Everybody Loves Your Money

I think I’ve mentioned this in the past, but the first quarter of the year is one of my favorite times of year, simply for the financial benefits. In the first quarter of the year I get:

-My annual bonus
-My annual raise
-Our tax return

From a financial point of view, it’s usually pretty good. I found out today that everyone gets a bonus equal to 3 extra weeks of pay. That’s going to come in handy. We are just about finished with our lake house and that money will take us all the way through to completion. We have just about arrived at the point I’ve been looking forward to since we started this project. (construction complete and lots of extra income each month).

Once it’s done, we’ll have a ton of extra income every month because we won’t be paying for all the construction materials. The first order of business will be to start building our emergency fund back up significantly. We’ve kept a reasonable buffer in savings but not nearly as much as we used to. It will be nice to see that balance go back up to what it used to be.

The second thing we’ll do is start putting more than the $150 per month away in my daughter’s 529 plan. It’s a great time to increase the contributions since the market is down some. I’m always happy to buy in to the market when it isn’t at it’s peak.

The third thing we’ll do is to roll my raise in to an increase in 401k contributions. Since we started on the lake house I have only been contributing 8% of my income to the 401K. It had to be 8% so that I didn’t miss any of the company match! Now I’ll be able to put 12 to 13% of my income towards the 401k. (or whatever gets me to the annual maximum per the IRS)

It’s been very challenging to see our balances increasing slower than they used to while we’ve been working on the second house. Psychologically I’ve felt like I’ve let my “future self” down a bit. I have to remind myself that by building the second place we are “living for today” and still meeting our goals for tomorrow. The equity we’ve built in the second house has more than covered the reduced contributions to our retirement accounts, that’s for sure.

I know I vented a bit in the last post about the piss poor shape our economy seems to be heading towards. With the fed lowering interest rates yet again, I’m seriously considering refinancing. If I can get a 30 year fixed for under 5%, I may consider it. What I don’t want to do is pay a bunch of points to get it. Zero points with a rate under 5% would be just peachy. I guess we’ll wait and see.

The lower rate also seems to be good news for all those people that bought adjustable rate mortgages. Hopefully this will give them some relief. If they’re smart, they’ll take the difference and start building their own emergency fund. Maybe they’ll even be able to refinance in to a fixed rate mortgage so that they aren’t at the mercy of the rate fluctuations!

Unless you’ve been living under a rock, you’ve undoubtedly heard about the proposed tax rebate that our fearless leaders in Washington have been working on. Is this really a good thing for our economy/country?

Everything I’ve been reading says that the benefit is negotiable at best. I’ve read articles that say that many of the people receiving the rebates would simply save it. That doesn’t exactly help us spend our way out of a recession. With the size of our economy, it’s easy to see how $150 billion would only be a drop in the bucket. To me, it seems like we are simply throwing a cup of water on a house fire.

So why are our politicians, both Democrats and Republicans, putting so much effort in to this initiative? If you were a politician, would you want to be the lone voice saying, “Don’t give them any money back. We need it!”? Yeah, I don’t think so either. Our politicians are all sissys that spend a significant amount of their time worrying about what the public will think of them. I guess we can’t blame them. Our system of government pretty much mandates that they do this if they want to keep getting a paycheck in Washington DC. Giving money back to people would surely help shape people’s perspectives, right? Not me.

The dollar is at all time lows against currencies around the world. Why is this? Well, the fact that we spend billions and billions more than we bring in, doesn’t help. The sheer amount of debt that our people have and our government has is clearly a significant reason for the lagging dollar. I guess you could take the alternate view and say, “Shoot. What’s another $150 billion?” With the amount of debt we have, what difference does it make? My simple mind says it all matters.

