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Planning for our children’s future: The financial final frontier

Personal finance consists of several big areas, and I’ve tended to tackle one at a time so I can put all my money and energy toward it. As I’ve written about in the past, I roughly divide the stages of taking financial control into three areas: the present, the past and the future. The first necessary step is getting your present budget under control; making sure you don’t spend more than you bring in. The second is cleaning up debt created by  past actions, such as credit card or student loan debt. And the third is securing your future, which I’ve mainly defined as saving for retirement. (I also consider paying extra to the mortgage in this category, although that could also go under the “clearing up debt” category.)

But there is another important aspect of the future to consider, for those of us who are parents: securing our children’s future.

The obvious first step for many is to save up money for their children’s college tuition. And while I agree this is important (and something I’ll likely start to tackle in the next couple of years), an even more important step that not as many people seem to talk about is making sure your children are financially literate.

College tuition is still rising, and kids are graduating with more debt than ever. So having money set aside for college tuition is no doubt extremely smart and valuable to kids. But if they don’t know how to manage their own finances by the time they graduate from college, it really won’t matter whether they have $0 in student loan debt or $50,000.

So even while I’m not yet saving for their college, I’m trying to make talking and thinking about money part of my kids’ everyday life. I never hide a thought about money from them, whether it’s weighing whether or not to buy something on impulse, talking about how we saved up to make a planned purchase, or explaining that keeping the water running costs us money.

I also tried to start giving my older child Astrid an allowance beginning at age 3. I kept it up for a while, always having her divide her $3 into three areas: $1 went into a jar for donating, $1 went into her piggy bank for saving, and $1 into her wallet for spending.

However, I soon found out that cash is just another toy to kids who don’t truly  understand its value yet. The money inevitably found its way out of the three areas and got mixed together, along with toy money and other random toys. So I eventually stopped giving her an allowance and decided to put it off until she understood money a little better.

I still don’t think she’d be able to resist playing with money, but I did want to start giving her an allowance. So when I stumbled across the website, I was thrilled. This site is a perfect way to still give the kids an allowance that they can easily access as cash, yet keep that cash out of their rooms so it doesn’t get played with and possibly lost.

The site lets you set up something resembling an online bank account for your kids, though much simpler and more visually appealing.


You can set up automatic deposits of their allowance and divide it into the three areas of spend, save and share (donate) in whatever ratio you prefer. You can even have the site calculate interest on the money. The parent login gives you a view of all your children’s accounts so you can change contributions at any time:


What differentiates it from a regular bank account, though, is that you’re not actually depositing money into an online account. You’re responsible for keeping the money for your children. In essence, you’re the bank.

So every week I take out the cash for their allowance and put it safely away in a hiding spot in the house. Their ThreeJars account automatically adds that amount weekly. When the kids want to spend their spending money, I’ll give them the cash and help them “withdraw” it from their online account. Every once in a while I’ll put actual money into their real mutual funds and “withdraw” that from the “save” jar in their online accounts. And I can help them donate money online using my own checking account, then deposit the corresponding cash and “withdraw” that amount from their ThreeJars account.

I’ve shown the account to the kids and tried to explain it. They seem basically uninterested in this allowance that’s basically just a number on the computer screen. I’ve decided to keep doing it and reminding them about it occasionally in the hopes that someday they’ll become interested in it.

And I think they’re more aware of it than I realize: We overheard Astrid talking to one of her little friends about where she was going to put her tooth fairy money, and she said, “I have a bank account on the computer.” So I guess she was listening after all!

Weathering a perfect storm

I usually write about personal finance from an individual accountability perspective. And there are so many stories out there (including mine) about irresponsible behavior being the cause of many people’s money catastrophes. But I think it’s important to also acknowledge that we live in a perfect storm of factors practically designed to lead more and more people down the road to financial ruin (or at least constant struggle with finances). As Elizabeth Warren and Amelia Warren Tyagi put it so eloquently in the first line of their book All Your Worth: “The rules of the game have changed.”

Income stagnation and widening inequality (rich people taking most of the financial gains) are big parts of the picture. These charts paint it better than I ever could. Suffice it to say, if you (like Elizabeth Warren’s mother) had to take a minimum-wage job to try and keep making mortgage payments, it wouldn’t happen.

Good-paying jobs that don’t require a college degree are in steep decline. But college tuition has skyrocketed. For many that means starting out life with an ever-bigger student loan burden. And the resulting salaries for recent grads in the past decade have hardly seemed worth it. There have been brighter reports this year, but chances are if you came from a low-income background, that college degree is not only going to incur higher debt but lower lifetime earnings than for kids from higher-income families.

