Geeky Girl has decided to start a business. This is in part a reaction to the book I got her while I was away, A Smart Girl’s Guide to Money. In it, there are ideas for businesses to start, like babysitting or dog walking, and an explanation of profit. So, Geeky Girl spent the better part of yesterday trying to decide what business to start and then calculating her profit. She figured out how much her supplies would cost, set a price for her product and then determined her net profit. She then hired Mr. Geeky and offered him a 10% cut. And she’s giving me a 10% cut to go towards my walking fund. I’m pretty impressed that she’s gone to so much trouble already. Her business? Selling cookies. So, last night, she got out cookbooks, selected a couple of recipes, and made a shopping list. She also made a sign to put on her booth. The plan is to set up at the street corner. I’m hoping at the very least to keep that entrepreneurial spirit alive.
There’s a really interesting conversation going on over at 11D about moving to a wealthier neighborhood to take advantage of the school district. The issue is that doing so might bring with it the need to fit in, both by the kids and by the parents, through clothing and other worldly possessions. We recently had this conversation, not about moving, but about attending private school after Geeky Girl expressed an interest in doing so. After we figured out a way to cover the cost for tuition, we immediately jumped to thinking about the people we’d be surrounded by. I’ve learned to live with the fact that our income doesn’t go as far here as it would in other places we’ve lived, and we chose our current neighborhood in part because we were surrounded by people whose income is roughly the same and whose values seem roughly the same. That is, they’re not interested in having fancy cars, perfectly manicured lawns, houses designed by interior designers, or designer clothes.
Yes, the private school down the street is “better” by some objective measures, but I’m not entirely sure it’d be better for our kids. Better academically maybe, but would their self-esteem take a blow when they got a lot of flack for not wearing designer jeans or driving a Lexus. I care not a whit about Uggs or Chanel sunglasses or whatever, but I do sometimes long to be able to travel more, to remodel my house exactly the way I want it, using high end materials instead of cutting corners, to be able to buy a new car. We can do those things, but not as often as the people who live in the next zip code and certainly not without some planning. We lived in that zip code briefly, and at one point at a play date, we were invited to a summer home where we might be able to hobnob with the Reagans. We could never have reciprocated, and that would have made me feel icky (as would hobnobbing with the Reagans, but that’s another story).
On the other hand, I’ve got a few advantages thanks to a generous father and some other friends. We go on vacation every summer without having to pay for accommodations, which makes a huge difference. We’d never be able to travel to the locations we do without that. Or we’d do it less often. We have friends who live overseas who’ve offered accommodations as well, again cutting the cost of trip nearly in half, making it more likely that we can travel there. And, it’s likely if I went back to work, there’s much more we could do financially since we’ve adjusted our habits to suit a single income existence. I think we’re doing okay by the kids. No, they’re not in the very very best schools, but they’re pretty damn good and living near a city gives them many advantages that we’d never have if we lived somewhere that would allow us to afford a Lexus. We’re doing the best we can, and I’m satisfied with that for now. But, I totally get the angst Laura and many of her commenters express. I have it, too, every once in a while.
I’ve been tweaking our financial situation over the last few weeks following the suggestions in Elizabeth Warren’s All Your Worth, which I think I mentioned, but can’t find that post at the moment. So, I started by tackling home and car insurance. I’ve been actually talking to insurance agents, and I’ve been proud of myself for saying to more than one, “I’m sorry but buying from you is more expensive than what I have right now. See ya.” I think I have something good lined up, and will find out for sure sometime today, but it’s been a time-consuming process. Most of us, I’d wager, don’t pay too much attention to total amounts paid for either of these pieces of insurance. And I’ve found that people display their prices in weird ways–sometimes monthly, sometimes bi-annually, sometimes yearly–so it takes work to make sure you’re comparing apples to apples. I don’t think I’m going to save thousands of dollars annually, but a few hundred, possibly.