Spend some time wandering around the personal finance blog world and, rather than taking the advice personally, take all that advice on behalf of the government. Countless posts out there talk about spending less than you earn. If that’s such great advice for people, how come it doesn’t count towards a government with nearly $10 trillion dollars in debt? Save a little money for a rainy day? Our government is so far away from having an emergency fund, it’s ridiculous. Wait, I take that back. It’s just that our emergency fund speaks Chinese, or Japanese, Or Arabic. How is it that the supposed most powerful nation in the world owes so much money to many smaller countries? Is that good fiscal policy for the long run? At what point does Rome fall here? At some point in the future, our country loses it’s definition as the most powerful country in the world based on our economy. Is it at that point that we wield our influence purely by military force? That’s scary.

As you can tell, I don’t have warm fuzzy feelings about how we are doing financially as a country. I readily admit that I worry about our long term viability. I’ve often thought, what should I do? Yeah, I’m keeping a portion of my assets in cash these days, but they are in American dollars. I’ve got money spread around in some international funds, but I’m not sure how much that will do for me. If it really gets bad, all my money won’t help all of the people around me and the gated communities can only keep so many people out when it truly reaches the bottom.

What do you think? Am I nuts here? Can we just go on forever spending money that we don’t have? Is it simply that the laws of finance don’t apply to a huge economy and country like the U.S.? That brings me to my original question and the title of this post. At what point do we have to lie in our bed? When do we face the financial day of reckoning? What day do we sit down, rip up our country’s credit cards and actually build a budget that we will stick to? Is it time for the US Government to participate on the next Oprah’s Debt Diet?

I finally found one. A WII, that is. I’ve been wanting to buy a Nintendo WII for quite awhile but haven’t been able to find one. Today I went to a grand opening of a Fred Meyer store and got there just in time to get the last one. I hadn’t intended on going there but heard they were having a grand opening while I was sitting in the barber chair this morning and decided to drop by on the way home.

This thing is incredibly fun. The graphics don’t compare with an Xbox or a Sony PS3, but they don’t need to. Swinging that controller around and seeing my wife and daughter participate and have a good time makes it money well spent. We anticipate having many, many hours of good times with it. I already strained my back getting a little carried away with the controller today. I’ll have to remember to move a little less in the future.

On a completely separate note, I find myself watching interest rates a lot more these days. We have a mortgage at 5.75%. The most recent rates I’m seeing have a 30 year fixed down around the 5.15 or so mark. If they get much lower, I may have to consider refinancing. Since we borrowed a little money on a HELOC to buy the lake house property, I wouldn’t mind rolling that in to our main mortgage at a better rate (It’s currently 6.49) and lowering the rate on my main mortgage as well. This is the only debt we have and if we could get it all under 5%, it would be outstanding. We’ll have a lower payment in case we ever have a financial hardship and can pay more than the principal on it while times are good (or should I say normal). I’m sure I’ll be posting about that in the future if rates continue getting more attractive.

And speaking of attractive mortgage rates and real estate. Did you see Jonathon @ Mymoneyblog is closing on a house? He’s got a bunch of posts over there as he has researched the process. If you are thinking of buying, his posts are well worth your time. Check them out!

http://thinksimplenow.com/clarity/the-simple-life

What can I say? This article nails it. I think about this often. Instead of trying to always have the latest and greatest, I know I need to focus on appreciating what I do have. Once you acquire something, you then have to care and feed it. It takes up space, you want to protect it, you begin to put your valuable time towards all these different things you have instead of where you might find more contentment. (Family, activities etc).

Anyway, it’s a great article that talks about simplicity. Well worth reading.

Last night my wife, daughter and I headed out to Costco to buy a queen size bed for the lake house. We didn’t do any comparison shopping to find the best deal on the bed because we previously needed a queen size bed (for the house) and found Costco to have the best price for the quality mattress they are selling. When we got there I headed to the back of the warehouse and looked for the mattresses in the “normal” spot. They used to be back towards the back, off to one side, but I noticed they weren’t there. As I looked around further for them, I realized that they were stacked in the middle of the store in a MUCH larger quantity than they normally had in stock. I would guess they had 10 times more queen size mattresses than normal.