Access to credit and the general attitude toward it have contributed. If your parents (like mine) were born in the 1930s, credit cards with revolving credit (you know, the kind we have nowadays that you don’t have to pay off right away) weren’t even available until they were well into adulthood and used to functioning without them. By contrast, many adults today were seduced into applying for their first credit card at a college fair, with no instruction on how to manage it intelligently.

So shouldn’t parents be teaching their kids to know better? Well, people my parents’ age were barely aware of revolving credit, and turns out 72% of parents experience at least some reluctance to talk to their kids about financial matters!

In addition, the number of consumer goods considered to be needs — from toilets to washers and dryers to dishwashers to smartphones to computers to cable to cars — has grown exponentially since the 1890s to today, as this article shows. And really, now that more people are living alone and many families need both parents to work to get by, many of these conveniences are necessary to keeping up our pace of work outside the home.

To make matters worse, the traditional “three-legged stool” of retirement — employer pension, Social Security and personal savings — appears to be broken beyond repair. I have never worked at a company that offered a pension. That plummeting blue bar in this graph is the nearly extinct pension or “defined benefit” plan. I still hold out hope that Social Security will be saved, but some believe it will disappear. Even if it doesn’t, chances are future generations will get less, and won’t qualify until they’r older. And this depressing graphic shows that people are unable (or unwilling, or unaware of the need) to save. So there goes the third leg.

This is only a partial list of the unprecedented financial problems facing people today. My point, though, isn’t to give up hope or abandon attempts to have personal responsibility. If anything, it’s a call to work even harder to hold onto your smaller earnings and maximize their value.

In my opinion, major reforms are needed to curb predatory lending, make education more affordable, and put income inequality somewhat back in balance, and financial literacy education needs to be much more common. But until then (and it’s going to be a hard struggle if it happens at all), getting mired in frustration or self-pity at the injustice of it won’t help anything — it’ll only  make things worse.

Lots of people do still have a fighting chance — but not if they give up the fight. That’s why I’m determined to keep talking about personal finance and help as many people as I can in my small sphere of influence.


The perils and the benefits of refinancing debt (but first, the perils)

I had a bad habit in my twenties and early thirties. Practically a ruinous one. And it’s something I see a lot of other people in a similar position get into.

I’d gradually run up debt on a couple of credit cards. I only ever paid the minimum monthly payment — this was before the days where a credit card statement was required to disclose how long it would take to pay the debt off and at what cost, so I kind of saw the minimum payment as a “recommended” one. Also, I always felt I needed every cent of my paycheck (and then some (hence the creeping debt). Paying more than the minimum was a luxury I couldn’t afford (though oddly, I could afford a number of other luxuries like new clothes, restaurant meals, drinks and tickets to shows).

But, as a result of adding more debt while not paying any extra off, those minimum payments would creep up. Having more money going to minimum payments meant less discretionary money, which (since I failed to adjust my lifestyle accordingly) meant even more credit card use.

And so the cycle would continue until even those minimum payments were a real burden. I was always scrupulous about paying on time, but it would get to a point where I feared I’d soon no longer be able to make the payments. Typically a period of frugality would ensue, where I cut out all fun and worked hard to spend as little as possible and maybe put a little bit extra toward the credit cards.

Then, inevitably, an offer would come in the mail for a new credit card. 0% interest for 12 months or some similar offer would be dangled before my stressed-out eyes. I always had great credit, so I’d always get approved for the new card. I’d transfer some or all of my other credit card balances over — sure, 3% of my balance would get added as new debt for the privilege, but it seemed a small price to pay.

My old cards would suddenly have little or no minimum payments. The new card wouldn’t bill me for a month, and when it did, the 0% interest meant a smaller payment than I’d made cumulatively on the balances before.

Suddenly I’d have some breathing room in my budget; money left over in my checking account after paying all my bills. I’d have the best intentions to use all that extra money to start paying down that balance before the 0% period expired.

But somehow, even though I had the same amount of debt that was stressing me out before, having the lower monthly payments just made it seem less of a crisis. I’d loosen up on the spending a little bit. What was meant to be a little break from the frugality simply became my new normal, so that extra money in the checking account would start to get spent instead of sent to the cards.

And then, when I got used to that level of spending, I’d start eyeing my old cards, which now had tiny or no balances on them. Spending a little bit would only trigger a $25 minimum payment; no big deal, right?

And before I knew it, they had balances again. And before I knew it, the 0% period would be up and my minimum payment on the new card would be punishingly high. And I’d cycle through again: going to an extreme of frugality, getting a new 0% offer, transferring balances, spending up the old cards again.

When I finally hit a wall where even I could see that cycle couldn’t continue much longer without missing payments, the fear of default shocked me into a different state of mind. For a long time, I put virtually every extra penny toward debt. (With a few carefully planned release valves of fun, having learned my lesson about overdoing frugality.)