I also transferred a balance from one credit card to another with a low interest rate. All my cards, whether I’m carrying a balance or not, (I only have the one I transferred that has a significant balance) have interest rates approaching 30%. Can we say loan shark? Cause seriously? This is crazy. These people have made lots of money off of me over the years (I’m not proud of that fact, but it’s true). We pay on time. We’ve paid off most of them, but still use them on occasion, and we get no break whatsoever. Thanks for being a great customer; we’re gonna raise your interest rate now. I remember the days when they raised our limits and lowered our interest rates. My plan is to pay these all off in the next few weeks. It’s a pretty small amount, but not an amount I regularly have lying around, so it takes a bit of planning.
My next step was to deal with savings and investments. As Warren points out (and nearly every financial adviser does), just paying off your credit card debt is a form of savings. The money you were putting into paying that off can now be put into a savings account. We have a basic savings account that is now earning us very, very little in interest. The account serves as both an emergency fund (which we’ve used in the last couple of years) and a college savings account. We can pay for about a week of college with it. Besides our 401(k) accounts, we have no other investments. I’m terrified of investing in anything, especially after what happened just a couple of years ago. I lost something like 30-40% of my 401(k) account. And since I can’t contribute to it anymore (need to roll that over–gah!), it will take a while (if I leave it where it is) for it to regain its value. Same for Mr. Geeky, though at least he’s contributing to his account. So, following Warren’s advice again, I decided to start a small investment account, investing in index funds. So I did this all online, doing a lot of research to figure out what company to sign up with. And then yesterday, the company called me to make sure I was doing okay and if I had any questions. And I think I freaked out the guy because I was pretty clueless. Unlike with the insurance, where I could just say, sorry you’re too expensive for what I want, I couldn’t just say, “Look, all I want to do is get a simple index fund.” I did mention that, and he said they had plenty of those, but then he asked, “What are your financial plans?” And I said, “Well, they’re kind of vague.” And then he put me in touch with a financial planner, which I think we’re going to pay a visit to next week. Mr. Geeky actually agreed to this. We’ve avoided it because we felt like our financial situation was too simple to require one. But it’s getting more complicated by the day. Retiring, paying for college, and other financial needs and wants are closer than ever.
I was telling Mr. Geeky that the guy on the phone seemed surprised about my financial uncertainty, and we both agreed that we didn’t really know anyone who seemed to be on top of their financial game plan. Maybe this is a problem with academics, who often have salaries that don’t give them enough money to invest in anything outside of their retirement plan and who have pensions and other benefits that mean they don’t have to do a lot of the planning themselves.
The next semi-financial thing I’m doing is setting up a will. And yes, I know I should have had one a long time ago. I’m just now realizing I’m a real grownup. Mr. Geeky even agreed to this move, something he, too, has avoided over the years. So, hopefully, we’ll have an appointment for that next week as well. It’s not exciting stuff, for sure, but it feels good to be taking care of some of these things.
We will never be perfect on the financial front. We just don’t have the time or interest to invest in managing our money, but we can probably do a little better than we are currently, and maybe leave the kids with a little something and be better off to help them when they’re getting started in their own lives. And yes, I feel old saying that.
No really. Thanks to ProfHacker, I was reminded of Mint.com, a site for tracking your money that I heard about on NPR. The problem with hearing about web sites on the radio in the car: no internets in the car. Last week, I signed up for an account and pulled in all my various accounts. I still have to pull in the retirement account, but am planning on it today. It is soooo much fun and so informative to have all of my accounts–savings, credit, loans, investment–all in one place. I can see at a glance where my money is, what’s coming in and what’s going out. The coolest thing about the site for me was the way it decided on categories based on the name of the company listed in a transaction. It was about 95% accurate. It was easy enough to spot the things that were off and correct them.
Even more exciting are the graphs and pie charts. Here’s an example of one from my account (without numbers):
You can click on each slice to drill down into the category further. So, for example, that orange slice up there, that’s shopping. When I click on it, I get this pie chart:
That’s a thin slice of books and the rest for clothes. Clicking on a slice that has no subcategories takes you to the transaction itself. This is how I found inaccuracies in categories. I would see a huge slice for something like movies and then clicking on that slice would show me that they’d categorized cable as movies or something like that.
