Extra-Ordinary Expenses - What a spending killer!

Back in 2008, I was tired of non-recurring items creeping into our life, so for 2009, I decided to setup a savings account for these expenses.  Items like these included HOA dues, anniversary, birthdays, holiday groceries, holiday gifts, family trips, family visits, oil changes, spring landscaping, etc.  

What I did was take a look at 2008 and setup a list of everything I knew that happens out of the ordinary.  This list added up to ~$5,000 a year (or $416/month).  It was easy to apply this to the budget each month, since we had the extra money, but what I'm finding is that even though it is nice to have the money there when we need it, it really cuts into our spending! :)

It's tough living on a streamline budget knowing there is over $400/month going into savings.  Savings has never been our forte.  And when the end of the pay period comes and it's tight, it's easy to see that money sitting in savings as a "over spending savings account".

It's worked out nicely, and we've stuck to keeping the money for those expenses.  Have you ever gone back to see how much those expenses add up for you?  You spend the money regardless, so you might as well somehow budget for them, you know?

Whose Tired of Car Commercials?

Since my money mindset change, car commercials are just so much more annoying nowadays. I have to laugh at their tactics:
"Come on in because this deal won't last!" or
"We'll pay off your trade, no matter how much you owe" or
"We're helping you in this credit crisis because we've just been approved to lend millions of dollars"
My long time favorite is how they throw out a payment like "$199/month!". I'm sure many people fall for it, but it just kills me knowing that there's no way they can guarantee it without looking at your credit worthiness. It's just a made up number based on someone with perfect credit with a car with no air conditioning, fm radio, and seat belts (hee,hee). What a ploy...

I understand the "make a buck" philosophy, because I too like to "make a buck", and I believe in a good capitalistic society. If I'm a stockholder of a car company, I want them to make a buck as much and as often as they can. And because of the shape the economy is in, I also understand that car dealerships need to put the full court press to keep those dollars coming in. I personally just find it annoying to hear the advertisements on my radio...anyone else too?

Living through a series of stupid car mistakes in my many years on this earth, I'd like to take a moment to offer up some suggestions and/or advice to those who read this and find themselves in the market to buy a car:
1) Buying a quality used vehicle is always better than buying new.
2) Line up the credit ahead of time. Don't waste hours sitting in the dealership. If the kinks are worked out ahead of time, you'll have a ton more buying power at the dealership. Even if there is an incentive to use their financing company, it just doesn't feel good being put in a vulnerable spot when spoken to by a person who's sole job is to tilt the tables in their favor. Walk in with the confidence of knowing you're ready to deal or walk away!
3) Don't look at the payment. Look at the loan and interest. If you can't afford to pay the car off in 4 years, don't get it. Over the years, car prices have gone up. Do you think their costs have gone up by the same amount? I would bet costs have gone down and profits have gotten higher. Higher car prices = higher payments. So, to keep Americans enticed into the debt trap, the terms have quietly gotten longer and longer. Who wants to make payments on a car for 6 years! I wonder what the percentage is of people who actually finish out a 6 year loan!
4) Once the deal is settled, walk away and "do the math": Take the payment and multiply it by the number of payments. Subtract the original loan amount from this number, and what you're left with is how much interest you'll be paying. If it's a "way out there" amount in your books, and if you can convince yourself that you'd rather pay a bank this amount instead of to yourself, get the car...it deserves you :)
5) Make yourself immune to the tactics of car dealerships. Assume their advertisment talks are statements of opinion (not fact), and remember it's just advertising...a way for a company to reach potential customers and take money out of their pockets :).

I speak from experience when I wrote those, can you tell? I've learned my lesson, and I'm done making someone else richer. Don't let your car be your #1 or #2 largest expense, like we have let ourselves for many, many, many, many (you get the idea) years.

Playing with a Cool Cost Cutting Tool

I like gadgets. Especially ones that help me lower my costs. A few years back, I stumbled upon the concept of "Phantom Load". Anyone ever heard of it? Well, did you know that any appliance in your house that has a remote, consumes electricity even when turned off? It's really in "standby" mode, because it has to be constantly ready to receive the "on" command from the remote. Being contanstly ready = electricity.

Just recently, I found this electricity meter called Kill-A-Watt for around $20 on Amazon. It's like having the electric meter on the side of your house, in the palm of your hand. It measures how much electricity a certain appliance is consuming. It keeps a running total over time, so I can determine how much money it's costing me over time. Considering how many appliances that use electricity even when they are not in use, it's been pretty neat to see how much money we've been throwing out the window. Even if I don't waste a significant amount of money, it's still very informational.

The biggest "phantom load" items that consume electricity is the home office. Not a whole heck of a lot to do about that, except turn the power strip off at night to eliminate any lingering phantom loads. The next big item is the entertainment center (hdtv, dvd, dvr, wii, computer speakers). Since we cut cable, we don't nearly use the entertainment center as much. So shutting off the power strip happens more often for longer periods of time.

Like I said, I don't think we'll be saving a ton of money by eliminating those items that consume electricity. But every little bit helps. If you think about it, a $150/month bill is only $5/day. If you can cut that down to $3/day, you'll save $60/month! Something that costs $.50/day to run costs $15/month! Plus, it just plain feels good to be in a little bit more control.

