Everybody Loves Your Money

February was a quick month, as it always is.  Normally I’d expect it would be an average or below average month for income.  This February turned out to be one of our higher income months and it wasn’t even a “3 paycheck” month for us.

A combination of factors helped boost our income this month and helped us add a solid $5500 to our savings account in February.  The first factor was the blog.  There were a few renewals as well as some new business.  I book the entire prepaid amount for advertising in the month that I receive payment (as opposed to averaging it across the subscription period), so I saw a bit of a spike in the blog income in February.

The second contributor was my annual bonus at work.  It wasn’t as large as it has been in the past but it was better than zero and definitely helped increase our income for the month.

Along with the extra income, we also locked down our spending more than we have in quite awhile.  As I reviewed our Mint.com spending summary for February I was happy to see that we only exceeded our budgeted spending by a few hundred dollars.  That’s mostly my fault because I bought a new audio receiver from Newegg.com that was ridiculously priced (low).  No regrets.  The other area that we were over budget on was our food/dining.  Not a big surprise.  We usually overrun this, although we are trying to do better at it.

Needless to say, I’m happy with how the month turned out from a budget perspective.  I’m also fairly optimistic about the rest of the year as we don’t anticipate any major expenses this year.  Luckily most of the big expenses are out of the way for the foreseeable future.  We shouldn’t need a car for the next 5+ years, we have a new roof and new siding on the house, and the lake house construction is basically complete.  Sure, we could probably come up with a few ideas on how to blow a bunch of money, but the overall theme at our house this year is going to be SAVING!  If we are able to control our spending we should be able to double our savings through 2010.  With the potential instability with my employment next year, frankly, the more we save, the better.

It’s been a tough week.  There’s really no other way to put it.  Layoffs at work have hit closer to home than they ever have before and the overall mood in the office is absolutely horrible.  Since last Friday I’ve been slowly hearing about many friends and really good employees that have been given their layoff slips.  Why?  Because the company has decided to try to outsource as much as they can to improve the bottom line.  Did they have to?  No.  We showed a very good profit last quarter and I believe we’ll continue to see very good returns.  I definitely feel a bit bitter about the whole situation and am really kind of mad at my company right now, and I didn’t even get a layoff notice!  Okay, enough about that.

I read an article today that talks about a recent Slate commentary from Charlie Munger titled “Basically, It’s Over”.  If you aren’t familiar with Charlie Munger, he’s been the sidekick of Warren Buffet for decades and I consider him to be pretty damn smart.  While you can always find gloom and doom articles out there about the end of America etc etc, I’ve always been impressed with both Warren Buffet and Charlie Munger.  They have always seemed incredibly honest and they have a great way of putting things.  So, when I read the article, I have to admit, it put a bit of fear in me.  I’ve often wondered how long we can sustain the massive debt levels that we’ve seen over the last decade (and beyond).  There is not a limitless supply of money or resources in this world and sooner or later all the excess spending at the government and personal level is going to come back to haunt us.  It appears that it might be sooner than later.  I found the comments about “blind optimism” to be very interesting.  While I haven’t studied history as much as I should have, I do know that we’ve seen many societies rise and fall.  It’s fairly likely that eventually the US will fall from world dominance and now seems like as good a time as any.  With trillion dollar deficit spending, the rise of a global economy and educated global workforce, rising unemployment and consumer debt levels that have never been seen before, it’s not a tough case to make for a rather gloomy future.

On the plus side, I just saved a ton of money on my car insurance……

Anyway, go check out the Yahoo article and the original Charlie Munger article as well.  Definitely worth reading.

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Previously I mentioned that we were working to get our daughter registered as a UK citizen.  She is eligible for British citizenship because my wife was born in England, although she lives in the US now and is also a US citizen.

As we thought about it a bit, we realized that we’d be foolish not to register our daughter as a UK citizen.  While she is automatically a “UK citizen by descent”, it makes sense for us to get her officially recognized so that she’ll be able to freely move in and out of the country and work there if she chooses.  It also gives her access to UK healthcare which might come in handy some day if we happen to be there visiting, or if we lose our insurance here in the US and she is in need of care we can’t afford.

We have also been contemplating moving to the UK when we retire.  My wife would love to live back in the UK.  She spent summers there when she was growing up and obviously feels a strong connection to the country.  When we first started talking about this we thought we’d discovered an incredible option for our retirement that would let us live comfortably and have free health care.  (I would have to wait three years to become a UK citizen to qualify for the healthcare but that’s not a big deal).  As we put more thought in to it, it became clear that our plan wasn’t as great as it first appeared.  While we would ultimately have universal health coverage over there, it definitely wouldn’t be free.  It hadn’t initially occurred to us that we’d really end up paying for this healthcare through much higher taxes to our pension, investments and social security income.  Our assumption is that it would probably end up being more expensive than just staying in the US and buying private health insurance.  Once we hit medicare age (assuming it still exists), we’d almost definitely be better off staying in the US.