I find being able to visualize my spending and drill down to find exactly where the money goes extremely helpful. I know Quicken and other programs like it did this in the past, but the categories often had to be done manually and it was complicated to set up multiple accounts. I felt like you needed a degree in accounting to do it successfully. Mint, by contrast, is dead simple, relying on data your banks already keep. Since we’re down to one income with my own income coming sporadically, keeping track of our spending is more important than ever. I’ve already found some places to cut more corners, and I’m actually enjoying the process of managing our finances. Who knew!
Image by schoschie via Flickr
Every day Mr. Geeky comes home from work and puts his keys and wallet in a little secretary that stands by the front door. He also puts any change from his pocket into a jar. When the jar got full, I suggested taking it to the bank. Not yet, he said. He needed to check for “valuable” old coins first. He added another jar. That jar got full. I made the suggestion again. Again he protested that there might be coins worth saving in there. Months passed. He didn’t move on to a third jar. By this point, there wasn’t room. Finally, I insisted, suggesting that the kids go through both jars and set aside anything they thought might be worth something–old coins, foreign coins, gold doubloons. So, they sat themselves at the dining room table. When they found their first old coin, they got pretty excited. Geeky Boy has books that hold old coins that he hasn’t looked at in years. He got out those and filled a couple of slots. Geeky Girl remembered she had a state quarter set. She got the folder for that and began filling out that collection. All in all, they only found 10-15 older coins, but they’re going through another container we found in hopes of finding more. They’ve been returning to the project periodically without my having to ask. Geeky Girl, especially, having not paid much attention to money before, exclaims when they find something unusual, something she’s never seen before and listens patiently when Geeky Boy explains what the D and the S mean on the coins.
They filled a medium-sized bowl with coins suitable for taking to the bank. Yesterday, I filled a bag with about half of the coins and trudge to the bank on my way to the farmer’s market. The bank lets you estimate how much money you have and if you’re close, you win a prize. As I poured the money into the machine, I saw mostly pennies. So, I estimated about 7.50. When it was all said in done, I had slightly over $52 in coins. Mostly dimes, it turned out. I’m really bad at estimating, especially now that I rarely handle cash, much less coins. All my cash is digital, exchanged either via electronic transfer or similarly, using my debit card. I used to keep tips in a mayonnaise jar on my dresser, saving up for the deposit on an apartment in graduate school town. I know about how much was there, in part because I knew how much I made in tips, but also because I dealt with cash all the time.
I spent a little more than half of my new found cash at the farmer’s market. Even though I always take cash there (most of the vendors don’t take other forms of payment), I felt a little giddy at having such a large amount, created, it seemed, out of thin air.
Money now does seem to come out of thin air, arriving in bank accounts without anyone having to touch anything. I used to work at a bank during the summers. One summer I filed loan applications, the 3 attached parts left after everything was signed off. Another summer I filed the checks people deposited into their accounts, checks that were then sent to other banks to be filed and then placed in an envelope to be sent to the customer with her statement. Even then, the real transaction happened electronically, with a machine reading routing and account numbers, a human inputting the amounts, which were then coded onto the check to be read by another machine. For a brief time each summer, it was my job to count money coming in from the vendors at the annual summer festival. Bags of coins and dollar bills showed up at the bank and I stood behind the tellers, counting it all by hand, recording amounts on deposit slips, amounts that were later entered into computers while the money itself went into the vault, to be redistributed to banks or to customers withdrawing money.
Geeky Boy asked the other day if people still traded things. I said, sure, happens all the time. But money became more convenient at some point and then banks became a place to store that money and now, they are the place where most of our financial transactions actually occur. And they make their own money off of those transactions. What a weird little system we’ve created, making banks the middle man for our exchange of goods.
I’ve been following the Edmund Andrews story as it’s been unfolding via various blogs, mostly via Megan McArdle. In case you weren’t following, Andrews excerpted part of his book on his succumbing to the subprime mortgage market in the New York Times. Since the story came out, lots of blame has been going around, a lot of it focused on his wife, who had been a stay at home mom, struggled to get jobs and, it turns out, had two prior bankruptcies.