But I did do two more balance transfers to consolidate my consumer debt. One was a credit card with a fixed 3.9% interest rate on transferred balances. Not as good as a 0%, but the fixed rate meant I wouldn’t suffer the fate of having a ballooning payment. The other one was an unsecured loan. At 8.9%, the interest rate was good but not spectacular. The thing that attracted me to it: there was no fee to put my balances on it, it wasn’t a credit card so I couldn’t add to the balance, and there were fixed payments for 60 months, so it would be paid off in 5 years at the latest.

Those two balance transfers really helped me because they not only reduced the number of bills I had but also reduced my monthly interest payments, enabling me to put more money toward debt. And the terms were better for where I was in life, unsure how fast I’d be able to pay down those balances.

But the only thing that ensured it was a good decision to do those two balance transfers was my being serious about getting out of debt once and for all. If I hadn’t been ready, I’d have started spending the newly freed-up credit on my old cards. Nothing can stop that except your will and determination not to do it.

So the only time I’d ever recommend a balance transfer is if you’re so serious about getting out of debt that you would never consider using the old cards (or the extra money in your budget). It’s hard to know when you’re at that point, but using balance transfers repeatedly without being serious about it can be disastrous.

magnifying glass on bills

Moderation is really hard (for me)

It’s been a while since I posted. Last July, I updated on my family’s financial situation, and how we’re finally debt-free except our mortgages. At that point I thought the only challenge left, financially, would be to ramp up retirement savings. I felt like we’d pretty much have enough money to do whatever we wanted, within reason.

And for a little while it worked out. We were able to spend on frivolous things without planning, though I still tracked everything out of habit. After years of being really budget-conscious and about a year of more strict parsimony, it felt really freeing.

Then I started looking ahead to the next year. I knew we wanted to travel to England, go to my 20th college reunion and perhaps install air conditioning in our 100-year-old home. I thought it might be tight but thought we could manage it, so I started putting money aside, but not with any real sense of urgency.

Then Neil broke his collarbone and had to go to the ER. And then had to get surgery on said collarbone. And Anitra’s tooth that had long plagued her started to fail, and it became clear she’d need an implant in the next year. Our not-up-to-code basement bathroom needed additional work to avoid being fined or worse by the city. The dishwasher started leaking. And these were all things that would need attention in the first half of the year.

Suddenly it didn’t feel like we had that much money after all. We think we’ll maybe be able to handle it all without dipping into credit cards (well, maybe not the air conditioning), but I had to put Roth IRA contributions on hold. That means we’ll need to double up in the latter part of the year to stay on track. Which means the second half of the year won’t feel like we have much either. Paying yourself instead of spending your money isn’t very exciting in the short term.

I’m not complaining; I’d rather know the limits of our income than close my eyes and charge on the credit card. And we’re extremely privileged to be able to afford these big expenses without going into debt or dip into savings. But I’ve realized that at almost any level of income and budget surplus, it probably seems like you hit your ceiling pretty quickly, especially if you have medical events crop up. I mean, there are naturally moderate people, but there are also a lot of people like me. And if you feel like you make a lot of money, you might not feel like you need to track it. Suddenly, those pro athletes and movie stars with huge debts have started to make sense to me.

But thankfully, I’m still tracking. I know exactly where our limit is, and I’m determined not to slide back down into consumer debt. But I’m finding myself engaging my willpower again, as well as scouting for deals on any purchases I need to make.

Financial freedom apparently doesn’t mean the freedom to do what you want. If you want to stay free, control and self-discipline are still very necessary.escrow

The markets are plunging — what to do?

I know what I wish I could do, anyway: Dump a bunch of money into my funds while prices are low. Seriously. I just put a few grand in last week, and I’m wishing I’d waited.

When markets are down and many investors get cold feet, I see bargains and want to jump in. But not badly enough to put unplanned money into my retirement accounts. And here’s why.

Ninety-nine point nine percent of people should not attempt to base their investments on market timing. Whether you’re a bear-market type like me, or only like to invest when it’s bullish, the best thing to do for most of us is to buy low-cost, indexed funds and put in a set amount of money.

Case in point: I didn’t know the markets would fall drastically this week, otherwise I would have held back my planned purchases of the past week. And come to think of it, I don’t know where the bottom of this fall is, so how will I know the best time to buy if I want the cheapest shares possible?

Likewise, if you try to react to plunging markets by getting out, you’re going to help facilitate further losses for everyone — and you’re going to sell what you’ve got for less than what it was worth last week. If you wait for the market to get better before you put your money back in, you’re buying at a higher price than what you sold.

Index funds are better performers than actively managed funds over time, and it’s for the same reason: They remove the human element, which has proven time and again to be illogical, risk-taking at the wrong times, cautious at the wrong times, etc. As this great overview says, “Since an index fund owns all of the investments in the index, there is no picking winners and losers.”

