Everybody Loves Your Money

My daughter has been in swim lessons for a few weeks. Normally the routine is that my wife and daughter carpool with the neighbors (who have a daughter the same age) and I sit at home taking up space on the couch or surfing the web. For the last couple lessons, the neighbors were out of town and I didn’t want my wife to have to go alone so I tagged along.

On Monday we arrived at the swimming pool (Indoor). I wouldn’t even have to say that if you knew I lived in the Pacific Northwest. Anyway, we got there and hadn’t been sitting for more than a couple minutes when a nice lady sat down next to us. Her son was in the class and I have to say, she was quite a chatty lady. Somehow I always manage to steer the conversation towards personal finance or related subjects. Well, it didn’t take much before the woman started spilling her guts about the precarious situation she has found herself in. She and her husband have two kids ages 3 and 5. They purchased a brand new townhouse last year at the peak of the market. Now they are realizing the area that they bought in to doesn’t have good schools, in fact it actually has pretty miserable schools, and she would love to move. She’d also like to live in a house, although I’m not quite sure why they didn’t realize that before they bought the townhouse. The reality for them, though, is that they can’t move. The builder is now selling brand new units just like theirs for $40K less than they spent. On top of that, it turns out that the builder passed on the sewer connection fees of over $4,000 to each unit owner and the bill just came in the mail. Needless to say, she’s feeling trapped and not very happy. She’s coming to the realization that her only option is to go back to work. While she feels that’s an option that she has in her back pocket I have to wonder whether it really is. She mentioned that her background is in montessori teaching. To my knowledge, the pay scale for that type of job isn’t very good so the daycare costs could easily knock out the benefit of doing that.

This woman was the first person that I’ve talked to in our area that is actually upside down in her house. Listening to her, I found myself feeling really bad for her. The strain in her voice and desperation in her eyes told me that this was causing them a lot of hardship. All that being said, they aren’t at risk of losing their home. I can only imagine how much more stressful it would be to be facing bills you can’t afford to pay.

Are you in a position like this woman, or do you know someone who is? If so, what part of the country are you in? While we’ve been pretty sheltered from the imploding real estate market in the rest of the country, it’s pretty clear our number is also up. I guess it’s time to hunker down a bit.

I don’t care what side of the political spectrum you are on, you’d have to be completely under a rock and out of touch with the world not to realize we have some serious issues with our healthcare system. I find myself wondering what it’s going to take to make some forward progress on this issue.

From my point of view, I’m a financially savvy, solidly middle class household with a net worth higher than 90+ percent of people my age. In this situation you would think that would give me some level of peace of mind when it comes to finances. Frankly, I don’t have much.

If I was to get very sick and need significant medical attention, I could be faced with huge medical bills. Yes, my health insurance (that I have through my employer) would cover the majority of the costs after a deductible but only up to a maximum amount. What if I was in bad enough shape that I couldn’t work for an extended period of time and ultimately lost my status as an employee? I could lose the health insurance that my employer offers me and then burn through the assets that I do have.

What if everything goes peachy until I’m 55 and want to retire? I would be faced with a LARGE cost to insure myself until I hit medicare age and even then, benefits could be reduced so much that medicare doesn’t really cover all of my health costs. Then what? How long could I sustain myself on the assets that I’ve saved over my working career?

My point here is that you can do everything right. Save 20% of your income, invest aggressively, amass a sizable retirement, only to have it crushed by medical bills. Is this a good system? Isn’t there a better way? Would I rather be taxed heavily throughout my life to give me peace of mind later? I’m not sure. All I know is that unless you are a multimillionaire, your prospects for a relatively risk free retirement are not so good.

At age 36, by the time I get to retirement age I may very well not get the chance to receive social security because of the massive hole in the social security funds. It’s the same story with medicare. After having paid in to these programs all these years, I may get nothing in return. It’s like buying insurance only to be told when you need to make a claim that, “Sorry, we’ve decided we can’t afford to pay out your claim”. Frankly that kind of sucks.

So what can I do as a 36 year old, reasonably financially intelligent individual? Well, for starters, save like hell. That may be the answer for me since we are living comfortably below our income level and have a pretty high income level relative to a lot of people in the country, but for others that may not be enough. If you are making $30,000 a year, I don’t care what level of income you save, it’s probably not going to be high enough to “save” your way out of these risks unless you live in your parent’s basement and mooch off of them until you are 50. That doesn’t sound like a very rewarding life and I KNOW the ladies don’t dig a basement “playa”.

In the system we have today, it seems the only real option for people is to earn more money so that they can save more money. Unless we have a major overhaul of our health care system, government and economy, that really seems like the only option for people. That being said, there will always be a significant percentage of workers in our economy that won’t rise above the $30,000 a year hamster wheel. As a society, what do we do about those people? Should we just throw up our hands and say, “Wow. It sucks to be you!”? Is that okay morally?