Reading the numbers makes me sick. As far as I can tell, these people make about as much as we did when we were both working. And yet, thanks to putting themselves into huge debt, they have a lot more than we do: a larger house, kids in private school, expensive clothes. Granted, they are on the verge of losing much of that, but it’s still depressing. I’m glad I didn’t run up $50k in credit card debt in order to have fancy clothes, fancy cars, and private school. Are there things I wish I had? Sure. But instead of getting in over my head, I’ve lived (mostly) frugally. Like the anger over the AIG bonuses, I think much of the anger directed at Andrews is about the relative wealth they displayed compared to most people. While many people went into debt to live a modest lifestyle–finally getting into a home in a decent neighborhood, for example–a lot of people lived within their means, forgoing an expensive lifestyle. Many people being foreclosed on now did not have 3000 square foot or larger houses. They are now living with family, don’t have jobs, etc. And yet, Andrews still has a job, still has a house even, and a book out that will certainly bring in some income.
My father in law used to say, “Poor people have poor ways.” And it’s sometimes true that poor people make some bad financial decisions, but it’s also true that they sometimes get hoodwinked into doing so or simply have no other alternative than a payday loan in order to put food on the table. Increasingly, though, I think the phrase should be “Rich people have poor ways.” As more stories come out about wealthy Wall Street bankers and mortage brokers as well as people like Edwards, it occurs to me that many of them weren’t so financially savvy. Unlike the poor, however, who tend to only suffer personally for their decisions, the poor ways of the rich are dragging us all down.
Gretchen Rubin has been writing a series of posts that outline 10 happiness myths. Today’s is Money Can’t Buy Happiness. She argues that it can. As people are losing their jobs or seeing salary cuts and experiencing depression as a result, it seems obvious that money does buy some happiness. I agree. When we were young and poor, one or both of us in grad school, we were constantly running into situations involving money that made us unhappy. It was not fun to juggle bills, to put off much-needed car repairs, or eat meals made up of whatever canned goods are left in the cabinet. I can remember days of going to the mall just to have something to do and being thoroughly depressed because I couldn’t buy so much as a cup of coffee.
We’re way past that now, and boy, am I glad. Having enough money to buy the essentials and pay the bills on time is a blessing. But, we have taken steps backwards financially over the years. Moving here was one such step, and my recent decision to quit was another. Both decisions, despite the financial setbacks, were made to make one of us happier. And I’d say that both decisions were good ones. We may have to think a bit more about purchases, budget a little more carefully, plan longer into the future for even small things, but all in all, the stress of having to do that is minor compared to the stress of working in a job that no longer appealed and that took me away from my family more than I wanted it to.
As Gretchen suggests, even though money may be a bit tighter than usual, I still spend money on little things that improve my life. I’m not a regular coffee shop patron, but every once in a while, I like to sit down with a latte and a muffin. I like bubble bath and magazines and books. Those are all things I could give up if I had to, but they’re also things that make me pretty happy with just a small investment of cash. And, of course, there are things that don’t cost money that make me pretty happy, too. But sometimes, a few bucks will buy a little joy.
In the comments, Janice points out this article in the NY Times also discussing the math problems people have when trying to figure out what’s reasonable to save on. Mr. Geeky and I have spent hours in the past doing the back and forth of deciding whether to buy something or figuring out how to save money. For me, saving $80/mo. on school lunches isn’t worth the time I’d have to spend making the lunches. But both kids have indicated they’d like me to do this. We’ll see.
This is a phrase I’m sure you’ve heard and one my father-in-law said to us a lot when we were in grad school. There’s an interesting conversation going on over at Half-Changed World about the cost of food and how low-income people are buying more Spam and other not-so-healthy options. I have written about health, food, and class twice before. Yes, it’s true many of us do not have the survival skills of our grandparents. I can make my own pasta and bread, but I don’t like to mostly because I lack equipment, time, and space to do so. Of course, I’ve been spoiled by watching food shows. My grandmother’s kitchen was 2/3 the size of mine and she made everything from scratch. I think mostly it’s a matter of establishing certain habits. We have a good farmer’s market, but I forget to go. Many of the CSA’s are $700/yr or thereabouts, which is a bargain really, but if you’re poor, you don’t usually have that kind of money and don’t know what to do with half that food anyway. And growing my own? Well, I have a postage stamp of a yard, which I’ve joked about growing potatoes and cabbages in and then guarding those with a gun, but really, I don’t know much about growing either. I’ve done it. I could do it, but could we really save a lot by doing that?
