Everybody Loves Your Money

I found this article on Slate pretty interesting. It reviews all of the Obama finances and shows that they are doing pretty well by yours or my standards but are much more humble than the other two presidential candidates.

Their holdings are pretty conservative but if I had that level of income, I think I’d probably play it pretty safe too.

Anyway, it’s pretty interesting reading:

http://www.slate.com/id/2190879/

I have to confess something. Lately my self control has been out the window. I’ve been spending too much on things I don’t really need. I have been eating more than I should and am 20 pounds overweight. And you know something that’s just crazy? I’ve found myself having some anxiety about money and my weight. You’d think the anxiety would drive better behavior but it is actually having the opposite effect.

So what am I doing about it? Well, a couple things. We are taking a much more conscious approach to our money. It doesn’t take a rocket scientist to notice that our economy is damn near in a free fall. The markets are nervous and frankly I think we are already in a recession. Yeah, I know it takes two consecutive quarters of negative growth but I think we’ll see that soon enough. With all the negative things happening in the economy I’m just hoping we don’t end up seeing worse than a recession. Okay, now you know my frame of mind. I’m just another nervous consumer/saver. We are going to be one of those households that makes it worse by saving more and spending less!

The other thing I’m doing personally is getting the weight under control. I’ve decided to start dropping weight. I’m only down about three pounds but that’s over 10% of the weight I need to lose. I’m using the Weight Watcher approach and am counting all the food I am consuming. I’ve always had the best luck with that. If I find I’m not following it tight enough I may even go join officially and sit in the meetings to force myself to do better.

It’s really kind of amazing how I can have such good control over spending (normally) and not be able to use that same skill set to manage my diet and overall health. You’d think that it would be an easy jump from managing finances successfully to managing your diet. It’s not, at least not for me.

On a completely unrelated note, my wife was officially hired by her company after over a year of being a contract employee. That means matching 401k, vacation, sick leave, holidays and a little more stability. Needless to say we are pretty excited about that!

When we purchased our lake house, we used a little bit of money from our home equity line of credit. We had never used the line of credit but had it sitting there in case we had an emergency, or a good opportunity. When we got the loan, we locked the rate at 7.49% because we didn’t want to have the fluctuating risk. Of course it was just our luck to borrow the money when the rates were at their peak.

Fast forward 1.5 years and rates have gone way down. I called my credit union and asked to have the fixed rate lowered to 5.99%. They said, no problem and mailed me a form to sign. A few days later, our rate was lowered 1.5% just from making a phone call! While that doesn’t change our payment amount, it does shave many months off of our loan.

That got me to thinking, is this possible with a primary mortgage? Has anyone ever been able to get their 30 year fixed rate mortgage lowered simply by calling and asking? The sense that I get is that it’s not possible with primary fixed rate mortgages.

QUESTION:
Do you know anyone that has lowered their primary mortgage with just a phone call, or do you always have to “refi”?

For all of those people (not unlike me) that are saving, saving, saving for retirement and always thinking about that magical day that you can retire……. Don’t forget to dance to the music along the way. (see video below)

I don’t know if you saw this article on CNN but it highlights Kent and Mysti Cope. They both worked for New Century Financial, which was the number 2 subprime lender in the country. They have both lost their jobs and have realized they have to make some tough sacrifices.

Sacrifice number 1: Trade in the Corvette for a Suburban. Huh? Wow, talk about really taking one for the team. I wonder if it was new.

Sacrifice number 2: Let the gardener go. Wow. Way to pull out all the stops there. I hope your homeowners association can tolerate your gardening skills. You certainly should have the time to keep the yard up now.

What wasn’t talked about in the article was all the sacrifices they aren’t making. I’d be interested to see a breakdown of their expenses. Clearly the largest rope around their neck is their home. The article points out that their equity line of credit, mortgage, health and life insurance equals about $10,000 a month. HOLY MOLY.