Think about it this way: According to this article (and many others), those who got out of the market in 2009 have still not recovered the value they lost. Those who stayed in have gotten it all back and then some.

Do some people get rich by timing their buying and selling? Sure, and that’s why trading is such an attractive profession for acquisitive sorts. But if it’s not your full-time job (and I don’t recommend it, because it sounds like a dirty and stressful game), then just keep putting away for retirement as if nothing is happening. In a couple weeks or months, it likely will be as if nothing happened.


Image courtesy of David Castillo Dominici at

Retirement: What’s the magic number? And how on earth do you get to it?

OK, retirement. This isn’t a pleasant topic for most of us, because we know we’re way behind where we should be. This is and isn’t our fault: Company pensions used to be very common, and social security more secure, so our personal retirement was only one component. These days retirement is much more of an individual responsibility, and it’s a big complicated responsibility that many of us aren’t equipped to deal with.

Besides that, many of us are dealing with stagnating incomes that don’t keep up with inflation, and student loan debts that would be inconceivable a couple generations ago.

But at the same time, it is our responsibility to try and put SOMEthing away for retirement, and many of us Americans just have our heads in the sand. We’d rather spend our money on gadgets, data plans and avoiding our kitchens. Even if that means racking up credit card debt and neglecting retirement savings.

Pulling your head out of the sand for even a moment to try and gauge how your current investments look can be enough to make you want to run away forever. But that’s only going to make things worse. What I’ve done is resolve that, even if I never reach a magic number of retirement savings, or even figure out what that number might be, I’m going to try harder to build my retirement fund. Because at least I’ll be closer to where I need to be than if I just ignored it out of a sense of futility and fear.

So, OK. How do you calculate how well you’re doing? There are any number of calculators out there, using different algorithms and data and giving you different results (usually either monthly income projected/needed in retirement, or total amount projected/needed upon entering retirement).

I chose to start with three sources I trust: Vanguard, Kiplinger and Fidelity.

Vanguard has a neat retirement calculator that lets you slide numbers up and down and see how close you are to what you need monthly in retirement, adjusted for inflation; a bar graph on the right-hand side of the screen adjusts whenever you adjust a number. It even links to a Social Security Administration tool that can help you estimate what your monthly Social Security income will be. (Of course, that annual letter you get from the SSA is more accurate, but this will work for a rough calculation.)

Kiplinger also has a simple calculator that produces a “nest egg goal” as well as a number of how much you should be saving per month to get there (noting that this number will need to increase over the years to get you where they reckon you want to get).

Since they use different data and produce different results, it was a bit tricky to see if they matched up. But once I slid the Vanguard ticker to where I’d be saving enough annually to meet what Kiplinger said I should be saving monthly, I could see that they both said about the same thing. To retire at 65 and have 80% of my current household income in retirement, I need to be saving about 35% of our current gross income. We are currently saving less than half of that. Yikes!

The third site I trust, Fidelity, has an interesting way to think about retirement. They use a simple rule of thumb: Make your goal to save 8 times your ending salary by the time you retire. They tell you to get there by trying to save the amount of your current salary by age 35, 3 times your salary by 45, and 5 times your salary by 55. (Note they mean your current salary at each age, so if you earn more at 45, you should try to save 3 times that amount.) The article goes on to detail factors that could affect the “rule of thumb” number.

I like this third calculation because it gives concrete goals to reach by certain ages–just the kind of financial goal that keeps me motivated. But in the end, it’s telling me the same thing–my family needs to be saving much more than we currently are.

Still, it gives me something to work toward, and even if I don’t ever reach these ideal numbers, I’ll be better off chasing them than pretending I’ll never get old or sick or want to stop working.

It’s a bit more complicated since I have three working adults of different ages in my household. But I didn’t let that stop me. Anitra is 36, I’m 41 and Neil is 42. Since the rule of thumb says you need to be at 1x by age 35 and 3x by 45, I figure you should be at 2x by age 40. So if I pretend Anitra is 35 and Neil and I are both 40 (ah, to be that young again!), we need 1x Anitra’s salary and 2x my and Neil’s salary to be on track. (Are we on track? Oh heck no!)

Since we already missed that milestone by at least a mile, I decided to make an aggressive goal to get caught up by the next big 5-year mark. In 2019, Anitra will be 40, I’ll be 45 and Neil will be 46. That means we should have 2x Anitra’s salary and 3x my and Neil’s salary saved up.

Do I think we can do that? I’m doubtful, but determined to try. It’s an astronomical goal in my mind right now: We’re basically only halfway there, which means in four years we’d need to save up as much as the three of us have saved up over our ENTIRE WORKING LIVES.