The one situation that it still might be a good idea to move to the UK is if we end up having very little money because I invested all of our money in a fool proof pyramid scheme or finally fell victim to a “hard luck” story from Nigeria.  In that case, if we were low income and wouldn’t be showing much income, we might be better off moving to the UK.  We would face very little taxes and would have access to the social benefits that the UK offers.

Who knows what will happen in the next 20 years before we retire.  It’s likely that we’ll retire here and spend time in Arizona or somewhere else warm in the winters but just having the additional options makes us feel fortunate.

My wife, Kate, was born in England and moved here when she was five with her parents.  She became a US citizen many years later and now has dual citizenship in the US and in the UK.  It never occurred to me that there could be any benefit to having citizenship in two countries until Kate flew to England a few years ago to visit her family.  I was back at home working when I got the call from England.  Kate was having stomach cramps and she was planning on going to the doctor.  My first thought was, “Oh no.  I hope she’s okay” and then, “Oh crap, this is going to be an insurance nightmare!”.

After a couple hours of worrying about Kate, she called to say that she was back from the doctor and everything was okay.  The doctor had prescribed some medicine for her and she had already taken the first ones and was starting to feel better.  As I let out a sigh of relief Kate said, “Oh and the best part is that there is no charge!”.  I said, “What??  How can that be?”  It never occurred to me that, in England’s eyes, she is a citizen and is eligible for government health care.  I can’t tell you how relieved I was that Kate was okay and that there would be no 2 hour phone calls arguing about how my health care provider in the states should help cover the cost of the care.

A few years later we became parents to a wonderful little girl.  When she turned 6 I happened to wonder whether she had any rights to citizenship in the UK since she was born to a UK citizen (even though we live here in the US).  After a couple hours of Googling and reading way more than I cared to, it became clear that, indeed our daughter IS a UK citizen.  They consider her a “UK citizen by descent”.  This means that she is a UK citizen but that if she was to have children when she’s older they wouldn’t have automatic rights to UK citizenship (unless of course she was living in England at the time).

We are now in the process of gathering birth certificates, marriage licenses and passports so that we can get our daughter officially registered as a UK citizen.  While it isn’t necessary for us to do this right now, by doing it now, we will save her the grief of trying to find these documents if she ever decided to move to England and had to prove her citizenship.

So, what’s the big deal of getting our daughter documented as a UK citizen?  Well, the first one that comes to mind is it gives her the freedom to move to England if she chooses to later in life and will give her unrestricted access to employment there.  The second reason is that she would always have England as backup healthcare if we were to ever lose our coverage in the states.  Believe me, if my daughter was to get sick enough to require significant care and we didn’t have health insurance, I’d be more than happy to fly her over the pond to England for treatment.  While this isn’t very likely, it’s just one more option for her.

So, those are a couple of the reasons that we are following through with getting her registered as a British citizen.  Are you aware of any others?

This week is a really tough week at work.  People at all levels of the company are getting laid off so there is a lot of “staring at the ground” going on as people deal with the prospect of losing their income.  While this has happened many times before at my large company, it’s hitting closer to home than it ever has before.  I’m seeing good friends getting their notices and I know that many more are coming later in the week.  I keep wondering how many of these people have prepared for a layoff.  It’s times like these that I like to go through my mental list of things I should be doing in case I am faced with the same situation.  (I’ve been told that I’m not at risk and should be able to keep my job so I’m breathing relatively easy for now).

Am I saving enough?

It’s a thought I have often.  We are saving well over 20% of our before tax income in our retirement accounts and are trying to build our emergency fund up higher, although I will confess I’ve slipped up on that goal more than a few times.  The good news is that we do have at least 6 months of income saved up and it’s easily accessible.  When you combine that with the safety nets that the local/federal government provide (unemployment benefits), our emergency fund should last us more than a year.  On top of that, the most likely scenario is that one of us would still be working.  In that case, we could go for years without my income because we have kept our fixed expenses very low.

Is my resume current?

I haven’t done a very good job of keeping up my resume, but with a few minutes of work, I think I could have it tuned up and ready to send out.  I’ve also kept up my contacts at previous companies and try to maintain a large network of contacts that I would certainly get in touch with if I found myself looking for work.  The most likely way that I would find a new job is through referrals and connections.  Blindly sending out a resume in this environment would likely not yield any results so my personal network is as important as ever.

Am I doing all I can to be valuable at work?

I’m definitely reevaluating my role at work and am going the extra mile to make sure things are done right and done quickly.  I’m also keeping in touch with my boss to be sure I’m doing all that’s needed.  I actually just met with him yesterday to lay out performance goals for the year and then we had lunch afterward.  My sense is that I’m still considered a valuable member of the team and would be one of the last to go if layoffs were to happen in our group.  I’ll continue to watch my performance and volunteer for extra work.  By doing this, it will help me gain even more visibility with my management chain and hopefully reinforce that I’m one of the key players on the team.

Are we keeping our bills to a minimum?

I’m still religiously watching our fixed monthly expenses so I know we are doing all we can to keep our bills low.  Our total fixed bills for things like mortgage, utilities, gas, food etc are still floating around 50% of our after tax income.  If we were to lose our jobs, we could probably reduce that another 5-7% by really locking down spending and getting rid of expenses like Netflix, cable and a couple other “extra” expenses that we have now.