I did the math from another tidbit in the article. They say that the monthly unemployment checks of $1800 only cover about 1/8th of their expenses. That means they must be spending approximately $14,400 each month. To make matters worse, they are both dabbling in commission/sales type work. She is trying to sell jewelry and clothing online and he has gotten his realtors license. Both of those have significant delays in generating much income, let alone generating profit of over $14,400 each month. Yikes.

Check out the article:
http://money.cnn.com/2008/03/31/news/economy/copes/index.htm

I was perusing the internet and came across this video and found it very interesting, as well as a little scary:

http://www.boingboing.net/2008/03/19/documentary-examines.html

After you watch the video, take a little time and read through some of the comments on the BoingBoing page. I was quite surprised at the intelligence in the comments. (Sure, there are a few moronic ones there too). I can’t see how anyone would argue that the current path we are on is a positive one. With trillions in debt and massive consumer debt, we can’t go on like this forever. At some point foreign investors WILL lose confidence in our ability to pay it all back.

While you’re at it, take a look at this video too. It really calls in to question how “free” our markets are. I have often felt like simple investors like myself are simply getting the very small crumbs while the market “rulers” are sucking up all the money.

http://www.youtube.com/watch?v=_3H6uEyR66M

It’s that time of year when people start planning out their summer vacations and begin booking all their weekends. One of the things we have coming up is a wedding to attend in July. We live in Seattle and the wedding is in central Montana. It’s one of my last cousins to get married and we really want to go to see her get married and also visit all of our cousins and relatives back there.

Over the last week or so I’ve been checking airline flights and it looks like the cheapest flights are about $350 round trip. When you multiply that times 3 it’s over $1000 just in airline tickets for my wife, daughter and I. Add in the hotel room and we are easily heading north of $2000. Ugh. On top of the actual expense of the trip is also the lost income for my wife. Since she is a contractor, she doesn’t get paid time off. Every week day we are gone makes the trip that much more expensive. Don’t get me wrong, I wouldn’t avoid going just so my wife can keep earning income, but it’s certainly something that comes in to the equation when deciding how long of a trip to plan.

The other option that we have is to drive there. It’s about 850 miles each way and takes a couple days to drive when you have a 5 year old. (In the past I’ve always just headed out at 4:00am and done the trip in one day but I don’t think my wife is going to approve of that plan now that we have a child). If we drive we would spend somewhere around $300 on fuel. That’s a lot cheaper than flying, but we also have to calculate in some wear and tear on the car. If we use the IRS mileage rate to calculate “real” costs it would be about $850 to drive. (The 2008 IRS mileage reimbursement rate is .505 per mile.) So, even if we use the conservative IRS calculation, it’s still cheaper to drive.

I guess the big question is how much is our time worth. The flight would take about 2 hours, while the driving would take around 13-14 hours. By spending an additional $200 we would get a couple extra days in town with our relatives. Of course if we fly, we may have to rent a car to get around there. In that case, it would really be more like $500 more to have a couple extra days in town. Hmmmmmm. I guess we’ll need to sit down and really hammer this out to decide what feels right.

If you are a long time reader of ELYM, you know that I’ve gone through a bit of a transformation, or enlightenment. For my entire adult life I have drooled at and spent way too much money on cars. If I had a nickel for every new car I’d bought, I’d have….. well, I’d have more than a quarter. As a college student I owned 3 different new cars. Pathetic. Each time I bought one I’d take it in the shorts when I got the urge to trade up or across. About a year ago I made the decision to stop the madness.

