The Hustle of Sistah Ant

I used a conservative estimate for my tax withholding allowances earlier this year, because I’m a contract (temp) employee and I didn’t want to chance owing the government at the end of the year since my income is somewhat unpredictable.  However, I didn’t want to overpay the government, so I used the 2008 Tax Withholding Calculator to figure out how I could increase my take-home pay while avoiding giving the government too much money throughout the year.

Well, that conservative estimate was a little too conservative.  It looks like I will have overpaid the government about $1,600 by the time my contract is up.  It’s a good thing that I haven’t had too little withheld from my check, but on the flip side, I just lent my country - this means you - $1,600 interest free that could have been working for me in either my savings, my IRA, or my stock portfolio.  See the sacrifices I make for y’all?  You’re welcome.  AIG, I’ll be expecting that thank-you-note any day now.

If/When I start working again after this contract is up, I will use the Withholding Calculator again to see how much of my money I can keep.

I will kick off this holiday weekend by getting some things done that I’ve been neglecting.  I’ve been a little busy and preoccupied.

I have to:

• check my credit report again, because I’m trying to check a different reporter and my credit score every four months leading up to getting the house, and I was supposed to check again this August,
• check my tax withholding to make sure I’m not behind on paying the IRS as I go, since I’m making more money than I thought I would this year,
• research home-buying counseling for the cheapest and best deal (I’m hoping that I’ll have the time to take advantage of one before the time comes to get a loan, because I could get a discount on a mortgage if I participate in counseling),
• set up an appointment to talk to someone at the brokerage that holds my IRA,
• set up a Roth with Vanguard,
• budget for this week’s pay check, and
• tally up this month’s net worth progress.

I might not get it all done by Tuesday, but I’m sure going to try.

Have a great weekend!

Update, 9/2/08: I did everything on this list except open the Roth and check my tax withholding.  While web browsing, I found about 2 or 3 dozen(!) counseling agencies in my city that can help with home buyers counseling.  The remaining task is to find out which one is free, because I have decided that I am not paying for it.  I checked my credit report and score, tallied August’s progress, and budgeted my paycheck (see my 9/2/08 post).  I also set up a brokerage appointment this morning for Thursday afternoon. 

I have a traditional IRA that came from a rollover of my previous job’s 401K.  I only have it because of not wanting to pay taxes on cashing out the 401K (otherwise I’d have gotten a Roth).  When I transferred it, it was a little over $300.  I’ve been adding to it since about January and now it’s just shy of $2,500.  That increase is all from my contributions which have already been taxed because they’re from my net pay.   So far as I know (but I haven’t asked), my current employer won’t make a direct deposit into this IRA, so I can’t contribute untaxed earnings.  Anyway, I don’t know if the money will be taxed again when one day, I start getting income from this IRA, but if they are, that would be a double tax.  I’m not happy about that, and I would rather be using a Roth IRA.   I just wanted to make this traditional IRA grow before concentrating on starting a Roth.

Meanwhile, the money has been sitting in a money market fund, because that’s where the company put the $300 when I transferred it over from the 401K, and I haven’t taken the initiative to actually invest the money.  That’s because in my ignorance, I’m guessing based on what (very) little research I’ve done that most of the investments require at least $2500 anyway.  I’m hoping I’m right, because if I’m wrong, I could have invested earlier, and that means I could possibly have sacrificed approximately six or seven months of possible investment returns (even though I know a lot of people are losing money in this scary bear market, and some may have even preferred their money to be in a money market, because they wouldn’t have lost money).  In my eyes though, every extra moment of waiting is bad, because of how late I’m starting.  Many people my age already have 5-digit retirement savings… I’m trying to get there, but I’ve been busy getting out of debt, saving for a house, and getting laid off from my old job.

When I get to $2,500, which will probably be by the end of this month, I will finally figure out how I want to invest the money in my IRA so I can get it out of the stupid money market fund and out on the Street, working for me.  I will do some reading and I might even talk to a company rep to see what some of my options are.  Any advice would be appreciated, because it might help me with my questions to a professional.

Few days ago, I said this about my stimulus payment:

"The government wasted paper to send me a notice that my check is on its way, as if I didn’t know. (I promptly recycled it.) "

Then I went online to see if they’ve sent my stimulus payment, and you know what they said?  That you’re supposed to hold on to the paper that tells you how much you’re going to be paid because you’re going to need it when you file your 2008 tax return.  So uh, don’t just recycle it.  And uh, I’m glad I only recycled the envelope and not the letter itself.   (I intended to get rid of the letter once I got my check… guess I won’t be doing that now.)

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.

We finally made groceries on Sunday.  The prices of bread, milk, and fruit were noticeably higher.  Anyway, at least now I can take lunch to work again.