About that time a Costco worker walked by. I stopped him and asked him if he knew whether there would be a coupon coming out shortly. I thought maybe that would explain the unusually large number of mattresses there. I didn’t want to buy a new mattress, only to have it go on sale a month later. He informed me that he didn’t think so and that they always had that many mattresses in stock. Okay. Since I KNEW they didn’t normally stock that quantity, I opted to smile and say thanks and continued on my way. I wasn’t done yet. The fact that he was so clearly not “in the know” told me to hit the customer service counter on the way out.

We pulled the mattresses up to the cashier and paid. As we headed out the door, I asked my wife to go over to the customer service counter and ask for a coupon book. Costco puts out a coupon book every now and then and I wanted to be sure that if there was a coupon for the bed, that we knew about it so that we could come back and get a refund for the difference. I’ve seen the bed in there before so I knew it wasn’t terribly unlikely that it might be in there again. Sure enough, there was a $100 off coupon for the mattress that starts next Monday. SCORE!

We clipped the coupon and stapled it to the receipt and have placed it in the kitchen where we can’t miss it. On the way home from work next week, I’ll run by there and get the difference refunded. Like I said, it’s always a good idea to keep your eye out for potential savings. $100 is $100. I’m happy to keep it in my wallet.

It’s Saturday morning and I’m finding myself sitting in my home office relaxing. It has been so long since we’ve just taken a weekend at home to relax that I have to admit, it’s kind of nice. Normally, I’d already be out working on the lake house, but we are getting so close on that, I decided to just take it easy this weekend. The other nice part about not going out there is that we aren’t spending gobs of money on building supplies this weekend. My wallet and bank account appreciate it.

I keep finding myself thinking about the future value of the money I have today. Nickel has a post about quick and dirty financial equations. While I knew about the Rule of 72, I hadn’t seen the easy way of figuring out what current money is worth at retirement age. Basically, you just have to add a zero to the sum that you are spending and that’s about what you are giving up in retirement. So, as an example, if I buy the Nintendo WII that I really want, I’d have to spend $250. Add a zero to that and I’m looking at a reduction of $2500 to my retirement. This rule assumes you have 30 years left before you retire and you earn a conservative 8%. If you do better than 8% in the next 30 years, you are losing even more. YIKES.

I absolutely love stumbling on to a new and simple tool like that because it truly sticks with me. I’m finding myself questioning all kinds of purchases by simply putting a zero on the end of it. The new laptop I just recently bought? Yeah, I robbed myself of $7000 in retirement. Uggghhh. Heck, even that nice cut of meat that we bought last night took a $200 bite out of retirement…… You get the drift. Of course, I don’t want to be the person that robs myself of today’s opportunities and enjoyment either, which is why I’m not collecting cans all day long and living on Top Ramen. It’s all about moderation, but I have to admit, this simple little tool is already altering my behavior slightly.

Now, if you’ll excuse me, I’m off to the store to spend money.

Well, our lake house is nearly complete. I hope to get a final inspection in the next few weeks. This is exciting for a number of reasons. 1) We will finally get to use the place. We’ve been working on it for so long, it almost seems weird to actually sleep there. 2) We can finally stop spending so much money on the place. I’m really looking forward to not having $3000 and $4000 Visa bills at the end of the month. Since we refuse to carry a balance on the cards, it’s quite a “sting” to pay the balance every month. Luckily we are fortunate enough to be able to pay it off each month. Once those big bills are a thing of the past, we can finally start aggressively saving like we were before. We pulled back on our saving a bit when we started this project (although we still made sure to fund our 401k and 529 plans).

Another expensive milestone is also behind us. Christmas is always a hit to the wallet around here, although we are mild in comparison to most people. We spent a total of about $600 this year. That’s actually a fair amount for us. (That doesn’t include items for the lake house etc..) It’s just good to have a few months of low key spending ahead of us. I’m a big fan of this time of year. You can start to see Spring around the corner and it’s also the time of year for annual bonuses, raises and tax returns. While we may not get much back in taxes, we definitely should see a bonus and I know I’m getting a raise. All in all, we should see our financial picture change a bit by April.