But then again, it’s not as crazy as it sounds. We no longer have consumer or education debt. We now have a substantial amount in retirement that means growth will be dramatic whenever the market takes an upswing. I don’t think we’ll make the goal, but I think we’ll get closer than seems possible right now.

So what’s my plan? Well, first off, we already contribute the amount needed to get the max 401(k) match at our jobs. Second, we have Roth IRAs that have been neglected over the past year, but I’m planning to max them out (or get as close as I can). (You can contribute up to $5,500 per person per year to Roths.)

If I succeed in maxing our Roths, I’ll up my and Neil’s work contributions so that, with our match included, we’re each putting aside 10% of gross. (I already put away 10% of Anitra’s gross freelance income.)

If I get all that set up, so we’re all maxing our Roths AND putting away 10% of our gross income, I’ll see how much we’re short of our goal. Maybe I’ll be able to stretch and put away even more. I’m not sure where we’ll put it then. Maybe up our 401(k)s and SEP (Anitra’s freelance version of a 401(k) a percentage at a time until we’re on track.

Of course this is all pie-in-the-sky thinking, since I haven’t even gotten halfway to maxing our Roths for the year and the year is more than halfway over. But it’s good to think pie-in-the-sky. Eight years ago, I set my sights on becoming debt-free except for mortgage. I didn’t really think we’d get there, but I figured any progress was better than none. And now here we are, on the other side of that seemingly unattainable goal. So you just never know.

financial future

Drastic shift in finances = new focus and priorities

It’s been six months since I last posted, and probably the most financially dramatic six months of my life so far. First a quick catch-up, and then on to the new focus in my life.

When I last posted here, I was in a period I called “temporary parsimony.” My family had stretched mightily beyond our means to buy the perfect home for us. As with many purchases like it, the process contained several pitfalls that meant we were stretched far thinner than we’d intended. Several unexpected costs around closing, plus the condo was taking forever to sell so we were covering two mortgages and sets of utilities. We knew we could do it, but only if we were extremely careful.

So we entered the most disciplined, strategic and conscious stage of our finances that we’d had since our near-meltdown in 2007. Our new home was furnished with loaners, alley castaways and Freecycle finds. Fun money was cut to the bone, debt payments kept to the minimum and retirement contributions reduced. Our entertainment consisted of cooking for friends and watching movies on Netflix. Our Xmas and birthday gifts were the money we’d saved up for those holidays so we could buy long-deferred wants (and it was thrilling, let me tell you, to suddenly have new T-shirts, socks, slippers and pajama pants!).

Our income was increasing during all of this; Neil and I got raises, and Anitra’s freelance business turned out to be much more lucrative than she’d predicted. But all of the money went to filling gaps, such as saving up to try and cover the big loss we knew we’d suffer on the condo if and when we finally sold it.

Even with all the saving and scrimping, we had to take out a 0% credit card to carry some expenses and use that money to buy  our way out of the condo. (The check we took to closing was nearly three times as much as what we’d brought to closing as a down payment when we bought the place!)

We received an opportunity to refinance the mortgage on our new place and save a ton of money monthly, but it involved paying off a smaller second mortgage that we’d taken out with the seller. We saved up as much as we could but also ended up taking out an unsecured line of credit to cover that payoff.

Even with the big checks, once the condo mortgage/dues were gone and the new home mortgage was reduced, I could see that our monthly cashflow looked much brighter. We’d still have to be disciplined, but there was light at the end of the tunnel.

Then we got unbelievably good news: A long-hinted-at windfall, a big chunk of money gifted by my dad, was coming to us. Sure enough, a few weeks later it was in my bank account.

I promptly paid off every non-home-related debt: the new credit card, the line of credit and the last of Anitra and Neil’s student loans. For the first time since I was 18, I had no student loan or consumer debt to worry about. There was even a good bit of money left over to start renovations on our shabby-looking (but very promising) home.

So six months since I wrote about all the ways we cut back, I could write a volume about all the impulsive and not-at-all-necessary purchases we’ve made! I’m still tracking every penny to make sure we don’t overdo it; we haven’t even come close, but I’m well aware that “lifestyle creep” doesn’t take much time at all to take over.

For the first time in a long time, I’ve shifted gears from how much I could reduce and save to thinking about what I want to spend our money on. It’s exhilarating, strange and a little scary to be honest.

But there’s another priority besides kicking up my heels and enjoying the sudden freedom: Retirement. I’m 41, and I realize that I haven’t ever given retirement savings my full attention. First I was too busy being young and irresponsible, and then I had to spend years digging myself out of the hole that irresponsible version of me had put me in.

Now I’ve always put a bit away for retirement, at least since my mid-20s, and I occasionally upped it incrementally. So it may be that I have more retirement savings than many Americans. But I’m not on track to have enough to live comfortably in retirement, nor to deal with expensive long-term care solutions, should I be one of many people who develops a disability late in life.

