Blunt Money

Rising gas prices affect us all, but they affect some people’s jobs (and therefore bottom lines) more directly than others.

We passed a taxi the other day that had been painted green. It was a Prius with a banner on it that proclaimed it a “green taxi”. I’m pretty sure that one reason for using a Prius as a taxi instead of the more standard Crown Victoria is to save money on gas. It makes sense.

With diesel at $4-something a gallon, I’d hate to be a truck driver right about now. It’s got to be difficult to watch your net income decrease with each passing month, even though you’re doing the same amount of work. (Or more.)

Then there are the pizza delivery drivers. I know someone who quit a part-time pizza delivery job because it was no longer worth it when taking the price of gas into account.

Oil and gas affect our lives in so many more ways than most of us realize. It’s scary. We’ll probably become more and more aware of just how big an effect they have as the years go on.

How are rising prices affecting you?

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I did get my (unexpected) tax refund recently. I’m glad that there was a little bit of time before finding out that I was going to be getting a refund and actually receiving it. That gave me time to contemplate what I most wanted to do with the money. Weighing your options without making an impulsive decision is probably one of the best things to do with a windfall. Time allows you to think things through and (hopefully) do something that’s in your best interest.

One commenter suggested that I should handle my refund the same way I handle my usual income, which was an interesting idea. After all, why should a windfall be viewed in a special light? Money is money, and my situation hasn’t changed otherwise. I guess the only difference for me was that my usual income is usually all accounted for, and this wasn’t. Maybe it would have been different if I was talking about a windfall the size of powerball winnings, but I wasn’t.

So what did I do? I invested a very small portion, which was a little bit of fun. That “investment” was really more like a gamble on a stock with almost no history. (Which is NOT the kind of stock that I normally choose.) In fact so far it’s down something like 6%, so hm, maybe that wasn’t such a good idea. Oh well, we’ll see what happens.

I then put the rest of the refund into a high-yield savings account. I feel good about this because it gave me a painless boost toward reaching my savings goal for the year. I feel more comfortable knowing that my emergency fund is closer to where I’d like it to be.

“Good debt” is often defined (by those who believe in it) as debt that’s taken out on an appreciating asset. Houses and student loans are generally lumped into that category. The idea behind taking on “good debt” is that you are risking some money now for a greater return later.

For example, you might go to college with the expectation of landing a good job upon graduation, making it easy to mentally justify taking out loans.

The problem with this thinking is that not everyone who attends college (or graduates) ends up with a good job afterwards, let alone a job that’s high-paying enough to quickly pay off student loans. This happens for a variety of reasons:

You might spend a lot of money on a degree in a profession that’s historically underpaid. (Such as teaching or social work.) You’re left with overwhelming debt and little means to repay it.

Or you may get a degree in a field that doesn’t have obviously translatable job skills, such as history or philosophy. The job you take after college may not even require a degree at all. Sure, it’s nice to have the degree, but that degree did NOT lead to greater return. Is that worth going into debt for?

Or you may get an undergraduate degree in a very specific field that IS obviously translatable, but that requires a graduate degree before even an entry-level job in that field can be obtained. If you can’t go on to graduate school (which often requires top-notch grades, fierce competition, testing, applying to multiple schools, moving, and additional time & money commitments) you may find yourself in the same boat as the person with a more general degree. In a sense this can be worse, because potential employers may review your resume and wonder why you’re applying for a completely different type of job.

You might take a job in your field, only quickly realize that it is NOT for you after all. Or you might want to be a stay at home parent. Do you want to be stuck working in a job you hate just because you have huge student loans hanging over your head?

Of course, no one goes to school with the idea that they’ll leave with some nice memories, knowledge that’s forgotten over the years, a piece of paper, and a pile of debt. Everyone thinks they’ll be the exception, and go on to make beaucoup bucks right out of college, love their jobs, and watch their lives fall exactly into place like the pieces of a puzzle.

But most people don’t.

That’s why they call it an exception. Life happens. People change. Circumstances change.

You cannot count on things going according to plan. You cannot use the phrase “education is an appreciating asset” or “I’m investing in my future” as an excuse to borrow tens of thousands of dollars because it’s “good debt” that “everyone” has.

It’s not, and they don’t.

I do believe that college is a good thing, especially if you go for reasons that are meaningful to you and you have realistic expectations about what your degree may or may not lead to. But I also believe you should do everything possible to stay out of debt while you’re doing so. Apply for scholarships, grants, jobs, employer reimbursements, go part time, do the 7 year plan, work and save up some money first, whatever it takes.

Get more from your education than the need to make a large monthly payment for the next 20+ years.

There’s a story that goes like this: Put a frog in a pot of hot water & it’ll jump out. Put it in a pot of lukewarm water and gradually turn up the heat, and it’ll sit there til it dies. The idea is that the frog won’t notice things are getting too hot for it until it’s much too late, because the increase is so gradual. Personally I think that story is more applicable to humans than frogs, but the idea can be used in a positive way too.