Anyway, I just wanted to check in. I know the posting has been a little light for awhile. I fully expect to post more often once we get a few more things done on the lake house.

Ugggh. It’s the first breakdown we’ve experienced since we made the commitment to drive older cars and not upgrade every time we get a wild hair up our xxx. Last Thursday my wife called me on her way to work to say that many of the lights on the dashboard were stuck on and the car was making a funny noise. Luckily this happened about 50 yards from her “work” parking lot so she was able to get it parked. I was off last week so I loaded up my 4 year old daughter and drove down to take a look at the car.

When I got there I found that indeed some of the lights on the dashboard were on continually with the car running but the light I noticed most was the battery light. From my many years of working in my family’s auto parts store when I was younger I knew that the most likely suspect was the alternator. The alternator generates electricity to charge the battery when the car is running. The only thing that threw me for a bit of a curve was the fact that other lights on the dashboard were also on (like the door “ajar” indicators for all the doors etc). That made me worry that it could have possibly been an electrical short or something else.

I called AAA and had them send a tow truck (I love it when that pays off). While I was waiting for the tow truck, a AAA technician showed up to see what the problem might be. He used a multimeter and tested the output of the alternator. It was only showing 12 volts which was a pretty good indicator that the alternator was toast. The tow truck showed up and hauled the car down to the closest Honda dealer. Yes, I dread getting my car serviced at a factory dealership because the prices tend to be higher than other repair shops but I do like the quality of the parts and labor that they have so that’s where I took it. The one error was that I should have had them tow it to the dealership we bought it from way back in 2000.

My daughter and I followed the tow truck to the dealership and once the car was unloaded, we went in to speak with the service dept. They said they’d diagnose the issue and give me a call. At about 2:00 they called to say that it was the alternator and I would need to pay for the $95 diagnosis. When we dropped it off he had said that if it was something easy like the alternator, I could expect a $47 diagnosis charge. When he called at 2:00 he also said that the cost would be $620 for the repair, plus the diagnosis. I said, “Are you kidding me?”. He assured me he was not so I told him not to do any further work and I’d call him back. I then called another Honda dealer and asked for a quote to have the alternator replaced. Their quote was a full $240 cheaper. I wrote down the part number of the generator they were going to sell me and called back the dealership that had my car. The conversation went like this”

Me: “Hi John, You are killing me.”
John: “Uhh, what do you mean?”
Me: “How is it that you are a full $240 more expensive than the other local Honda dealer? It’s the same parts and they quoted me less labor to install it as well. It appears that I’m single handedly paying for your dealership remodel” (Their dealership is all torn up and is being remodeled right now)
John: “Which dealership was that?”
Me: “XXX Honda that’s about 10 miles from your place. Here is the part number as well”
John: “Let me talk to my manager and I’ll call you back”
Me: “Okay, call me back”

About 30 minutes later he called me back to say that he had called the dealership and their price was about the same. I said, “You need to call them again. I guarantee that they quoted me this price and I’ll drive the car down there if it comes to that.” Finally, he called me back and said that they would do the work for the same price. Amazing. Had I not “called” them on their quote and checked with their competitor, I would have had to pay over $240 more for the same work. Ridiculous really. As I was sitting in the service lobby, I could hear other service writers telling people how much they charged for various repairs and I was convinced that they were marking up their service much higher than they should have.

Needless to say, I won’t be going back again. We picked up the car and it’s functioning properly again. I’m hoping that it is truly fixed and we don’t experience any recurring problems with it. Uggh. In the future, I’ll go to the dealership that was straight with me from the start. I should have my head examined for not going there this time.

On a completely separate note, I hope you have a Happy New Year!!!! We finished the kitchen and bathroom at our lake house so we are very close to getting the final inspection. I CAN’T WAIT!!