Random Thoughts on "Happiness"

Today I was going through a bit of a self dwelling period. There was something wrong, but I couldn't place what exactly was the problem. It all related to how I can be happy and what "happiness" is to me. Better yet, what do I need to do to acheive "happiness". The things that were weighing on my mind in recent days are the following:

• Currently, we have no retirement savings...and I'm 35.
• Family vacations are few and far between.
• I dispise the feeling that I put my job ahead of my family some times.
• Worrying about being a 50+ year old Web Developer. I don't know too many!
• Feeling that there is never going to be a time that I'll be sufficiently skilled in Web Development. Technology changes all the time, and I can't see the time I'll be an expert in the field.

I never found the answer to my thoughts, but I had to wonder if people can truly find happiness in their lives. What defines happiness to you? Did happiness start with a passion? What actions/sacrafices did you have to take to acheive it? Was it some life changing experience that opened your eyes? What does it feel like?

I am not saying that I am unhappy or incapable of being happy. I enjoy my life as it is now. I have a great family and a loving wife. My job is going well, and I love what I do. I just wish I could take those simple enjoyments and be content with them. I'm always afraid something is going to come along just when things are finally going our way and "F" it all up. I know it stems from years of financial blunders and career mistakes. But now I want nothing more than to have an inner peace that will let me relax and take life as it comes and not worry about money or career. I once heard that if you find something you love doing, you'll never work a day in your life. I can only wish I had that passion.

We Cut the Cable

We've talked about it for months, but finally we took action. We've always had a modest cable package with DVR through Time Warner Cable, but the bill was usually within the range of $80-$90/month. Considering my son loves the Wii and Netflix, we didn't watch but probably 2 hours of tv a day. It just never seemed worth the money but was an item we felt was always necessary. If we could get a cheap package that included only House and Spongebob, we'd be set :).
So last week, we had the cable guy come and cut our cable access and remove the DVR. It was a lot less painful than I thought it would be, considering my son used tv as a "wakeup tool" each morning. I instead woke him up a little later, got him dressed right away, had my morning coffee with him while he ate breakfast, and then took him to school. Not having tv created extra bonding time, which can't be beat.
Cutting cable was also a move that we wanted to do to make us feel that we were trying to spend our hard earned money more wisely. If we can cut back on those things that are "luxury items", we might not complain so much about not having more discretionary income.
The one thing to always keep in mind is that cutting back doesn't mean doing without. As Dave Ramsey always said, "It's always easy to go back into debt. And what you're doing now obviously isn't working. Why not try it different for awhile.". Cable tv isn't a debt item, but it doesn't hurt to try doing without it for awhile. If we miss it, I'm sure Time Warner Cable will be happy to take our money again :)

Refinance Complete

We refinanced our house last week, and I must say, we are VERY pleased with the outcome. The overall outcome will be a reduction of loan term from a 30 year fixed rate conventional mortgage to a 15 year fixed rate FHA mortgage with only a $90/month increase! We locked in a rate of 5%...down from the 6.65% we started with a year ago.

We credit much of the easy to our mortgage broker (and accompaning title company). In a world where customer service doesn't account for much (but is the determining factor in many decisions), these folks did the job right:
Jennifer Smith: First National Bank, Denton, Tx (link)
Fon Laughlin: Laughlin Law & Title, Crossroads, Tx (link)

If anyone else is looking to refinance here in North Texas, I'd recommend these people. We are not AAA rated people, so don't think that it was so smooth to avoid any hickups :)

What Could Budget Software Offer You?

In the past 11 years, I have crafted probably thousands of budgets, trying to cut down on the time it took to reconcile my budget against the bank, while keeping tabs on where our money was going. When times were tight, it was highly important to make sure I did this reconcilation daily, so we didn't overspend during the pay period. If I had forgotten to jot down that $5 meal, it could've turned into a $35 meal after going negative in the bank. I can't tell you how many times I had to call the bank begging them to reverse overdrafts. To say it bluntly, I was HORRIBLE at managing money. We are in a much better position in life now, but I know I still have quite a bit to learn.

When it comes to tools to manage finances, I haven't found a way to beat the ol' spreadsheet method. There's Mint.com and QuickenOnline.com, but there always seems to be something about them that just doesn't make me jump for joy because my life will now be easier. For me I need a software that can do these key things:
- Let's me setup a budget view for a month but break its down by pay period.
- Let's me categorize bank transactions
- Let's me enter other transactions (future planned amounts, debit card transactions that haven't hit the bank yet, or check payments)
- Does a category by category comparison report to show over/unders
- Shows how much money will be left at the end of the pay period based on budget minus actual

Only with these key items accounted for, can I come up with an amount of money I expect will be in my account at the end of a pay period. As far as I know, Mint.com or Quicken.com doesn't do this the way I need them to. I can achieve that now, but it takes a combination of exporting report data from Quicken into my budget spreadsheet and running some comparisons.

What process do you use to keep yourself on track daily, weekly, or bi-weekly? Being a Web Developer, I dream of the day that I can build a software tool that helps me automate the mundane things I do.