For example, take my 401(k) account. My aim is to eventually max it out, reaching the $15,500 limit. But that is a very LARGE portion of my salary. Way large. So I’m applying the frog-in-a-pot approach and increasing the amount that I contribute to my 401(k) a little bit at a time.

Increasing my contribution by a few percent when I got a raise was painless. I never saw the money, so I never missed it. But I’ve also been increasing it by a few percent every few months. It’s always a little bit of an adjustment each time my paycheck decreases, but since since the decrease is so little, it’s relatively easy to adjust. After all, it seems like such a small amount. I can just eat out a little less, or find a way to make a tiny bit more money elsewhere.

I’m to the point now where my 401(k) contribution plus my IRA contribution equals 30% of my gross salary. I still have a long ways to go before I reach the max, but doing it this way is so painless that I don’t even notice the increase in temperature.

It’s a lot easier to do it this way than it would be to go from cold (not contributing at all) to boiling hot (contributing the max). 1% at a time (or slightly more) will get you there, so consider putting yourself in lukewarm water.

Your retirement account & future self will thank you.

Basic Financial asked recently about my gardening start-up costs. They were pretty high, due to a few factors that probably won’t apply to many people who garden:

1) I live in Arizona. Our yard consists of rock-covered caliche. That kind of yard is great for making bricks and earthen houses and conserving water, but not so great for growing plants that do well in places where it, I don’t know, rains?

2) Also, it gets really hot here. I learned that “full sun” does not mean the same thing as “full Arizona sun + heat”. So I had to create a shade contraption for my garden to keep it from burning to a crisp. This way it only gets about 4 hours of full sun in the morning instead of being burned all afternoon. So far it seems happier that way.

3) I wanted an organic garden. This meant that in addition to hauling in various mixtures to create a decent soil, I needed to buy untreated lumber to create the box for the dirt, and a drinking water safe hose. The hose was especially important to me, because I knew it would spend much of its time lying in the sun. Lots of sun + normal hose = lead leaching into the water. I didn’t want to be watering stuff I plan to eat with lead tainted water. I guess I could have been less lazy and just hauled the hose out of the sun each time I watered, but I knew that wasn’t going to happen.

So, with all that out of the way, here are my start-up costs:

Shade supplies, $52.05
75 ft drinking water safe hose, $71.95
Many bags of vermiculite, peat moss, & compost, $79.06
Tomato cages, $10.70
Untreated lumber & deck screws, $35.27

That totals $249.03, which does not include plants. The two tomato plants & 3 packets of seeds were about the only inexpensive things involved!

Let me start off by saying that I’m grateful to have health insurance. I pay about $80 per month for coverage for just myself, which is a good deal. But…

ARGH!

I have about $2100 in medical expenses happening right now. I’ve known about these expenses for a few months — in time to figure them into my flexible spending plan, in fact. My insurance pre-approved them up to 50% after my deductible, and my flexible spending plan told me that the expenses qualified for reimbursement. All was well with the world, or so I thought.

Until I began incurring the expenses. Then the claims came back denied from my insurance. Flexible spending was still reimbursing me though, so at least that part was ok. But then I got a letter from them too, stating that the most recent claim was denied. How could it be denied?!

I’m sure things will get straightened out, but it’s so incredibly frustrating. At least I AM getting the treatment that I need, because I’m able to pay for it out of pocket. The doctor is working with me too, which I’m grateful for.

But what if I couldn’t pay? An emergency room sure wouldn’t treat me for this. Or what if I had something more debilitating and was unable to send forms & write letters to try to get this straightened out? What if I was uninformed or easily confused? What if I was at the mercy of strangers in some office somewhere, unable to get the treatment that I need just because they said “sorry, we don’t cover that”?

I feel sorry for people in those situations. (And not very long ago at all, I would have BEEN in one of those situations.)

People deserve to get the treatment they need, without a lot of rigmarole and additional worry. Even if they don’t have the money. I guess you can put me firmly in the camp of “health care should be a right for all people”.

Well April was a nice month. We had lower expenses than usual, due to refinancing our mortgage the previous month. (Our first payment isn’t due until June 1.) We decided to use the money that we would have paid to our mortgage to finish up our windows. It felt very strange not sending any money to our mortgage or our mortgage fund, but we’ll get back on track with that in May.

My liabilities are down very slightly, which is something. My assets are up, due to my tax refund, increasing my monthly investments & savings, and the stock market finally being a tiny bit nice to my old IRA. I also spent quite a bit less this month in general. Here’s hoping I can make this a regular thing.

April’s stats:

Assets: Up $4588.16
Liabilities: Down $328.54
Change in net worth over previous month: Up $4916.70