Many people who take a hard look at their income/expense picture conclude that the solution is simple--just earn more. But as Amy D. explains early on in the Complete Tightwad Gazette, it's like trying to lose weight by exercise alone, without restricting calories. It takes twice as much work, not to mention time. People who try to earn more in their careers often have to spend more money and time to do so, whether it's achieving an advanced degree, or just working overtime. Some people try to squeeze in a home-based business on the side, but I know from experience that this can be a time-waster and a money-loser, if you're not extremely careful. Often the simplest solution for couples is to add more paychecks--hence the phenomenon of the wife wasting her time on low-paying service jobs.
Am I being pessimistic? There are, after all, lots of women with "good jobs," jobs that required a lot of investment on the front end, and seem to pay off in the short term. And, since I've heard "I need to work" so often, we need to examine the case of the more highly-paid Mrs. Let's say the wife has a moderate-paying job, like schoolteacher or nurse. I firmly believe (tho I have no charts to back this up) that in order for a woman to earn a high enough income to make it worth her while to be in the workforce, she must spend more hours in the workplace. Either it's because her skills confine her to office or service work (which may suck hours in exchage for a fixed salary or offer shift work for a low fixed hourly wage), or she finds herself funneled into public sector jobs, for which there is a fixed wage but more hours of actual work (such as schoolteacher). The one exception seems to be nursing--where a woman can go out, acquire her credentials, and then work a fixed number of hours for a fixed wage that is high enough and doesn't entail more work.
But there is a further cost to the woman's increased income productivity in the workplace. She now spends so many hours outside of the home, that she must "replace herself" and the things that she may have done in the home, with purchased goods and services. This goes above and beyond the cost of daycare and convenience food; the woman says to herself that she is working--therefore she can afford to buy things. And since wholesome family life is lacking, she'll hit the stores to try and replicate it. Ever been in beautifully decorated and furnished homes that stand empty all day? Or perhaps she splurges on twice-monthly maid service. On top of that, there are the children to truck here and there, and programs to put them in so that they don't go home to the empty house, and fees and supplies for those activities. Not to mention the enormous emotional strain that a "productive" wife puts on a marriage. Not only do husband and wife hardly see each other, nor are permitted to serve one another in tangible ways involving their home life, but they spend hundreds of hours a year in the company of co-workers of the opposite sex who may or may not seem more attractive or sympathetic as time goes by. Add the inevitable financial strain of increased expenses that the wife's career was originally supposed to prevent, and you have fertile ground for divorce--the biggest expense of all.
But it isn't my intent to debate the wife who works. Work if you will, only do so with eyes open to the consequences. The fact is, most of us can only increase our productivity up to a point. After you've reached a certain "balance point" (if you will) the IRS will come and take away the surplus. It's sad but true--our modern economy actually punishes increased productivity with increased taxes. The way our progressive income tax works, you get taxed at a lower rate for the first $15,000 of earned income. But each $5- $10,000 (depending on the tax code in a given year) you make beyond that is taxed at successively higher rates. A married couple filing jointly pools their income and gets a standard deduction that is not equal to twice the amount of standard deduction a single person is allowed to take (hence the term "marriage penalty"). Add the wife's income on top of the husband's income, subtract the deduction, and you can see why it generally doesn't pay to make the wife work. They are now in a higher tax bracket. Every bit of extra income the wife brings in is taxed at much higher rates than the husband's. Even if they have a number of itemized deductions (such as their mortgage, daycare, or child tax credits), these "shelters" still represent income that had to be paid out during the year for various expenses...expenses which tend to be higher when both spouses work (since they figure they can "afford" it). An income tax return is not the windfall it seems to be, either. Keep in mind that Medicare and Social Security/FICA taxes are equal to or greater than the federal income tax and you can't claim anything against those. Earn more income, and you'll pay more on them...without ever seeing a penny of it back. The higher tax cost of working wives (even if they are more highly paid), along with increased expenses, can thus erase the perceived gains.
Consider ALL the costs of being employed. Not only are there higher taxes to be paid, but the higher the income, the higher the cost of being employed tends to be. What do I mean? Just one example: let's say you have a long commute in order to get to your workplace. Do you have any idea of what the cost per mile of driving your car is? It's more than just the cost of gas. It's the total cost of every penny you've put into that car--including expected future repairs--divided by the total number of miles you expect to get out of it. You would have to add up your mileage during the year and multiply it by that figure to get the cost of your transportation. How much time do you spend commuting and how much would that time be worth if spent in a more productive way (like if you worked closer and could get there earlier)? Does your commute incur extra costs (lattes, occasional trips to McDonald's for breakfast, SIRIUS satellite radio, etc.)? If you're a woman, you're probably extremely sensitive to what the other women in the office are having, doing, and wearing. The higher your income, the more likely you are to spend more money on clothes, haircuts, handbags, and lunches. Most men are virtually required to carry cell phones anymore, to be perceived as viable job candidates. Increasingly, women and kids are packing cell phones as well. The bills are enormous. What about Internet use? The purchase of other personal electronics (pagers, PDA's, laptops) that seem to "go with" the image or requirements of being an upwardly mobile worker? My husband travels for work and goes through about $100 worth of luggage a year. Add it up.
