before my car is paid off and I own it outright - title in hand.

Embarrassed because I can’t even remember what janky math it was that I used to get the outstanding car loan amount wrong in the first place.  Something about the monthly payment amount times the total number of payments over the life of the loan minus the combined amount of payments already made, bla bla bla, I dunno what happened, but I messed it up.  I’m a lawyer, not an engineer.

But at least now, I realize that I own more of my car than I thought I did.  This makes me feel a little less guilty about the debt that I’ve gotten myself into.  I’ve noticed that every month lately I’ve been so busy putting money away that I haven’t been making my debt total go down by very much at all.  This correction is psychologically good for me.  I’m actually in the same amount of debt I was in before I realized my mistake, but it looks like I’m in less debt, so I feel better anyway.  …Um, despite the mistake.

Word to the wise ants out there:  Double check your math.