Especially now that I have enough money to have a bit of fun, traveling and fixing up the house and shopping, it would be a jarring thing to suddenly find myself scrimping and scraping again when I’m old.

So I’ve got to try and tackle this monster of a topic, retirement. Unlike budgeting and paying off debt, it’s not a simple calculation. It involves uncertain growth rates of investments, certain (but indefinite) inflation, and the mystery of just how lucky I and my spouses will be in the aging gamble: Will we manage to stay fit and mentally unscathed and wanting to spend money on fun, or will we be hit with debilitating ailments that take money to take care of? Either way, how much would those two futures cost?

Whatever the answers are (and I’m not sure I can answer them with any degree of accuracy), one thing is clear: We need to be saving more. Even if we don’t manage to get to a magic number that I may or may not come up with, we need to get closer to it than we are now.

My next post will show you my first rough attempt at calculating what we’ll need in retirement. Then we’ll just have to go from there.

NT water

Temporary parsimony part 3: Cheapskate living

New year, new focus! After some hesitation, I decided to renew my domain and webhosting subscription and try to keep this blog going. Where better to pick up than by continuing my miniseries, the last entry of which was in August?

In that post I promised to talk about ways to replace spending with free or cheap behaviors. Well, it’s as true today as it was in August: We need to avoid spending at all costs. (That’s one of the reasons I was hesitant to renew this blog, but I figured $9 per month overall is cheap for an activity that will entertain me and hopefully help keep me focused.)

A number of the money things I’d hoped would happen have happened, but one of the biggest has not: We haven’t sold our condo. That means we’re paying two mortgages and sets of utilities. We’ve reduced the price on the place several times, so when we do sell, it’ll be at a considerable loss.

So that means we not only need to keep living frugally to cover bills, but any extra money we DO come up with needs to be saved to help cover the loss when we sell the condo. It’s tough. But we’ve found lots of ways to make it work. Enough so that when one of us got a year-end bonus, we were able to save nearly all of it!

Living like a cheapskate is such a holistic thing; it’s permeated all parts of life. So it’s really hard to categorize or pick out the behaviors we’ve developed. But here goes:

– Don’t throw anything away. I can’t tell you how many things I’ve kept using and wearing that are not ideal. Clothes, shoes, dishes, furniture; if it’s even marginally functional, I keep it.

– Make things last as long as possible. Last year I finally started wearing makeup again after years of not. I like it; it makes me feel more confident and in control. However, the makeup I like (while not super high-end) costs more than I’m prepared to spend right now. So I’ve cut back makeup-wearing to only special occasions. That way I  keep my hand in the game, but the products I have will last for a very long time.

– Ask for long-term loans. When we first moved in, we didn’t have nearly enough furniture to furnish our new larger surroundings. Our friends we’re renting to generously loaned us several pieces that they want back eventually but are in no hurry to get. So a good portion of our furniture will need to go back to them when we can afford to replace it.

– Keep an eye out for free stuff. When moving, we started noticing furniture sitting in the alleys behind houses. We realized that sometimes people just leave unwanted items in hopes that someone will get it. We had to be quick, but we managed to obtain a few pieces that way, including two chairs that we may actually end up keeping, they’re in such good condition.

– Tell your friends you’re looking for free stuff. We had a friend bring over some old dining-room chairs and a grill because she knew we were on the hunt for such things. A couple more friends donated their old drop-leaf dining-room table for our new sewing room.

– Use giveaway sites on the internet. Thanks to we now have a loveseat, an extra dresser, a shoe rack and several other things.

– If you can’t get it for free, look for it cheap. Craigslist yielded some decent bargains on end tables, a table for the music room and other items.

– Keep your social life cheap. I’m not gonna lie; I miss going out to eat, going for coffee, going on trips, going to music shows. It’s not like we never splurge on these things, but it’s a much rarer occasion. But we haven’t turned into hermits; cooking dinner for friends (or going to their home for dinner) and watching movies or playing games at home is just as good a way to hang out as eating at a restaurant.

– Be patient and appreciate  what you have. The biggest danger to maintaining this lifestyle is feeling deprived. It’s not like I don’t have money in the bank and ample credit limits, so spending would be the easiest thing ever. Getting impatient for “the good life” could derail our long-term prospects for prosperity. So I just try not to think too much about the things I want; if I do, I try to enjoy the anticipation of someday being able to afford them. I look around at my big, could-be-beautiful home; my loving family; and my circle of generous and loyal friends. I think about my good health, my smart kids and my promising career. I appreciate being lazy, I appreciate working hard. There are so many things to love about life even without the ability to spend freely.