All of this DOES NOT INCLUDE the cost of the degree track or vocational skills you had to acquire in order to go to work in the first place. Student debt must be factored in to the income a certain career track has to offer...and it only goes up in proportion to the expectation of higher income. Consider the mania over college education. Every child is now encouraged to make a college degree their ultimate goal, regardless of the child's individual potential and preference. But is this a good investment of time and money? How many of us pissed away our college years only to find ourselves hip-deep in student loans with no sense of purpose in life? The lucky ones who did manage to get good jobs and earn more find themselves in higher tax brackets and more expensive lifestyles. Did they really get ahead?
Hey, I'm not trying to rain on anybody's parade here. If you paid your dues and are now pulling down a substantial income and have absolutely no financial worries, kudoes to you. In good times, it makes sense to increase your productivity as much as opportunity and common sense afford. In bad times, people must often consider alternatives they never would have touched before. And times are bad. Median real wages for men and women have gone down for the last five years--and this was during a supposed "recovery." Now our stocks and bonds and houses are "deflating"--losing value--while food, gas, and health care costs continue to rise, as well as the cost of a college education. And all the cheap gewgaws from China are not enough to make up for it. My point is, if the college education doesn't pay, why pay a premium for it?
What you really need to consider is, how can you maximize the income you have to spend on actual LIFE, while minimizing the amount you spend on "cost" (taxes, housing, debt service, cost of employment). Instead of asking yourself how many square feet you can get in a house, or how new a vehicle you can purchase, look at the bottom line and ask, what do I want for my family? Do we want a high quality of life without financial pressures? Would we rather have mom at home, or working at the projects she finds most satisfying? If we think smaller in terms of material things, we can think larger in terms of having a fulfilling family life. Taking summer vacations (the inexpensive kind)...starting a garden...putting an addition on the house by doing it ouselves. Or just watching the leaves fall while the cookies are in the oven. Sometimes the things we enjoy the most are the ones that take more time than money. If you seek to maximize the use of time allocated to producing income, according to the skills and the wage that bring you the most gain with the least tax/debt liability, you can free up the maximum amount of time to spend on family, hobbies, church or civic work.
An inspiring example comes from the pages of the Economic Survival Manual. A working couple, upon toting up all the costs of being employed, promptly quit their jobs, and worked out a plan. Along with their two teenage sons, they each found a part-time job paying $5,000 a year. Since each of them was paying only the minimum in taxes, their disposable income was about the same as when mom and dad spent long hours at work and on stressful commutes. Plus each of them worked only a few months a year to earn his or her share of the family income. The rest was free time! This example comes from 1982, when getting health care coverage was less of an issue, but it's worth it to think outside of the box.
The bugaboo that keeps people from pursuing this plan, however, tends to be the high fixed cost of a mortgage. "Even if the costs are higher," they'll say. "We have to increase income to pay for the house."
We'll tackle that next.
NOTE: In wordy and detailed posts, I'm going to experiment a little with format. Here, I bolded the main idea in each (enormous) paragraph to help readers wade through. Let me know if you prefer it plain, or chopped up into smaller paragraphs, or what have you.
Friday, September 28, 2007
Tuesday, September 18, 2007
Wacky Way #1: Don't bother with a budget
Every beginning finance book begins with having you make out a budget. But really, that is stupid advice. I tried!
For a year, I dutifilly sat down with our bank statement and laboriously added up individual check and debit card payments in about ten different categories in an effort to figure out the elusive budget. It didn't work--there were always incidental expenses, impulse buys, random fees and "miscellaneous money" (Who spent $73.47 on check number 2225??). Add to this the fact that when the paycheck comes in, it isn't always a constant number either. I attempted to average our income over a one-year period but that was also a laborious task...one that I would have to repeat year after year (assuming we still had it). And this is coming from a person whose aptitude test scores always registered "accountant" at the top. How is the not-too-keen-on-math person supposed to perform this feat? The answer: don't.
Here's what you do. You need to get the big picture on your finances, and Uncle Sam already forces you to do it. So dig up last year's tax return, and grab a Tupperware lid or something round and draw a big circle on a piece of scrap paper. Fold the paper in half so your lines match until you have some even-numbered amount of divisions in your circle. You start with your total amount of compensation on your W-2's (don't rely on the figure in box 1--add up all the little bonuses and benefits that are listed separately, because that list represents your total compensation). If your household depends on income from some other source, add that in. Don't worry about interest or dividends--just the income that you are counting on to come in on a monthly basis to pay the bills. This is the size of your pie. Write that amount across the top of the page.