I don’t pretend to even begin to have an answer for any of the questions I’ve asked here. I’m simply trying to point out that the system just doesn’t seem to be working very well. I hope I’ve conveyed that without any emotion or bias but I’m sure a bit leaked in to the keyboard.

And while we’re on the subject, Lazyman has a couple posts that talk about unhealthy people paying more for their insurance. Does this help the overall long term situation, or just make it worse for some?

I, like everyone else in the country (or at least it should be everyone else in the country), am doing my taxes now. I have been dreading doing my taxes because I pretty much knew I’d be on the hook to pay in this year. Well, I was right. After running all of the calculations it comes down to a balance of a little over $1000 that I need to pay in to the IRS. I was looking at a decent refund until I entered in my side income for the year. I pretty much knew that would happen so I started taking out additional money from my paycheck towards the end of last year to compensate. Unfortunately I didn’t start that soon enough.

This morning my wife called me on her way to work and said, “Hey honey. Can we donate money before April 15th and deduct that from our taxes?” I told her that I didn’t think you could do that and then it hit me. Why in the world aren’t we just contributing to an IRA for my wife to lower our overall income level for 2007? She has been working in a contract position all year which didn’t offer any sort of retirement plan. I had been thinking that it was just an unfortunate “bummer” for her being in a contract position. For some reason it never occurred to me that we should just contribute funds to an IRA for her outside of her company. Frankly, I think it’s pretty pathetic that I didn’t think about this considering the fact that I run a personal finance blog and spend a lot of time on my fellow PF blogger sites.

Anyway, I’m doing the research now to figure out how to go about putting a chunk of money in to an existing IRA that my wife has at our credit union. We rolled her 401k money over from an old job a couple years ago and since it wasn’t very much money, we have just let it sit there. With this contribution, we’ll eventually move it out of the lower yield account and in to a brokerage account that is IRA qualified.

After making this contribution it will change our tax return from owing over $1000 to getting $12 back. I tried to zero it out completely but Turbotax wouldn’t let me. I’m assuming that the tax tables just don’t work down to that level. (In other words, since they go in ranges, I can’t get to zero)

So, instead of having to dig up a little over $1000 to pay in taxes, I’m now going to pay our future selves about $3500!

(Update: I’m still trying to figure this out. My wife has said all along that she wasn’t eligible for her plan and box 13 on her W2 does not have a check for retirement plan but she called HR and they said she can contribute now. So, I’m just trying to do all of my due diligence before I invest in an IRA for her. If anyone has any advice, please leave a comment. And no, I won’t hold you liable for any bad advice….

Yes, it’s another day of the year that was created with the sole intention of getting in your wallet. All over the country today people will be busily rushing from store to store looking for that perfect gift for the one they love. Chocolate, cards, stuffed animals, yep they all help tell the one you love how important they are to you…… unless you live at our house.

Years and years ago we agreed that getting caught up in the Valentine’s trap wasn’t something that we wanted to do. We always take the time to do something special for each other but we don’t empty our bank account trying to show how much we love each other. It turns out that there are 365 days in the year that you can show your love to your significant other, which is what we try to do.

So what is Valentine’s day like at our house? Well, I got up early this morning and made tea and breakfast for my wife and brought it to her in bed. She was thrilled! She is British and she does love her tea. In her mind, tea in bed is 10 times better than tea at the breakfast table, so she was all smiles. I’ll end the day with a nice card for my wife and another for my 4 year old daughter and will have dinner ready for them when they walk in the door. It really is the simple things in life.

Here’s an article from the “What were you thinking”? department:

http://cbs5.com/local/auto.loan.defaults.2.645976.html

Vivian Snyder bought a $100,000 BMW convertible with only $2500 per month in disability income. Somehow her income got stated as $8600 per month so that she would qualify for the lease. She definitely bears most of the responsibility for putting her entire retirement savings in the pot as her down payment and also should bear a lot of the responsibility for signing a document with the wrong income stated on it. I have to wonder how sleazy the car dealer was, though, because it sure appears that they altered the income after the fact to make sure she’d qualify.

You can read people’s comments on Fatwallet here:

http://www.fatwallet.com/forums/messageview.php?catid=52&threadid=807688&start=80

Up next is:

This man put up a post on Fatwallet asking for help on how to help his father who just inherited $1 million dollars from his grandfather. Nothing too special here, although I have to wonder how someone with over $100K a year in income has $30K in credit card debt. On the surface, it appears that they might be at risk of burning through the funds fairly rapidly. Interesting comments from people though. This is a subject I’ve thought a lot about as I try to help my mother come up with a financial situation that will help her live a comfortable life once she stops working in a few years. My thought is to invest the money in secure investments that will yield a reasonable 4-5% return to supplement her social security. Have you thought much about how to help your parents navigate their financial future?

http://www.fatwallet.com/forums/messageview.php?catid=52&threadid=807553&start=20

Personal Finance alongside Celebrity news?