That’s all I can think of right now. Let me know if you have any smart strategies or tips to share about living on the cheap. And Happy New Year!


Image courtesy of Stuart Miles at

Temporary parsimony part 2: ways we cut back

During the process of saving for, making an offer on and buying the new home, we have cut back category after category of our spending. And when we move in, especially if we haven’t sold our condo by then, we’ll be cutting even more drastically.

It’s funny — since I do use a budget and slice-and-dice our money up into planned categories, I rarely feel like we have “extra” money. If we do end up with a windfall or surplus beyond what I’ve planned, I always use that money for extra debt repayment or stash it into savings — it doesn’t just sit around.

So there have been many, many points in this home-buying process where an added expense has come up and I’ve put the brakes on, said “That’s it! We don’t have any room in the budget for that.” But then I’ve inevitably found something that can be cut, reduced or kicked down the road to be paid later.

I’ve come to fully realize how many spending categories are discretionary and can be stopped. There are only a few fixed bills; everything else is on the table when it comes to making cutbacks. It just depends on how much we want or need that money for something else. In our case, we want to be in our new home so badly that we’re ready to put just about everything on the table.

Over the course of the past few months, here’s what we’ve cut from our budget and/or savings and in what order:

  • Extra debt repayment
  • Travel/vacation fund
  • New computer fund
  • Charitable contributions
  • Emergency fund (except for some money that’s now earmarked for something else, but could still be used for emergencies)
  • House cleaning service
  • Roth IRA contributions (though I’m budgeting for a big makeup contribution once we’re back on track)
  • Diaper service (including compostable products, pickup and dropoff)
  • DVR service for cable (we couldn’t cut cable entirely because it’s built into our association dues)

That’s what was needed just to purchase the new place and cover a loss on the condo when we sell it, and kick out our tenants and move in once we sell.

Now that we’re planning to move in whether or not we sell the condo, we’ve had to plan more budget cuts:

  • We’re taking out a student loan for tuition on my husband’s last semester at college. We will try not to spend the money we’d saved up to pay for the semester, but that money will be available as a de facto emergency fund in case something comes up such as a medical emergency, large unavoidable expense with the new house, etc.
  • We cut back the money I had planned for buying new winter gear. We’ll make do with what we have and seek out used or cheap replacements for what we can’t do without.
  • We’re cutting personal spending money in half, and we also know the rest of the personal spending money is on the table as a potential future cut if needed.
  • Moving into the new place will actually cut our internet bill in half or even by three-quarters, an unintentional but welcome budget reduction.
  • We’re cutting the budget for birthday presents (early next year) in half.
  • We’re cutting our barbershop budget; some of us will be skipping the barber entirely or going less frequently.

If there are small expenses that crop up, we have a few more places that we can still cut:

  • More of our spending money.
  • Reducing the Xmas gift fund.
  • Netflix (not much of a savings but it’s something).
  • Carshare (we set aside money each month to use Hourcar and Car2Go).
  • CSA (farm share; we get a good amount of bang for our buck so it wouldn’t be a huge savings to buy at the store instead, but it would help some).
  • Reduce the grocery budget (we’re going to try not to spend all of it anyway so that we have more wiggle room).
  • Continue to cut out Roth IRA contributions (right now I have them scheduled to restart in December).

If we have large-scale unavoidable expenses, or don’t bring in our projected income for any reason, these are the ways we’ll have to cover them:

  • Use the money planned for a big Roth IRA catch-up contribution.
  • Use the money planned to pay off the last semester’s tuition, and carry the student loan for awhile instead.
  • Use the money we have earmarked for renovations on our UK property; if used, we’ll have to find money to replace it, or else take out a home equity loan in the UK to fund the renos.
  • Get a 0% interest, no-payments credit card (last last last resort).
  • Loan from family member (very very very last last last resort; would do anything to avoid but know that the option is there).

Now all of the above is just preparing for worst-case scenarios. We also have several positive money possibilities on the horizon:

  • Promotions and/or new job prospects that could bring in more money.
  • Year-end bonus probability.
  • A potential windfall that’s up in the air but not yet out of the picture.
  • Selling the condo sooner than expected or for a smaller loss than we’re predicting.

If any of these happens, we need to be strategic about the money. Smaller amounts of money should be used to make improvements on the new home according to highest priority. A larger windfall would be used to reduce our principal debt so our monthly payments would be smaller and our journey to debt-free shorter.

In the next post, I’ll share ideas I’ve been gathering for ways to save money by buying cheap or doing without. I’ve also been brainstorming lots of free activities to keep me occupied and keep any desire to shop or spend money at bay without feeling bored or deprived.


Image courtesy of gameanna via

Temporary parsimony: the prelude

Thank you thesaurus! A great word for thriftiness that I rarely see or think to use.