Sistah Beginner and I went shopping on Saturday - maternity wear for her and work wear for me.  I picked up some otherwise-expensive-but-outlet-priced makeup, a very nice belt, and a cute skirt suit which was about 50% of its original price because I took advantage of my new favorite outlet store’s sale.  I also got some unmentionables and some slippers - those things I always forget to get for myself even though I need them.  Surprisingly, despite my recent acknowledgment of a burgeoning shoe fetish, I didn’t look too hard for shoes and consequently, I didn’t get any.  My entire shopping trip, including lunch and dinner, came in under my $200 budget.

I contributed 10% of this week’s check to my IRA and paid my bills.  I contributed enough to the my My Own Home savings account to bring the amount saved to $8,000 even.  I still haven’t paid the camera off of my credit card, but that’s because I have to deposit some cash I received from Mister Ant’s mom for her end of Mister Ant’s birthday gift.  Once I do that, the card will be cleared off in time for the end of the month.  Then less than $100 will remain in my checking account to last me until the end of the week when I get my next check.

My next check is already spent.  I have to pay my car note, my share of May’s rent and April’s household expenses, and contribute both to the IRA and the My Own Home accounts.  I am considering giving less to the IRA account because I want to keep my money more liquid since I’m contracting, and because I want my house sooner rather than later.  But I’m trying to remain disciplined.  It’s not like a 401K where I’d be contributing and getting a match without even thinking about it.  If I don’t make the conscious disciplined effort to save, the account won’t grow.  And I’ll have to make catch up payments later on if I want to increase 2008’s tax deduction for contributions - who knows what kind of money I’ll be making on my next gig, or for that matter, how long it will take to get my next gig.  That thought encourages me to contribute and save while I still have the wiggle room to do so.  What do you think?

Anyway, that’s what happened to last week’s check. 

I was paid on Thursday and I put all but a hundred dollars into the house fund.  It felt great!  After doing a few calculations, I see that if you add up my emergency fund, house fund, and retirement fund, I have over ten thousand dollars in assets that have nothing to do with the value of my car or other personal possessions.  That makes me happy.  I’ve never been able to save this much cash before.  I love the feeling of knowing that I have enough cash to get through months of unemployment if I need to, or to deal with an emergency if I have to.

I’d love to talk about the great things I did to get here at this point, but before I do, I have to point out that I got a big help when I was laid off and received my severance package - I saved the entire amount of my severance pay, which accounts for thousands of dollars of my savings.

But other than that, here are some factors that have helped me to increase my cash assets by over ten thousand dollars since I started this blog less than a year ago:

• I increased my income by getting certification in my field, which qualified me for higher-paid positions.
• I used payroll to make direct deposits of portions of my paycheck into my savings account.
• I signed up for my company’s 401K and later learned how to roll it over into an IRA when I was laid off to avoid bad tax consequences.  I’ve also been encouraged to save in my IRA for tax purposes, because it helps to decrease my tax liability.
• I did calculations with each check to allow for bills and living expenses so that I would know exactly how much I could afford to save - this way I could save that amount up front, instead of spending money without a plan and hoping there’d be money left over at the end of a pay period to save.
• I put unexpected windfalls directly into my savings.
• I set goals and visualize what I will do with the money, which helps me to save aggressively.
• As soon as I paid off my old credit card debt, I committed the payments I was making to pay off debt to my grow my savings.
• I put money into my "high" interest savings account as soon as I get it, which 1) gets the money out of my reach before I spend it away, and 2) increases the balance of my account, which affects how much I get a month in interest payments.
• I don’t spend the money I’ve saved, which used to be a big problem for me.  If I want something, I can save for it, use my credit and then repay it, or just not buy it.  The only thing that can persuade me to dip into the savings is a real emergency, or something that would jeopardize my credit rating (which, since I’m saving for a house, IS an emergency, of sorts).

March went well, folks. I increased my net worth by 5% which was nice.  I saved over a thousand additional dollars for the house fund, which is great!  I now have over half of my original target amount for the house fund.  I intend to have at least $13,000 saved up for the house before I start actually looking for financing and looking at houses.  My unstated goal is to actually get about $18,000 together so that I’ll have money left over for emergencies/incidentals/moving in/minor repairs, etc.  It’s a realistic plan, given the prices of homes where I live, my credit rating, my ability to save, and the time frame within which I want to move.

I sometimes spend time just looking at my net worth page,  thinking about, "If I can pay this, then this will happen to my liabilities," or "If I can save that, then this is what will happen to my assets."  To date, I am still $72,000 in debt, between my car note and my student loans.  Am I sure that I want to pile more debt on?  I know a house is an appreciating asset, according to conventional wisdom.  But the mortgage that comes with it is still debt.  More debt.  Thirty years of debt.  Oh my gosh.  Sometimes the very thought it is just so scary and sobering.  Believe me, I want the house - but not so much that I want to do it for the wrong reasons, like, I’m at the age where I should have one, or I want a mortgage interest deduction, or my friends are getting houses (actually they’re not), or I want to be the first one out of my clique to get a house.  It’s more like, I want to own a place outright by the time I am old and I don’t want to work anymore.  And, I want a place to raise children where I can control my living space instead of worrying if my rent will go up or waiting for a landlord to fix something.  And, Mister Ant and I need space to be comfortable, unlike our current cramped apartment.  And, if I’m going to be paying every month to live somewhere, I’d like to get more out of it than shelter, if I can get some equity in an appreciating asset in the meantime.  Home ownership, in my opinion, is not for the faint of heart.  It’s a lot of responsibility.  The thought of it is very sobering.