Now start going through your deduction paperwork. It should tell you how much you've paid toward interest, principle, and taxes on your house (or you could just add up your rent, if you're lucky enough NOT to owe on a mortgage). Next, add up all the types of compensation on the W-2 that do not come to you in the form of money, because these represent money that you paid out through the company for various benefits that they administer for you (health care premiums, 401(k), etc). Then add up all the boxes of taxes that were taken out (don't forget state income tax and even sales tax). Get out your trusty calculator, figure the percentages, and draw them into your pie. You can see that these three categories already take a massive chunk out of your total take-home income. Don't get discouraged--we'll tackle these in later posts.
Next, add up your debt-service payments such as car loans, credit card bills, student loans, and any other debt that you pay a monthly interest payment on. If the payments differ from month to month, try to get an average and multiply by 12. Draw that one into your pie.
Now from here, you can take this exercise as far as you want--adding up your health care costs, charitable giving, food costs, utility costs, phone, whatever. The purpose of the exercise is to get you to see, of course, that what you are making on paper is far more than what you actually see in your bank account. So the next time you are feeling "rich" because you figure you make such-and-such and your house is worth such-and-such and you're tempted to splurge...just remember how small of a slice of that overall pie you are living on.
Your first goal, at the beginning of this money-management odyssey, is to get rid of all non-mortgage debt. To do that, you have to come up with extra money--and unless you are about to get a raise or big promotion (and assuming you don't want to have to send the Mrs. to work), you're going to have to reduce or eliminate some spending to free up money to pay off debt.
Do you see why budgets don't work? The moment you have a figure posted in your head, say $300 on food for the month, or $75 on a phone bill, you find yourself spending the whole amount, thinking you can "afford it"--without any incentive to examine the expense for more ways to save, substitute, or sacrifice. This is why governments may make "budgets," but they always overspend them.
Instead, aim for spending as little as possible. Try to find ways to keep cutting as the months go by. Monitoring your bank statements helps, as well as NOT pulling cash from the ATM. Cash tends to get frittered away, whereas every debit charge gets recorded on your monthly bank statement. Ruthlessly analyze this statement for at least six months, and slash extraneous expenses. This can be distressing at first, because unexamined spending tends to be loose indeed. But you will save far more this way, and will not be tempted to "go over," because you are always seeking the lowest possible cost. Once you've reached the level where you can't go any lower, you can note down the numbers if you like and call it a budget.
But don't get complacent.
The goal is to find money and re-direct it toward paying off debt. This will be easy at first, but gets harder as you go. Examine every utility and telecommunications bill that you get. Read insurance contracts and question charges that you don't understand. Shop loss-leader sales at the supermarkets and be sure to record prices in your notebook. Ask around for tips on saving money, and look for money-saving books and web sites. I only recommend The Tightwad Gazette because it is the most comprehensive re-education in frugality you can get for the money, and highly entertaining, too.
You might become obsessed with money for a little while, because you are embarking on a whole new lifestyle, but try to remain low-key about it. Comments like, "Hey, honey, when I mix your gourmet coffee grounds with half Folgers, we save 25 cents a cup!" may not go over too well. It's hard to convince the family that your goal is their eventual financial freedom when all they hear about is how wasteful they are with money. Just do what you can to work around the edges until the numbers finally begin to convert your husband. Then feed the kids on your vision of what debt-free life could look like. You could take trips. They could go to a horse-riding camp. If they would just give up their expensive sneaker obsession, it would be enough to pay for a family cell phone plan, or whatever ideas you can think of...
If you are lucky enough to have a small-ish debt or no debt at all, great! You can move on to the next phase of the plan that much faster. After all the non-mortgage debt is paid off, you will experience a surplus. Not only did you save money by cutting expenses, but now all that money that was going toward debt is freed up for your next financial goal--a six-month emergency savings cushion. "Great!" you say. "I didn't have any debt to begin with, so I didn't even have to cut expenses!"
STOP!!
You still need to cut your expenses as far as possible...not only does it become a fun challenge (when you're not stressed over debt), but you'll never be able to afford a six month cushion if you keep expenses at current levels. This is why people don't have an emergency fund--they figure they'd never be able to save that much. Plus, you'll still want the money for some other goals worth pursuing, so trust me on this one. Discipline yourself for one year or so and you'll soon find that saving and the tightwad mentality become second nature.
For some people, this is all too much. They would rather just re-finance or roll the debt onto a low-interest credit card, or tell the wife she "needs to contribute" with a low-paying service job. But what I hope you will eventually realize is that our life and our labor are valuable. That is our form of capital.
We may not own factories or natural resources or large tracts of land--we own our labor. And we housewives who depend upon our husbands' labor do not want to see it go to waste. Neither can we afford our own energy or interest in our family to get frittered away. For Catholics, this process is packed with great virtues like prudence and stewardship. Don't forget to pray for the help and resources you need. It might be a part-time job, for a while.
But don't lose sight of your ultimate goal, which is to be the God-centered family you always knew you should be.
For a year, I dutifilly sat down with our bank statement and laboriously added up individual check and debit card payments in about ten different categories in an effort to figure out the elusive budget. It didn't work--there were always incidental expenses, impulse buys, random fees and "miscellaneous money" (Who spent $73.47 on check number 2225??). Add to this the fact that when the paycheck comes in, it isn't always a constant number either. I attempted to average our income over a one-year period but that was also a laborious task...one that I would have to repeat year after year (assuming we still had it). And this is coming from a person whose aptitude test scores always registered "accountant" at the top. How is the not-too-keen-on-math person supposed to perform this feat? The answer: don't.
Here's what you do. You need to get the big picture on your finances, and Uncle Sam already forces you to do it. So dig up last year's tax return, and grab a Tupperware lid or something round and draw a big circle on a piece of scrap paper. Fold the paper in half so your lines match until you have some even-numbered amount of divisions in your circle. You start with your total amount of compensation on your W-2's (don't rely on the figure in box 1--add up all the little bonuses and benefits that are listed separately, because that list represents your total compensation). If your household depends on income from some other source, add that in. Don't worry about interest or dividends--just the income that you are counting on to come in on a monthly basis to pay the bills. This is the size of your pie. Write that amount across the top of the page.
Now start going through your deduction paperwork. It should tell you how much you've paid toward interest, principle, and taxes on your house (or you could just add up your rent, if you're lucky enough NOT to owe on a mortgage). Next, add up all the types of compensation on the W-2 that do not come to you in the form of money, because these represent money that you paid out through the company for various benefits that they administer for you (health care premiums, 401(k), etc). Then add up all the boxes of taxes that were taken out (don't forget state income tax and even sales tax). Get out your trusty calculator, figure the percentages, and draw them into your pie. You can see that these three categories already take a massive chunk out of your total take-home income. Don't get discouraged--we'll tackle these in later posts.
Next, add up your debt-service payments such as car loans, credit card bills, student loans, and any other debt that you pay a monthly interest payment on. If the payments differ from month to month, try to get an average and multiply by 12. Draw that one into your pie.
Now from here, you can take this exercise as far as you want--adding up your health care costs, charitable giving, food costs, utility costs, phone, whatever. The purpose of the exercise is to get you to see, of course, that what you are making on paper is far more than what you actually see in your bank account. So the next time you are feeling "rich" because you figure you make such-and-such and your house is worth such-and-such and you're tempted to splurge...just remember how small of a slice of that overall pie you are living on.
Your first goal, at the beginning of this money-management odyssey, is to get rid of all non-mortgage debt. To do that, you have to come up with extra money--and unless you are about to get a raise or big promotion (and assuming you don't want to have to send the Mrs. to work), you're going to have to reduce or eliminate some spending to free up money to pay off debt.
Do you see why budgets don't work? The moment you have a figure posted in your head, say $300 on food for the month, or $75 on a phone bill, you find yourself spending the whole amount, thinking you can "afford it"--without any incentive to examine the expense for more ways to save, substitute, or sacrifice. This is why governments may make "budgets," but they always overspend them.
Instead, aim for spending as little as possible. Try to find ways to keep cutting as the months go by. Monitoring your bank statements helps, as well as NOT pulling cash from the ATM. Cash tends to get frittered away, whereas every debit charge gets recorded on your monthly bank statement. Ruthlessly analyze this statement for at least six months, and slash extraneous expenses. This can be distressing at first, because unexamined spending tends to be loose indeed. But you will save far more this way, and will not be tempted to "go over," because you are always seeking the lowest possible cost. Once you've reached the level where you can't go any lower, you can note down the numbers if you like and call it a budget.
But don't get complacent.
The goal is to find money and re-direct it toward paying off debt. This will be easy at first, but gets harder as you go. Examine every utility and telecommunications bill that you get. Read insurance contracts and question charges that you don't understand. Shop loss-leader sales at the supermarkets and be sure to record prices in your notebook. Ask around for tips on saving money, and look for money-saving books and web sites. I only recommend The Tightwad Gazette because it is the most comprehensive re-education in frugality you can get for the money, and highly entertaining, too.
You might become obsessed with money for a little while, because you are embarking on a whole new lifestyle, but try to remain low-key about it. Comments like, "Hey, honey, when I mix your gourmet coffee grounds with half Folgers, we save 25 cents a cup!" may not go over too well. It's hard to convince the family that your goal is their eventual financial freedom when all they hear about is how wasteful they are with money. Just do what you can to work around the edges until the numbers finally begin to convert your husband. Then feed the kids on your vision of what debt-free life could look like. You could take trips. They could go to a horse-riding camp. If they would just give up their expensive sneaker obsession, it would be enough to pay for a family cell phone plan, or whatever ideas you can think of...
If you are lucky enough to have a small-ish debt or no debt at all, great! You can move on to the next phase of the plan that much faster. After all the non-mortgage debt is paid off, you will experience a surplus. Not only did you save money by cutting expenses, but now all that money that was going toward debt is freed up for your next financial goal--a six-month emergency savings cushion. "Great!" you say. "I didn't have any debt to begin with, so I didn't even have to cut expenses!"
STOP!!
You still need to cut your expenses as far as possible...not only does it become a fun challenge (when you're not stressed over debt), but you'll never be able to afford a six month cushion if you keep expenses at current levels. This is why people don't have an emergency fund--they figure they'd never be able to save that much. Plus, you'll still want the money for some other goals worth pursuing, so trust me on this one. Discipline yourself for one year or so and you'll soon find that saving and the tightwad mentality become second nature.
For some people, this is all too much. They would rather just re-finance or roll the debt onto a low-interest credit card, or tell the wife she "needs to contribute" with a low-paying service job. But what I hope you will eventually realize is that our life and our labor are valuable. That is our form of capital.
We may not own factories or natural resources or large tracts of land--we own our labor. And we housewives who depend upon our husbands' labor do not want to see it go to waste. Neither can we afford our own energy or interest in our family to get frittered away. For Catholics, this process is packed with great virtues like prudence and stewardship. Don't forget to pray for the help and resources you need. It might be a part-time job, for a while.
But don't lose sight of your ultimate goal, which is to be the God-centered family you always knew you should be.
Friday, September 14, 2007
Top Ten Wackiest Ways to Save Money
Let's face it, finance can be a boring topic. You can plow through manual after manual purporting to give financial advice, especially to householders, and find (along with perhaps some interesting bits) the same budgeting worksheets and the same safe n' sane investment advice doled out over a generation. Considering how popular these books are, you'd think more people in America would be managing their bottom line better.
BUT THEY'RE NOT!
The real savings rate for US citizens is now -1.3%.It hasn't been this bad since the Depression. Which is pretty much what Amy D. sums up in the first few pages of The Tightwad Gazette, Book One.
For people who are dang near desperate for money-management advice (and don't want to fall asleep learning about it), the unconventional approach is worth a look. For instance, have you considered trying some of these offbeat ideas?
1. THROW YOUR BUDGET OUT THE WINDOW
2. EARN LESS
3. DUMPSTER DIVE
4. HIDE YOUR MONEY IN YOUR MATTRESS
5. LIVE IN A BUS
6. FLEE YOUR 401(K)
7. GIVE BIRTH AT HOME
8. EAT CAT FOOD
9. BUY "LOSER" STOCKS
10. FREQUENT PAWN SHOPS
Sound sensational? I hope so, because this post is an introduction to a series I've already mostly written, according to the subtitles above. Look for each new post with a lag time of 1-3 days to allow for editing (and possible teething). I'm serious about spewing out my new-found insights to anybody who feels like they might benefit from them...so stay tuned....
BUT THEY'RE NOT!
The real savings rate for US citizens is now -1.3%.
For people who are dang near desperate for money-management advice (and don't want to fall asleep learning about it), the unconventional approach is worth a look. For instance, have you considered trying some of these offbeat ideas?
1. THROW YOUR BUDGET OUT THE WINDOW
2. EARN LESS
3. DUMPSTER DIVE
4. HIDE YOUR MONEY IN YOUR MATTRESS
5. LIVE IN A BUS
6. FLEE YOUR 401(K)
7. GIVE BIRTH AT HOME
8. EAT CAT FOOD
9. BUY "LOSER" STOCKS
10. FREQUENT PAWN SHOPS
Sound sensational? I hope so, because this post is an introduction to a series I've already mostly written, according to the subtitles above. Look for each new post with a lag time of 1-3 days to allow for editing (and possible teething). I'm serious about spewing out my new-found insights to anybody who feels like they might benefit from them...so stay tuned....
Wednesday, September 12, 2007
Price Book Blunder
I don't consider myself a financial guru. In fact, I have been known to make dumb mistakes about very basic stuff. Take today. I have been touting the benefits of saving at the supermarket with the "price book," which is a little notebook in which you record the absolute lowest rock-bottom price at which you can get your groceries, unit cost/size, and whatever store or source you found it at.
Now, what I didn't tell you is that I've cheated a little bit and carried my price book around in my head. I pretty much buy the same stuff from the same 3 stores, so I didn't think it was worth the exercise. However, I always have my calculator to cut through any unit cost mumbo jumbo I run across on store shelves.
But I got burned today.
Trawling through the local Safeway looking for decent prices on stuff (and not finding squat except $2 a pound coupon cheese), I saw a special on buy-one-get-one-free 18 ct eggs. This is usually a no-brainer, so I start to check them and put them in the cart. Then I see the price is 5.19. Whoa! I think that sounds high, but I'm not really sure. You see, egg price displays surely have to be one of the seven wonders of the world when it comes to confusing people. I'd have to have the price book in front of me to tell me how much to pay per egg.
But since I don't, I whip out my trusty calculator, which tells me the sale eggs are 14 cents apiece. Knowing that sometimes sales can be misleading in that they don't actually give you the lowest unit price for the item, I start calculating the cost per egg on some of the other myriad size/price cartons. Finally I come up with one at 13 cents per egg. Oh well, I thought, this is the best I can get. Prices are going up. So I grab the 18 ct version of this size egg and head for the register. Whoops! Once I'm through I'm checking to see I got my coupon deal for the cheese and I see that I've paid $4.29 for 18 eggs!!
That's 23 cents per egg!!!!
How did this happen? I calculated 13 cents per egg for this size based on a sale price for a dozen egg carton--not the 18 egg carton. By buying the wrong size carton, I accidentally ended up paying full price for the eggs, when even the old buy-one-get-one-free deal would have been better. Of course I didn't realize this until after I'd gotten home and cracked two eggs into a batch of TVP-laced meatloaf. I don't even know if they let you take back something like eggs (I usually can't anyway, since it's impossible to run right back to the store when you've got two tired kiddos...and I hate making a spectacle of my tightwaddery to mystified store personnel--"No, there's nothing wrong with the eggs...I just paid too much for them...")
Of course, if I was a true tightwad (a la Amy Dacyzyn) I would have used two heaping tablespoons of soy flour + two tablespoons water in place of the eggs. So I have a long way to go. Upshot is, I learned an expensive lesson that cost me my savings on the coupon cheese and betrayed the limits of the "price book in my head" idea. The only comfort I get out of all this is the hope that some housewife somewhere will learn from my blunder.
Now, what I didn't tell you is that I've cheated a little bit and carried my price book around in my head. I pretty much buy the same stuff from the same 3 stores, so I didn't think it was worth the exercise. However, I always have my calculator to cut through any unit cost mumbo jumbo I run across on store shelves.
But I got burned today.
Trawling through the local Safeway looking for decent prices on stuff (and not finding squat except $2 a pound coupon cheese), I saw a special on buy-one-get-one-free 18 ct eggs. This is usually a no-brainer, so I start to check them and put them in the cart. Then I see the price is 5.19. Whoa! I think that sounds high, but I'm not really sure. You see, egg price displays surely have to be one of the seven wonders of the world when it comes to confusing people. I'd have to have the price book in front of me to tell me how much to pay per egg.
But since I don't, I whip out my trusty calculator, which tells me the sale eggs are 14 cents apiece. Knowing that sometimes sales can be misleading in that they don't actually give you the lowest unit price for the item, I start calculating the cost per egg on some of the other myriad size/price cartons. Finally I come up with one at 13 cents per egg. Oh well, I thought, this is the best I can get. Prices are going up. So I grab the 18 ct version of this size egg and head for the register. Whoops! Once I'm through I'm checking to see I got my coupon deal for the cheese and I see that I've paid $4.29 for 18 eggs!!
That's 23 cents per egg!!!!
How did this happen? I calculated 13 cents per egg for this size based on a sale price for a dozen egg carton--not the 18 egg carton. By buying the wrong size carton, I accidentally ended up paying full price for the eggs, when even the old buy-one-get-one-free deal would have been better. Of course I didn't realize this until after I'd gotten home and cracked two eggs into a batch of TVP-laced meatloaf. I don't even know if they let you take back something like eggs (I usually can't anyway, since it's impossible to run right back to the store when you've got two tired kiddos...and I hate making a spectacle of my tightwaddery to mystified store personnel--"No, there's nothing wrong with the eggs...I just paid too much for them...")
Of course, if I was a true tightwad (a la Amy Dacyzyn) I would have used two heaping tablespoons of soy flour + two tablespoons water in place of the eggs. So I have a long way to go. Upshot is, I learned an expensive lesson that cost me my savings on the coupon cheese and betrayed the limits of the "price book in my head" idea. The only comfort I get out of all this is the hope that some housewife somewhere will learn from my blunder.
Monday, September 03, 2007
Should the Mrs. get a job at Costco?
Dear readers,
The following is a scenario I typed up to help out a friend. I hope it helps clarify the picture for a housewife who wants to "help out" with family finances and thinks that a part time service job might fit the bill. Think again:
"Let's say you work 30 hrs a wk at $8.00 at Costco (or a service job like it). You will be earning $240 a week, or $960 a month. However, there are several "hidden" expenses to a second income, especially a part-time service income. Is it worth it? Subtract:
-$144 federal taxes
-$48 state/local taxes or other withholding
-$180 for 3 meals/wk prepackaged or takeout (for your tired days)
-$50 extra tank of gas a month (assuming you work locally)
-$100 in Costco food and other "great deals" (c'mon, you know I'm right)
That leaves $438 left.
For your 120 hours a month, you're earning $3.65 an hour. At current household spending levels, it will probably just evaporate. Then it seems you're working for nothing. Running to stand still. Is it worth it? What if you:
Reduce your food bill by 1/3 using a price book and doing some (not all) scratch cooking? (1/3 of a $400/month food bill--if that sounds shocking, get out your bank statement and add up the shopping trips)
+$132
Examine the monthly services billed to your household for redundant/unneeded services. (Examples: phone/cell/internet/cable bills are enormous...do you really need all of it? Can anything be trimmed back or bundled with just the services you use? Do you really need voice mail when you have an answering machine? Do you need your garbage picked up every single week? Do you drive less than 3,000 miles a year--you could get a low-mileage discount on your insurance policy (worth $100/yr to us))
+$75
Reduce debt service payments by paying off high-interest balances or switching to a low-interest, no fee credit card (15% of $300/mo worth of pmts. You have to resolve to pay it off, don't add more debt!)
+$50
Examine monthly bank statement for "blown money" (that irresistible sale, those DVD's, trips to Starbucks, internet shopping. Did you really need it?
+$100
What about entertainment? What if you rented movies instead of going to the theater? Learned to make your own pizza? Subtracted one restaurant meal in a month?
+81
=$438/mo savings, the same amount you would have earned (net) from Costco.
You have this savings now every month to do with what you will. If you find new ways to save, the added wealth starts piling up every month, because once you figure out how to save, conserve, cut back, or substitute expenses, it is money in your pocket as long as you continue those habits ($500 X 12 months=$6,000 minimum tax-free income to your family for the year).
Some people resist measures like this because they think it will cause feelings of deprivation. To that I say, nothing makes me feel poorer than looking in my bank account and seeing only four digits, regardless of how much "stuff" there is around me. Remember that book about the millionaires next door? They shop clearance and don't waste money on things that you only use/experience once. But I know you are creative enough to find ways to save without lecturing everybody, saying "no" all the time and complaining about bills. By changing habits only slightly, you can cut back considerably. I've low-balled all these figures to prove a point, but I know you can do much better because you know your situation. If not, ask your husband to show you or start digging into your paperwork to find out. If you like where this is going, you can take the next step:
*See your household as a "home-based business" and yourself as a capable business manager.
*Continue monitoring bank statements and hidden spending habits that cost hundreds or thousands a year.
*Determine to make your household an engine of wealth by adopting a capital/net-worth mentality instead of an earn-to-spend consumer mentality.
*Inventory your husband's investments...get rid of time bombs! slash expense ratios!
*Plug money into Roth accounts...do you have an IRA?
If the problem is health care insurance, examine the policy you currently have. Does the company give you any choices? Our company offered a low-premium, high-deductible health plan that didn't seem too attractive until we had piled up some money in the bank. Even with hospital bills, we've racked up savings just on the premiums (and the plan is surprisingly generous once we pay the deductible). Even if you can't change plans, the extra savings can help make up the shortfall.
The point is, cut back and conserve on expenses that don't deliver. Reduce or pay off high-interest debt and make sure your investments are working for you, not just sitting there. Build retirement savings. Build a cash cushion. Have adequate insurance, but not too much (do you have life insurance?) Run financial "fire drills"--what would you do if hubby got laid off? If somebody got injured or really sick? What if the housing market tanks and our houses lose value? What if inflation causes prices to rise across the board?
Our success story...after buying this house we had more credit card debt than we had money in the bank. Now after four years we have a 6 month cash cushion and our net worth has quadrupled. We managed this on one income, with a little luck and a lot of discipline, which was mostly just a change in attitude and an awareness of where the money goes. It does work.
Husbands just want to see the bottom line. Unless you really want to trade 120 hours/mo for $3.65/hr, put these steps into action and prove to your husband that you are an efficient manager who can pull her own weight. You don't have to ask him to spend less or change his standard of living. And his enthusiasm will rise when he sees the money start to pile up in your bank account."
Will my advice be heeded? I don't know. So many people seem stuck in a consumer mentality that they are more willing to trade hundreds of hours of their precious time and labor for a pittance that will simply be melted off in trade for consumer junk. Even with families that aren't rabid spenders, the perceived need for extra income will mask the extra expenses that a working wife can bring.
Case in point: my friend Lisa, who went to work "part-time" to help out with family expenses has now increased her weekly hours to 36, the most she can work w/o pulling benefits. She looks and sounds tired, but she probably thinks she has to work this much because the bills just keep piling up. The incentive to save or cut back household expenses has probably given way to "tired days" and the conveniences or material rewards that make such wheel-spinning seem worthwhile. Give it a second look, please.
ROLL CALL! Where are my readers? Have I lost all five of you? I have lots more savings/economic/finance/investment articles in the pipeline thanks to reams of recent research and I am prepared to explain how it can benefit YOU! If you want to see more posts like the ones I have done recently, please comment as my e-mail is now checked daily and my brain is budgin.'
In the meantime, let's all repeat the new Catholic Housewife mantra--
"A frugal and industrious housewife is ALWAYS worth her keep (kids or no kids)."
The following is a scenario I typed up to help out a friend. I hope it helps clarify the picture for a housewife who wants to "help out" with family finances and thinks that a part time service job might fit the bill. Think again:
"Let's say you work 30 hrs a wk at $8.00 at Costco (or a service job like it). You will be earning $240 a week, or $960 a month. However, there are several "hidden" expenses to a second income, especially a part-time service income. Is it worth it? Subtract:
-$144 federal taxes
-$48 state/local taxes or other withholding
-$180 for 3 meals/wk prepackaged or takeout (for your tired days)
-$50 extra tank of gas a month (assuming you work locally)
-$100 in Costco food and other "great deals" (c'mon, you know I'm right)
That leaves $438 left.
For your 120 hours a month, you're earning $3.65 an hour. At current household spending levels, it will probably just evaporate. Then it seems you're working for nothing. Running to stand still. Is it worth it? What if you:
Reduce your food bill by 1/3 using a price book and doing some (not all) scratch cooking? (1/3 of a $400/month food bill--if that sounds shocking, get out your bank statement and add up the shopping trips)
+$132
Examine the monthly services billed to your household for redundant/unneeded services. (Examples: phone/cell/internet/cable bills are enormous...do you really need all of it? Can anything be trimmed back or bundled with just the services you use? Do you really need voice mail when you have an answering machine? Do you need your garbage picked up every single week? Do you drive less than 3,000 miles a year--you could get a low-mileage discount on your insurance policy (worth $100/yr to us))
+$75
Reduce debt service payments by paying off high-interest balances or switching to a low-interest, no fee credit card (15% of $300/mo worth of pmts. You have to resolve to pay it off, don't add more debt!)
+$50
Examine monthly bank statement for "blown money" (that irresistible sale, those DVD's, trips to Starbucks, internet shopping. Did you really need it?
+$100
What about entertainment? What if you rented movies instead of going to the theater? Learned to make your own pizza? Subtracted one restaurant meal in a month?
+81
=$438/mo savings, the same amount you would have earned (net) from Costco.
You have this savings now every month to do with what you will. If you find new ways to save, the added wealth starts piling up every month, because once you figure out how to save, conserve, cut back, or substitute expenses, it is money in your pocket as long as you continue those habits ($500 X 12 months=$6,000 minimum tax-free income to your family for the year).
Some people resist measures like this because they think it will cause feelings of deprivation. To that I say, nothing makes me feel poorer than looking in my bank account and seeing only four digits, regardless of how much "stuff" there is around me. Remember that book about the millionaires next door? They shop clearance and don't waste money on things that you only use/experience once. But I know you are creative enough to find ways to save without lecturing everybody, saying "no" all the time and complaining about bills. By changing habits only slightly, you can cut back considerably. I've low-balled all these figures to prove a point, but I know you can do much better because you know your situation. If not, ask your husband to show you or start digging into your paperwork to find out. If you like where this is going, you can take the next step:
*See your household as a "home-based business" and yourself as a capable business manager.
*Continue monitoring bank statements and hidden spending habits that cost hundreds or thousands a year.
*Determine to make your household an engine of wealth by adopting a capital/net-worth mentality instead of an earn-to-spend consumer mentality.
*Inventory your husband's investments...get rid of time bombs! slash expense ratios!
*Plug money into Roth accounts...do you have an IRA?
If the problem is health care insurance, examine the policy you currently have. Does the company give you any choices? Our company offered a low-premium, high-deductible health plan that didn't seem too attractive until we had piled up some money in the bank. Even with hospital bills, we've racked up savings just on the premiums (and the plan is surprisingly generous once we pay the deductible). Even if you can't change plans, the extra savings can help make up the shortfall.
The point is, cut back and conserve on expenses that don't deliver. Reduce or pay off high-interest debt and make sure your investments are working for you, not just sitting there. Build retirement savings. Build a cash cushion. Have adequate insurance, but not too much (do you have life insurance?) Run financial "fire drills"--what would you do if hubby got laid off? If somebody got injured or really sick? What if the housing market tanks and our houses lose value? What if inflation causes prices to rise across the board?
Our success story...after buying this house we had more credit card debt than we had money in the bank. Now after four years we have a 6 month cash cushion and our net worth has quadrupled. We managed this on one income, with a little luck and a lot of discipline, which was mostly just a change in attitude and an awareness of where the money goes. It does work.
Husbands just want to see the bottom line. Unless you really want to trade 120 hours/mo for $3.65/hr, put these steps into action and prove to your husband that you are an efficient manager who can pull her own weight. You don't have to ask him to spend less or change his standard of living. And his enthusiasm will rise when he sees the money start to pile up in your bank account."
Will my advice be heeded? I don't know. So many people seem stuck in a consumer mentality that they are more willing to trade hundreds of hours of their precious time and labor for a pittance that will simply be melted off in trade for consumer junk. Even with families that aren't rabid spenders, the perceived need for extra income will mask the extra expenses that a working wife can bring.
Case in point: my friend Lisa, who went to work "part-time" to help out with family expenses has now increased her weekly hours to 36, the most she can work w/o pulling benefits. She looks and sounds tired, but she probably thinks she has to work this much because the bills just keep piling up. The incentive to save or cut back household expenses has probably given way to "tired days" and the conveniences or material rewards that make such wheel-spinning seem worthwhile. Give it a second look, please.
ROLL CALL! Where are my readers? Have I lost all five of you? I have lots more savings/economic/finance/investment articles in the pipeline thanks to reams of recent research and I am prepared to explain how it can benefit YOU! If you want to see more posts like the ones I have done recently, please comment as my e-mail is now checked daily and my brain is budgin.'
In the meantime, let's all repeat the new Catholic Housewife mantra--
"A frugal and industrious housewife is ALWAYS worth her keep (kids or no kids)."
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