All in all, I think we are doing all we can to prepare for the day that we might be faced with a layoff.  By spending far less than we make, and saving some of our monthly excess income, it is providing us with a level of security to weather most any storm.  If we hadn’t been doing this for so long, I think we’d be much more stressed out about potentially losing our jobs, that’s for sure.

There’s a storm brewing that’s going to rain on Verizon and give you unlimited amounts of sunshine.  Skype is now going to be available on a number of Verizon’s smart phones.

This is good news for consumers like us.  Whether the wireless carriers like it or not, the momentum is shifting in our favor.  I think our wireless experience is going to come down to cost/coverage in the very near future.  You’ll be able to get unlimited data plans and the days of taxing you to death with texting plans and calling plans will finally be behind us.

The savvy wireless phone users will realize it’s very much to their advantage to shift their phone numbers to calling services like Skype or Google Voice so that you will be able to freely move from one wireless carrier to another based on price and coverage alone.  I’d liken it to your ability to switch DSL/Cable providers to get the best price every year.

I think it’s high time that the wireless carriers lose their leverage over their customers.  I think we’ve overpaid for mediocre service for a long time.  I’m excited to think that we can shift these carriers to being “dumb pipes” so that we simply use them for the connection.  No longer will we have to settle for crappy phones with crappy services.  With phones like the Nexus One and the Iphone (and the hundreds that are coming down the pike) we’ll be able to slowly forget what carrier we are even using, except for the data bill that shows up each month.

Of course I’m exaggerating a little bit because I think we all know that the carriers aren’t going to be marginalized that easily, but I think the writing is on the wall.  The tides are shifting in our favor and it’s just a matter of how long it takes to be complete!

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According to multiple outlets, Heather Mills, ex-wife of Paul McCartney, has managed to burn through $54.5 million dollars in less than two years.  Heather received the funds in her divorce from McCartney in 2008.

Heather claims that plenty of the money was given to charities or “ethical businesses” and she also paid for a couple properties for her daughter.

Just to put this in perspective.  In order to go through that much money she’d have to have a burn rate of $2.27 million dollars a MONTH.

Unfortunately Heather didn’t take time out of her busy schedule to peruse the multitude of personal finance blogs out here.  Had she done that, she might have realized how she could have made that initial money work for her so that she’d have a lasting legacy and fund her “causes” indefinitely.

Imagine if she’d invested those funds to generate annual income that she could have used for her charity causes, supported her daughter indefinitely etc.  This seems very similar to the fate of lottery winners who get a large sum of money and then use it like an unlimited bank account, only to have regrets when it’s all gone.

Let’s just do some simple math and see what she could have done.

$54.5 million invested very conservatively could have easily yielded 4%.  That equates to $2,180,000 each year, or $181,000 a month.  That’s without eating in to the principal.  So unfortunate……

If you are craving a burger and fries from Denny’s (Not sure if that’s possible), you can get a free burger and fries if you are one of the first 500,000 people to sign up for their Rewards program.  You’ll also be entered for a chance to win 52 free Grand Slams.

From what I hear, the lines at Denny’s were crazy today.  I know Lazy Man went by but didn’t stop when he saw the line stretching around the block.  Did you stand in line to get a free breakfast?

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If you feel like braving the lines, you can get a free Grand Slam breakfast from Dennys today (Feb 9th) from 6am to 2pm.

Here is the information:
http://www.dennys.com/superbowl/splash2.html

With all of the attention on Haiti the last few days and the powerful destructive capabilities of an earthquake, it’s probably worth asking the question whether you should buy earthquake insurance. For years I questioned whether we should have the insurance and I felt as if I was living on the edge a bit. For those of you that haven’t spent much time reading through your insurance policies, it’s almost unheard of for an insurance company to cover losses from an earthquake as part of your standard homeowners insurance. Both earthquakes and floods are usually explicitly excluded from homeowners policies.

What would happen if we had a major earthquake that caused significant damage to our home? Where would we live? Could we afford to rebuild? How much of a blow would it be to our finances?

After going through the ugly answers to each of these questions, I did some homework and decided that, for us, it was too risky not to have earthquake insurance.

I looked around and found very few options for earthquake insurance. We ended up going through a company called Geovera. The deductible on this policy is very high. If we were to have a catastrophic earthquake we would be on the hook for $49,500 before the policy would start paying. What does it cost for something like this? For us it’s $368 per year. This policy is not meant to pay out for a light shaking that cracks some sheetrock in the house, instead it’s designed to cover only a very large loss. Since I live in the Pacific Northwest and we have a MASSIVE fault line just off the coast, it feels like a good policy to have. The experts believe our area is due for a strong earthquake due to the fault lines in the area and the fact that we haven’t had a major earthquake in many decades.

Geovera is rated as an A- for financial strength so I’m hopeful that they would be able to cover our losses in the event of a major disaster.

If you live in an area that’s prone to earthquakes, have you considered getting earthquake insurance? What would you do if your house was destroyed like many of the structures in Haiti?