We now own two used cars. Both of them were built in 2000 and have between 60,000 and 90,000 miles on them. The first is a Toyota Tacoma pickup. It was a friend of mine’s and I love it. It’s simple, doesn’t have a ton of bells and whistles and just runs. I have absolutely no regrets on that purchase. The second is a 2000 Honda Accord that we own for the second time. Yeah, it’s a little confusing but we bought it new in late 2000, drove it for about 40,000 miles and then sold it to my sister. After a couple years, we bought it back from her and are continuing to drive it. Unfortunately the Honda is the car that is testing our resolve to drive older cars. The first test was when the alternator failed about 3? months ago. Luckily AAA came to the rescue and we ended up spending over $400 to get it fixed. Just when I got over that unexpected expense and told myself that it was better than a car payment and massive vehicle depreciation, the car has thrown us another curve ball. What now, you ask? (okay, maybe you didn’t ask, but humor me). We now have an intermittent “SRS” light coming on. After a little research on the wonderful world wide web it turns out this is a well documented feature, I mean problem, with the Honda Accord from 2000-2001. Apparently it has to do with a control module that malfunctions. When the “SRS” light is on, it means that the airbags will not deploy. While I fully trust my wife’s driving, I don’t particularly trust all the strung out crackheads that she might be driving by each day. From what I’ve gathered on the Honda forums, it sounds like it’s anywhere from a $400-$1300 fix. UGH.

The good news is that we are currently experiencing a fully functioning Honda Accord that doesn’t have the SRS light on. (It went off last night). I can’t say I really trust it, but I’m going to wait and see what happens over the next week or two. I really hope I don’t have to take it in so soon after the alternator. I guess this is the price we pay for driving older vehicles. Good times. Good times.

It must be something in the air, or perhaps it has something to do with all the doom and gloom stories about our economy, the price of oil, the failing housing market, the falling market. I don’t know, maybe I’m just crazy, but I’ve found myself thinking a lot more about doomsday scenarios when it comes to our finances. I’m going to be starting in a new position at my company, I just got a 7% raise, and we have finished the massive expenditures on our lake house so you’d think I’d feel warm and fuzzy all over, but I don’t.

I’m finding myself thinking, “What would I do if I lost my job?” Well, I’d fall back on my emergency fund for the first few months, but what if I couldn’t find another job for awhile? What if my wife lost her job too? How would we afford health insurance if we weren’t working for an extended period of time? What social programs would we be able to fall back on?

It’s easy to see how someone could go insane worrying about all the possible scenarios when the economy isn’t doing very well. When I start feeling stress about our finances I try to stop myself and think as rationally as possible. The reality is that I have a skill set that is in demand (IT) and have enough money saved that we could get by for quite some time. What I have to remind myself is that in a true financial crisis, we could do some fairly radical things. One thing we could do is withdraw some of our ROTH IRA contributions without facing a tax penalty. If things really got bad, we could withdraw some of our 401K and face the penalties of doing that. We could also borrow some money from our home equity line of credit. And if we were really in a pinch, we could even ask our parents for help, although that’s not something I’d really want to ever have to resort to. I guess the fact of the matter is, while we have many options that aren’t ideal and would drastically impact our long term goals, we do have a lot of options.

Are you worrying about your finances these days?

Well, I’m happy to report that after nearly 1.5 years worth of weekends, our lake house just had it’s final inspection and we PASSED! No more inspectors and we can move in now. I can’t even begin to tell you how much of a weight has been lifted off of my shoulders. No more deadlines, no more possible hiccups.

When we embarked on this project so long ago, it seemed like we would never get it done. All those cold weekends installing the siding, roofing and trim. All the back breaking sheetrock. All the mistakes and fixes. All the blisters, sore backs, sore legs, sore arms, sore “you name it”. I think the best part about it is that the financial impact is coming to a close. Sure, we’ll spend some money on some things for the place but all the huge construction costs are behind us. I knew that it would be expensive to build the place but it was really pretty amazing how the little things added up. I have a huge folder in my office that has every receipt for the place. The last time I added it up, we had spent over $35,000 on materials and labor (for the few things that we subcontracted out). It’s been awhile since I’ve added up all the receipts though so I’d put the total cost at about $45,000. Somehow we managed to pay cash all the way along which, when considering the total, amazes the heck out of me. How did we dig up that kind of cash?

Oh well, I guess the money fairy must have been looking out for us. Now the number one priority for us is to start building our emergency fund back up to a much more comfortable level.

Here are a few pictures of the interior: