1. More staffing changes at work lead to more work production expected with fewer people.
2. I broke my right arm about 5 weeks ago leaving me with just the ability to peck at the keyboard.  I am right handed so not having use of this arm made it even tougher.

But work has now slowed down and I am ready get back to contributing again!

Since my last post, several new things have happened:

1. Paid down the last $2500 on 2nd to last credit card. I was very excited to get this debt knocked out and only have 1 card left.  Part of this was from the savings but it was the last $2,500 and was more of a mental accomplishment than anything else.  Now that I only have 1 credit card with less than $10K left and I am pushing every penny towards it.
2. Selling/Renting out townhouse next May. Never too early to start planning right??  My roommate and I were college roommates and were both looking to enter the real estate market after  graduation.  Hindsight is 20/20 but we purchased near the top of the real estate boom; luckily housing prices in our community have remained steady and even slightly increased.  So based off comparable homes that have sold and adding in fix up costs and real estate agent fees we should come out a couple grand on top each.  Another positive is that there are a limited number of our models in the neighborhood (2 bedroom end unit w/ basement) and 2 other end units are on the market now so we should have a good idea of the selling price come spring.

   The other scenario is to keep the house and rent it out.  We are currently deciding if we want to be landlords.  It would be nice to get some extra cash right now to pay off the debt from the sale but long term it might be nice to have someone else pay down the mortgage.   Renting was our original goal when purchasing the house but as you all know things change and thus both of our goals have changed in the last 4 years.

   Thus, Debt Kid’s last article about home ownership has really hit home lately!

3. Broken arm. This created some surprise medical expenses.  I am on a high deductible plan so I have to pay everything out of pocket at first.   Luckily I do have an HSA to cover the deductibles and I have contributed a significant amount over the past year.  But medical bills add up quickly so combine this accident with x rays I needed earlier this year and I will be using up all of those funds and probably paying some out of pocket.
4. Cleaning house. I have been relentlessly cleaning shop to find extra cash to pay down debt.  I sold quite a bit of electronics on ebay/amazon earlier and now I’ve moved onto extra clothes, books, and random items.  I’ve taken a lot of these items to Goodwill and taking another batch over to Platos Closet too see if I can get anything there.

   I am contemplating a career change/move and realized I need to be as mobile as possible.  Going through my closet/attic I also realized how much junk I’ve accumulated and have absolutely no need for.

   How do you sell/donate your extras?  What is the best way to achieve the highest return on your investment/time?

I look forward to posting again!!

why buy when you can rent?

I love that the love affair with “home ownership” has come crashing down in the past few years.

Especially among 20-somethings. I’m obviously sympathetic to those that have lost their homes, but nonetheless glad “homeowner” isn’t such a golden term anymore.

Graduating from school in the heyday of the housing boom, there was a quiet and sometimes not so quiet “race to be the first homeowner” among my peers.

Why were we all chasing this American dream?

We got caught up in the hype. Caught up in the lie that owning a home is always a good investment.

I strongly believe now that owning a home in your 20’s is a bad idea for the majority of us

Why?

Most 20’s college grads live/work in urban, high priced areas. Rents may be high, but they are still much cheaper than the mortgage on comparable places for sale.

You pay a crapload of interest the first few years of even a traditional 30 year fixed mortgage.

Property Taxes.

Homeowners Fees.

If money buys freedom, why would I use it to tie myself down?

I understand the advantages of homeowners (tax deductions, pride, etc), but I just think for most urban 20-year olds, you’re much better off to rent than stretch to afford a condo that’s small and ties you down just so you can “buy a home”

I have a friend who’s girlfriend is upset because he can’t afford a house here in Seattle. He is 26 and in grad school. Are you kidding me? A decent single family house, in the city limits is going to start at 300K not falling apart.

By this time next year, I’m pretty sure I could be in a position to buy a nice place if I wanted….and I’m gonna pass.

image credit: Freedigitalphotos.net

I’m financially preparing for disaster. My family has been notified by FEMA that our home is now in a flood zone—already, preemptively declared an emergency.

You see, we live on a river. Upstream is a very effective flood-control dam. In the 15 years our home has been here—it hasn’t flooded. We’ve been here since 2004 and have never even been concerned about the water. We couldn’t even get quoted on flood insurance because it was deemed unnecessary.

That all changed after a storm last year that put pressure on the dam, and an earthen abutment that supports the dam was seriously compromised.

Now we’ve got our flood insurance, and we’re preparing for the worst. As you can imagine, that includes sandbags and plastic bins and high shelves, but there’s also some financial preparedness that is key to surviving a disaster intact.

Steps to financially weathering the storm

Read your insurance policy:
We live in a condominium, so our insurance works like renter’s insurance. We cover anything not nailed to the house (furniture, personal articles, appliances) they cover flooring, drywall, windows, carpets and the building itself. This means I had to read both policies to verify our actual coverage! In the end, I discovered that neither policy will cover loss of use on our building. If we can’t live here—we still have to pay the mortgage, and we aren’t provided any money to pay for a hotel. Thank goodness that mom has an extra room big enough for the whole family. If the dam fails however, our losses are projected to be catastrophic—and we may be at mom’s house a couple of years until our place is rebuilt. I’m working with a broker to create a specific “loss of use” policy to cover our time out of our house if we have to evacuate long-term.

Document your belongings:
Our insurance policy will only cover the value of our items—which means we’ll have to itemize everything we want covered. We’re doing this with a digital camera. Going room-by-room and taking photographs. Receipts for high-dollar items like the piano, and appliances need to be packed in a plastic bag and put with our evacuation “stuff.”

Put things you need during/after the disaster OUTSIDE the disaster zone:
There’s a bin in the house where the “stuff” goes. This is everything we need to recover.
Banking info
Insurance Policy
Blockwatch phone list
Critical papers including recipts for appliances, etc, the kids’ adoption papers, etc.
These things aren’t “valuables” per se but it’s doubtful if we could put our lives back together easily without them.
Also in this bin is a disk with the photos of our belongings (backed up on Shutterfly in case we have to send them to our adjuster—they can be sent electronically immediately).
The bin is big enough for 3 days of clothes for each member of the family, our prescription medications and a bag of pet food. The emergency bin will go with us when we evacuate.

In the event that the evacuation order comes—the kids can pack remainder of the bin while I pile up the sandbags and move some valuables. Our insurance policy also provides $1000 towards sandbagging and $1000 towards removal of items that may otherwise become claim items (i.e. art, jewelry).

Save the money!
Our deductible is $1,000. It’s set aside in a separate bank account until the dam upstream from us is repaired—a five-year dedicated fund planned for flood, so we don’t find ourselves in a financial pinch paying the deductible and staying on our feet—however damp they may be.

Do you have a plan?

It sounds strange living a stone’s throw away from a river, but our disaster plan was really only prepared for the “3 days 3 ways” to stay put in our home in case of ice/snow, earthquake or power outage—we found our emergency plan totally unprepared for evacuation, and our home ill-prepared to meet the requirements of our insurance company. Have you considered and prepared for local and regional disasters that may force evacuation from your home?

Picture by Jeff Keen

I’ve wrestled with budgeting since becoming self-employed. How could we possibly budget when we don’t know from month to month how much income I’ll make?

Due to overtime, my husband’s income also varies pretty wildly, but we know the minimum and plan based on that.

I’ve finally reached a point where I think I’ve figured out a plan that works. I’m a slow learner. Don’t laugh. Starting two businesses in one year and managing the household finances is a big project for any gal! For those of you wandering around in the dark trying to figure this out like I was; here’s what I’m doing.

List your fixed expenses in order of priority—top to bottom

If you don’t have a budget, don not proceed. Do not pass go, go back a few steps and figure out your fixed and variable expenses for the month. This list should be the minimum you need to survive normally and keep the lights on and keep your credit intact. The minimum. I mean it!

Make a second list, in order of priority of items that you want/need.

This should be the list of all the “stuff” you want or need. Your emergency fund, paying off debts, savings for furniture, Christmas gifts, etc. The order of priority may change from month to month, so be prepared to change this list frequently.

Now what?

Now, with your monthly income, you pay the items from your fixed expenses, in order of priority. You make minimum payments on any debts. With any “variance” above that amount you apply it to the next item on your “wish list” (our first item is emergency fund, and second is an itemized list of each of our debts and after that we get into “stuff”).

If your minimum monthly income is not enough to meet your monthly fixed expenses plus minimums on debt payments, you need to slash your fixed expenses, and divert part of your income from a high month into a rollover fund—that can be spread in to fill the gaps in super-low months. You also might need a second job.

Being self-employed for nearly a year now, I’ve got a good idea of my average income per month and have a few “side hustle” tricks for picking up the income if it’s looking too low late in the month. I keep a running “work in progress” spreadsheet that shows all of my lines of business with rows for the projects that I’m billing and then a column for each month. I put the income amount in the month that I expect to receive the payments so that I can see my anticipated income each month. Each time an invoice is paid, I just hide that row. If I know a customer is going to slow-pay me, I just move it out a month, removing the “income” from this month’s projections and into next months.

By applying any income beyond your essential items in order of priority, you give yourself permission to stop spending when you run out of income for the month. You simply pick back up in the same place when your next check comes in—with the next paycheck, or invoice payment. If crisis hits and you can’t pay everything on your fixed list—you’ll be skipping purchases or payments on the least critical items (you sorted them by priority, remember?). You won’t find yourself foreclosed on or without food for the sake of paying or buying whatever was on your mind. Hopefully, this strategy will give you a plan, and with a plan will come peace of mind.
Good luck!

You know the more colorful phrase.

Bad things happen. Sometimes bad things happen because of our stupidity (guilty!), and sometimes bad things happen and that is just life.

“Nothing bad has happened in my life”

I had lunch with a friend today, in his mid twenties, who said, “Nothing bad has really happened in my life”

This isn’t uncommon for people my age. They had great childhoods. They didn’t see a family member struggle with mental illness. They haven’t faced any real major obstacles in their life.

When I encounter someone like this, my reactions split. Part of me feels envious, and the other feels sorry for them. When stuff hits the fan (and it will eventually), how will they handle it?

When it comes to money, some people make mistakes early in life (me!), others get hit with an illness or job loss and have no control over their circumstances.

Mistakes just make us human right?

It’s how we respond to those mistakes that define our paths in life.

I choose not to give up after I had to confront my massive trading losses. I was very tempted to give in. To just run away, and try to avoid the horrific pain I knew would be coming.

I’m glad I faced the fire. I have learned things in the past 3 years that I never would have had I not screwed up so royally.

It’s funny how sometimes our greatest mistakes can turn into the most opportune learning experiences. I know that’s been true in my life, and I imagine it’s better true of many of you as well.

What lessons have you learned when “Crap Happens”?

We’re ahead of where we usually are by this time in the month.

I haven’t stomped my feet and given up on the envelopes and the zero based budgeting yet, but yes, it is still scary. Another check came in this week and from it, I just started paying down the list on our cashflow plan (it’s in priority order, so that makes it easy). When the money ran out, I stopped paying, and it gets us 2/3 of the way through the list. Not too shabby. Another check will come in before the end of the month—and before the due dates on remaining planned items.

Plan ahead before starting this system

I’ll caution folks that this might be hard to start off on if, like us, you start your plan on the 1st but don’t get paid until the later. My husbands’ checks come on the 10th and 25th. I wish we’d stashed ourselves a bit of cash before we started on this. My income is self-employment income, so the timing is more erratic—depends on how current my clients are staying on their bills.

This does mean that I’ll be paying some items out of priority order simply because of due dates, but it’s no big deal if the phone bill gets paid before the grocery cash gets picked up at the bank—since I know we’ve got enough for both.

Time commitment

This is taking some maintenance time each week, but not nearly as much as I expected. I’d say about 10 minutes a week, though our first budget and cash-flow plan took the two of us a couple of hours to figure out.

How is this new?

The difference between my former method of managing the money and this cash-flow method–is that this truly is a plan. I know exactly what is getting paid based on priorities. It’s not a matter of paying great big payments on the credit cards (and patting myself on the back–only to find out I spent the grocery money), but it’s paying with purpose. There’s no panic or wonder, there’s no stress in it at all. There’s no concern about the fact that our income can fluctuate by as much as $3,000 a month. I simply pay down the list and in order of priority. When there is no more money, I just say “no” and that item isn’t getting paid at this time (the last 1/3 of our list is all debts, so while small payments will get paid in “low” months, I won’t be making giant payments).

It is fortunate for us that we don’t have to worry about not being able to pay something at all–but on this plan, if we were in that position, we’d know exactly where to stop and still be able to support our family.

Overall value

I’m a nerd, and my husband is a free spirit. I always want an extra cushion—and struggle with spending down to the last dime—even if the simple math tells me I can do it. I keep a little more than the plan says in the bank just to ease my mind and get used to the program.  My husband doesn’t like to feel constrained to a “plan.” But both of us are feeling good about this program—because he doesn’t have to feel too constrained (the item is either in the budget, or must be put into the budget—at which point, sometimes it’s less important than initially thought). Likewise, I don’t feel too “loose” with the money—paying it all out pretty much right away, because I’m getting used to some of it being in cash, versus in the bank account.

I suggest giving it a try. One thing we love is that we can’t go over budget on the envelope system on a cash budget item (groceries, gas, etc.). It’s working great!

My mother is moving back into a rental house that she owns, her only real equity as far as her finances goes.

The house badly needs new carpet.

How much does new carpet cost?

Well, what I’m finding out is that it completely depends. It depends on the carpet mostly. Carpet is like cars. You can get a KIA or you can get a Porshe.

My mother had called empire direct, and I immediately told her to go with someone else (after reading some terrible reviews online). Their price was 4.36 a sq. foot, or 39.24 a sq. yard, including pad and install for what sounded like medium grade carpet. That price is high, right?

From what I’ve read, a decent carpet should run around $20-25 per sq. yard installed. My mother needs about 1500 sq. feet of carpet installed.

What’s been your experience with buying carpet?

There are a few very common ways of doing this:

1. paying an extra amount in addition to your regular payment every month
2. adding lump-sum payments to the principal balance
3. setting up a bi-weekly payment plan

Option #1 is the easiest and most effective to implement in my opinion. You already have your mortgage payment automated (right?) so adding a little extra every month is is to “set and forget”. Option #2 could work well as long as you are able to manage your money well enough to consistently pay down your mortgage principal. If you choose this route, have a plan so you will know when you will pay a lump sum to this debt. This could when you reach a certain threshold in your savings account or you work overtime or receive “unplanned” funds some other way. Option #3 is becoming popular as well but some banks require you to use their service to implement this approach. For this you basically pay your mortgage every 2 weeks which adds an additional “monthly” payment over the course of the year. This works because it is biweekly, not bimonthly, meaning you make 26 payments which are half your normal mortgage payment (effectively 13 monthly payments) as opposed to 12 normal monthly payments.

Too Much Too Soon

Now I would love to start paying off any of my two mortgage or two home equity balances faster than planned. Unfortunately, I have credit card debt to handle first before considering where my extra money will go. This got me thinking of some long term questions since I do not really have a plan in place for my debt after paying off my credit cards.

• When will I be free of non-secured (credit card) debt?
• If I pay it off as I have planned, what will I do with the extra money?
• Invest in retirement?
• Pay off secured (housing) debt?
• Some form of both?
• Purchase another apartment to rent?

With that being said I now consider paying off my credit card debt my medium term debt (~3 years) and I’ve begun to think about my long term goals (>5 years) for after that. I’ll discuss my “master plan” in my next article.

No, my girlfriend didn’t break up with me. She did however, go home early tonite because she wasn’t feeling well. We’ve both been dealing with a nasty bug this week that seems to have infected half of Seattle.

I already worked about 5 hours earlier today. My full time employee and I were at Ikea picking up a few odds and ends for my office. We hired a few new part-time workers this last week, and needed to setup a few more workstations. I don’t usually work weekends much anymore, but it feels good.

Sometimes I’m amazed at how quickly things have changed for me. I’m not out of the debt woods yet by any means, but I’ve made some really big strides this year. I sleep better. I have a girlfriend I’m going to propose to in the near future. I have a mattress to sleep on!

Gotta love having a mattress!

A mattress to sleep on in an apartment that’s warm. Do you realize it was just two summers ago that I was sleeping on the floor of my office, and sometimes in my car???!!! Holy smokes. It doesn’t actually seem like that long ago. And yet, at times it seems like ages. It’s weird how some events are like that.

New Project: Coming Next Week

I’ve got a new project in the works that I’m pretty excited to share about with you guys, probably next week. It will be the first one that I can actually share about here, since I’ll be working on it as DK.

What are you happy about?

What are you happy about this weekend?

How would I find people?

No one would pay.

I don’t have the time.

I don’t have enough pots and pans, etc.

After talking a while, I convinced her that it was something she should pursue especially since she specializes in a type of food that is hard to find in our area. Would you believe that by the end of the day, she had her first gig? Catering for her cousins birthday party. Said cousin was willing to pay $300.  I’m really excited for her because knowing how these things work, people at the party will definitely ask who made the food. I’ve advised her to have business cards ready to hand out so she can capitalize on that.. Which brings me to my first point.

Figure out what you would do even if no one paid you.

After giving such great advice {:)}, it only made sense that I should think about how to apply it in my own life. I like to write but it’s not something that pays say $300 in  a weekend. It’s also a market that I feel is saturated. I took up photography a little while back and that is what I have decided to focus on. Unfortunately, photography is an expensive hobby so I will have to spend a little to make a lot.  However, once I’m comfortable charging for my skill, I can start taking pictures of peoples birthdays and weddings. I like doing this anyway, so getting paid for it is just and added bonus.

Hobbies you can capitalize on

I think the main thing is to pick something you actually like doing for others. If you enjoy cooking, but don’t particularly enjoy making food for a large number of people, catering might not be for you. You don’t want to make money but end up viewing your hobby as a chore. That to me defeats the purpose. I know not everyone can cook or has the money to spend on a camera but there are plenty of other things you could do on the side. Do you like experimenting with makeup? You could get paid for doing makeup at weddings or other formal events (think prom). Are you really handy with a blowdryer and curling iron? Why not do hair for events as well. If you enjoy running, you could start a local running class. Those of you that enjoy academic subjects could tutor. The trick is to capitalize on what you love.  This doesn’t have to be your full time job but it could bring in an extra $600 a month which is a great thing in my book.