If you’re renting, worst case scenario is that you have to move somewhere else and maybe come up with a couple months rent to do so.  But if you mess up with a house for any reason - illness, unemployment, whatever - worst case scenario is that you have no place to live, no place to put your stuff, and you’ve defaulted on an obligation worth thousands and thousands of dollars, leaving you with jacked up credit that will keep you out of getting into another place.  Yikes.

Debt is slavery.

To keep "Yikes" from happening, you have to keep an income to keep paying for the house.  I know you have to keep an income even if you don’t buy a house.  But the house is your shelter, not a mere car or wide-screen TV.  Talk about pressure to make nice with the boss and stay on everyone’s good side.  Talk about pressure to get a paycheck.  People stay in jobs they HATE so they won’t get put out of their homes - so that "Yikes" doesn’t happen.  Do I need that kind of pressure?

You know what?  I’m not going to scare myself out of getting my own home.  But I do have these thoughts from time to time.  If nothing else, they’ll probably keep me from attempting to buy more house than I can afford.  You will not catch me with some astronomical monthly mortgage payment.  Neither will you catch me doing anything I’m not comfortable with - I’m going to really have to like and want the house I "marry" my future to.  ‘Cause I’m going to spend most of my waking hours for years and years making sure that it’s paid for.   It’s going to have to be worth it.  Even now, when I’m at work and I want to just get up and go home instead of working overtime, I think about being able to buy my own home, and that’s what keeps me at the desk, despite sleepiness, or an aching back, or wanting to just go home…  I’m already working for the house.  Ain’t that something?  I’m already sacrificing my time and money for it.  But maybe it’s not slavery.  Maybe it’s indentured servitude…

I blew my entire paycheck this weekend.  But it wasn’t all bad.  I paid the remainder of this month’s bills, so the only stuff I need to be concerned about are my share of the household expenses and next month’s car note.  With the leftover money, I contributed to my IRA, put a few hundred in my house savings, and then I FINALLY paid my tax bill.  I managed to cut it in half by contributing more to my IRA for tax year 2007.  After that Sistah Beginner and I went out for tax-free outlet shopping!  Yay!  Sistah Beginner needed maternity clothes, and I am in constant need of clothes for work.  I stuck to my budget of about $100, and came away with two microfiber stretch camisoles, four button-down blouses, and a gang of trouser and athletic socks.  I’ve done better with $100, but I’m upping the quality of the clothing that I’m buying, so I’m satisfied with the trip.  I still could use some shoes and some trousers.  Why are trousers so hard to find?  Sheesh.  I didn’t like the fit of any of the ones I tried on.  And by the time I finished shopping, my lower back was killing me.  I hate shopping.  But I love that I have the discipline to set a limit and stick to it.  (Sistah Beginner stuck to her budget by bringing an envelope with cash in it - she stopped spending when the cash ran out.  I am so proud of her!)  I have a little over $100 left to last me the week. Oh yeah, and I didn’t use any credit.  Yay!

I really like the money I’m making now.  There’s so much of it, and it comes every week!  A year or two ago now, a $500 tax bill would have really been hard to deal with.  But now, with a little extra knowledge, and all this money, reducing and then simply paying my tax bill is no sweat.

Where am I going to work after this, and will I be able to get this much money?  Every job I’ve ever taken has paid me more than the previous job.  What if the job market is so tight that I won’t be able to get the same amount of money or more when this project is over?  

And if I AM able to put away enough money to start shopping for a house, how am I going to get approved for a mortgage without having a permanent job?  And how will I build my savings back up quickly enough to have an adequate savings cushion to feel comfortable taking on a mortgage obligation?

And with all of this focus on the house, how in the world are we going to have enough money to have even the simple wedding that I want?

I’ve been doing great so far, despite a weird economy and having been laid off a few months ago.  But just because I’ve gotten rid of all my revolving debt, doesn’t mean that I don’t have financial concerns.  My net worth is still tens of thousands below zero.  I still have student loans and a car payment.  A mortgage will still add to my liabilities, even though it will be secured debt.  And I still don’t have enough money in my retirement savings.  My financial journey is far from being over.  I thought I wouldn’t have much to talk about once I became revolving-debt-free, but I was wrong - there is so much more on my horizon.