I’ve been on a bit of a hiatus with this blog, and the main reason is that I typically only blog here when I feel like I’ve figured something out and want to share what I’ve come up with. But basically since March, I haven’t felt at all sure of myself, so I don’t feel I have any valuable insights to impart. My wife has told me several times that I should go ahead and blog in the midst of it; that people would probably be able to still learn from my confusion. But I felt so muddled and insecure that I wasn’t sure where to begin.

Well, I feel we’re moving to a period of more certainty, so I’m ready to start blogging about my financial life again. And it’s a much different financial picture than I had even five months ago!

A number of things have happened since March:

– My wife came back from the London Book Fair with a clarity about her future: She didn’t want to be in publishing in England, and she didn’t want to be in publishing full-time at all anymore.

– We had been in a holding pattern for several years while we waited to see if there was a chance we could move to England or if we should make our permanent home here in the Twin Cities. So once this last possible avenue to the UK was closed off, our path was clear: Stay in Minneapolis.

– We had already been saving for a move/new home regardless, so we planned to keep doing that. But then we got another interesting piece of news that month: A large windfall might be headed my way soon. This would speed up our timeline considerably. (For the record, said windfall has yet to materialize, but it did cause us to take moving more seriously, and probably put us in more of a mindset to buy sooner than we otherwise would have.)

– For a long time we’d had it in the back of our heads that we’d love to get some sort of duplex or multifamily home for our next one. We had a friend in mind who we thought would be a perfect person to live with, and share pets, children and some living expenses with. We happened to bring this up to a couple of other friends, and they leapt on the idea. As our children’s godfathers, we could think of no better match for someone to share our home with.

– We began planning renovations on our current condo to get it in selling condition, and we also decided to check out the multifamily market in our desired neighborhoods to see if it was even feasible — if we could get the amount of space in the right neighborhood for the right price.

– The first day we set out with our real estate agent, the third home we found was eerily perfect for us. And unlike most of the other places we were seeing on the market, let alone what we’d seen that day.

– With some creative wrangling, months of stress,  a loan from our friends and a clear-out of our emergency fund, we were able to purchase said home in late July. The home cost much more than we expected, both in additional debt we took on and in monthly housing costs. This probably deserves its own entry at some point, but for now let’s just say the budget I foresaw when we made the initial offer was much different from the budget we ended up with when all was said and done.

– The duplex, purchased from an investor-type owner, already had tenants in the upper unit. We could kick them out with 45 days’ notice — but then we’d lose income that covered over half the new housing costs. We’d already promised the lower unit to our friends and they’d given notice at their old place, so they needed to be able to move in Sept. 1. We still hadn’t sold our condo, so we thought we should probably stay there and keep the upper unit rented.

– We found out that even if we sold our condo for what we owed on it (doubtful), we’d still end up at a loss because of realtor fees and other selling costs.

– I started to think that even if we did sell our condo, we would struggle with our budget once we kicked the tenants out and lost that income. I cast about for other possible solutions. I came up with two cheaper but much more disruptive options: renting an apartment for a short time, or squeezing with our friends into the small lower unit of the duplex.

– One element kept stressing me out: We had an FHA loan, so not moving in within 60 days and making the duplex our primary home would violate the requirements of the loan.

– Living in a staged condo and chasing after two preschoolers and a cat, trying to maintain a pristine appearance in the face of their natural chaos, was a strain on all of us. As was knowing we had a beautiful new home but not knowing when we’d actually be able to inhabit it.

– A final straw was finding out we need to have a change-of-ownership inspection and renewal of the rental license. The confusion of which unit(s) to get inspected, and figuring out how much of a story we’d have to maintain about not moving into the place despite the FHA rules, was overwhelming.

– We decided to go with the most expensive option of all, one I’d never seriously considered before. We decided to kick the tenants out and move in Oct. 1, regardless of whether we’d sold the condo, and to just carry two mortgages indefinitely if we had to.

– We had to do some wrangling and moving around of expenses, and planned a severely curtailed budget. Then the renters threw an unexpected but somewhat welcome curveball: They said they wanted to move at the end of August instead of the end of September.

– We did some more mental gymnastics and figured out a way we could afford that. It was even tighter, a much tighter budget than we’d had in years, and much much tighter than I thought I’d be comfortable with. But the lure of getting out of our staged condo and into our already beloved new home was greater than any worries about being on a shoestring budget.

– We told the renters they could move out early if they found a place. We’re still waiting to hear if they have, though a glance at Craigslist revealed that there are still lots of places available for a 9/1 move-in. So we think they will.

– That means we need to be completely disciplined, creative and tight-fisted with our money for at least the next five months. That definitely deserves its own entry, so I’ll save the details of what we plan to do for my next post.


Image courtesy of James Barker at