I spend on average $150/week on groceries. I buy a fair amount of produce, but I do use a lot of shortcuts–frozen veggies, pre-made dough, the occasional frozen entree or side dish–and I buy meat. But I could live without it if I had to. These days, I tend to see what’s on sale and then think about what kinds of things I could make from it. Ground beef was two for one last week. That made a spaghetti meal and tacos. And it wasn’t the lean meat either. And that’s the thing–and what I said 3 years ago too–the good stuff is expensive. You can complain all you want about poor people not knowing how to prepare healthy meals, but when you’re just looking at the bottom line, you’re likely not to pay as much attention to the nutrition labels.
It’s kind of funny that this is even a question, but for women with children, it is. I guess it should be a question for men with children, but it isn’t. I’ve been thinking about my recent post and stumbled onto another one with a similar theme. Before I was married, I never questioned whether I would work or not. I knew a couple of women from both high school and college whose goal was to marry, have kids and stay at home, but for most of the women I knew, the question of whether to stay home or work didn’t arise until after kids came along. For me, the question didn’t arise until pretty recently. When our first kid came along, I was our only income, so there was no question about whether I would work or not. I had to. I had a pretty heated argument with someone who suggested I was shortchanging our son by returning to work. I remember nearly shouting, “Well, who’s going to pay for our food and shelter if I don’t work!” I was pretty steamed. In hindsight, it wasn’t that I felt my adversary was right, but that I resented the dilemma in the first place. Somewhere inside I kind of wanted to stay home. After all, the job I had at the time was just for the money (and the insurance).
Back when my kids were little, I felt like they got good care. I didn’t feel like I needed to be there to read books or play or whatever. We did all that when we were with them and I knew they were getting lots of attention from their caretakers. Now that they’re school age and they’re not really getting anything special out of aftercare programs (or don’t even have aftercare programs), I feel more of a need to be with them, to help them with homework and to help them negotiate social issues that arise. This year, Mr. Geeky has been meeting Geeky Boy after school. On days when he can’t, he calls us and discusses homework and other things. Not ideal, but it works.
Despite the tug of wanting to be at home, I work for three main reasons. First, I work purely for my own personal satisfaction. I need intellectual stimulation. I need to be challenged. I need to be around people. I enjoy solving problems, thinking about issues, etc. I’m not creative enough to create that environment for myself at home. Second, I do it for the money. I enjoy the extra income, and for a long time, we actually needed it. We could probably get by now without it, with a few sacrifices, but I know I appreciate the buffer my income generally gives us. Third, I feel the need to contribute and chose my job accordingly. I think if I were just working for the money, I would not feel as satisfied nor would I feel as compelled to work. If I were a corporate drone of some kind or a salesperson or something along those lines, I don’t think I’d enjoy working. Being part of an educational institution and mission makes me feel like I’m doing some good in the world, even if it’s only for a handful of people. That’s not to say that I feel that if I’d been at home, I couldn’t contribute in some way. It simply reflects my own perception of how I need to contribute. I’m just not the type of person who could get satisfaction out of volunteering by itself.
In other words, my decision to continue working is an individual one and probably different from many other women. There may be women who work purely for the money and are satisfied with that. There are women who don’t work and are satisfied with that. It’s often a complicated decision for many people. A two income family juggles many things in order to make things work. A single income family may have to make certain sacrifices in order to make that situation work. And the world of work doesn’t make either situation all that easy. For one, there’s no in between really. Some jobs are inflexible and involve working long hours, keeping people away from their families and placing undue burden on the spouse at home (if that’s the situation). I feel lucky to have enough flexibility that I can take days off when I need to and could take plenty of time if something tragic happened. That, too, helps me continue to enjoy work, knowing that my workplace would want me to put family first when I need to. If only every workplace had that attitude.