I’m not real sure what’s going on with “The Street” but they launched a site called mainstreet.com which is supposed to be a combination of celebrity, politics, fashion or just plain fun and personal finance. Huh?? Here is their summary:

“MainStreet launched in February 2008 with a simple mission: To present news stories in which life and money intersect. Every article – whether it’s a cautionary celebrity tale, a rags to riches story, politics, fashion or just plain fun – will have a secondary focus on improving your personal finances. Updated throughout the day, MainStreet delivers national and international news that impacts your life decisions, your pocketbooks, and your future.”

http://www.mainstreet.com/

It’s tag line is “Where life and money intersect”. Uhh okay. Tag line sounds okay but when I look through the site, I struggle with their concept. How can I seriously consider reading a site for personal finance information when there is a glaring face of Amy Winehouse or Britney Spears looking back at me. Maybe I’m missing something, but it just doesn’t make sense.

I, like many other people in the US, got a new insurance card on January 1st. Back in the November/December time frame I had to choose a new health plan as my company continues to tweak their offerings to try to hold costs down. I moved to the plan that didn’t require any monthly payments and from what I could see seemed to be the lesser of evils in the plan offerings.

Well, now I know how it’s going to impact me. I received my first health care “explanation of benefits” and was surprised to see that I’m on the hook for the first $600 of health care expenses this year. Ugh. (I guess I forgot about this fact from December) So the same shots I got in December (allergy shots) now cost me $24.00. Luckily I’m on the 1 shot per month, but it’s still going to make me whine each time the bill comes. I’m also expecting to start receiving bills from my daughter’s and wife’s doctors.

I know I still have it pretty good compared to many other people but I guess it’s always hard to accept the fact that I lost a portion of my benefits now that I’m on the new health care plan. I’ll definitely need to start budgeting the added $600 in costs to our budget. I’m also going to look in to a health savings account so that I can use pretax dollars to cover these things. In the past, I never really needed to worry about it. I know national health care isn’t the fix all, but there has to be a way for every citizen to have health care and not go broke. To be clear, we are far from being broke from a $600 annual increase but I’m mostly thinking of all the horror stories I’ve read about where people are losing their homes due to massive medical bills.

So, that’s my whine for the day. Relatively speaking, I guess it looks pretty pathetic for me to be upset about a small increase in costs. I should probably just be grateful that we have insurance to begin with.

Ahhh. Life is good. You know how I’ve talked about my fetish for electronics? Well, there is really no way around it. I love gadgets. I wish I could buy every new gadget that comes out but we all know that isn’t possible or even remotely intelligent.

So, why is life good? My company bought me a new cel phone. It’s a million times sexier than the free ones I buy for personal use, that’s for sure. With my new cel phone, I can text, take 2.0 megapixel photos, surf the web, use a bluetooth headset, sync it to my computer and just drool at the coolness factor I’m holding in my hand. I wonder if people will notice me now? Just kidding.

I have to admit, I’m really enjoying the new phone. The hardest part is going to be just using it for work. I’d love to use it all the time, but I can’t run up the bill on this thing, of course.

I think what I’m finding most enjoyable about this thing is that I get to go through the new gadget euphoria (that is sure to burn off quite quickly like it always does) but not pay for the privelege. The fact of the matter is, I needed a new work phone and this just happened to be one of the choices I could make. Good times. Good times.

We spent the weekend installing flooring at the lake house. My knees, back, feet and just about every other part of my body are very sore. The floor is looking great and when I calculate out what it’s costing me to put it in, my wallet is looking even better. I was able to buy the Harmonics flooring from Costco. I did some comparison shopping and found that Costco, by far, had the best deal. To top it off, they have a coupon coming out in March which will give me another $5 off per case. That’s going to add up to $200 back to me. I talked to the manager and asked him if they would refund the difference once the coupon does come out and he said, “no problem”. Just one more reason that I love Costco. After the coupons are applied, my total cost per square foot is going to be $1.39. You just can’t beat that for the level of quality.

To switch gears a bit, I’m still finding myself wondering what our economy is going to do. There is no question I’ve lost some confidence in it. Every time I spend any money I think to myself, “Is this money that I should be putting away for the days ahead? Am I going to need this money if the economy starts really getting ugly?”. We are starting to save a bit more money than we were before. I also realized that this month is a three payday month. Along with my annual bonus, that should give our emergency fund a big lift. As that account goes up, I find my financial anxiety goes down so I’m looking forward to socking a bit more away!