Financial pow-wow

S and I are sitting down this weekend to have a major financial discussion.  As I’ve mentioned before, he and I have always kept very independent financial lives.  This has worked for us for many reasons but times they are a changin’ and so must we.  I don’t mind saying that I’m really not looking forward to the idea of hashing out budgets together or coming up with a savings plan or how to handle family insurance or really anything that involves the two of us having to sit down and openly and honestly talk about the financial situation we are about to find ourselves in with twin infants. 

We have trouble communicating about finances.  In part this is due to the horribly crappy financial messes we were individually in when we started dating (me and my debt mountain/ him with his job loss and foreclosure).  Even though out situations are better now, we have the residual feelings of shame that keep us from wanting to open up about finances.  Also, we have completely different outlooks on money and how to handle finances which has led to some heated moments in the past.  Lastly, we are both stupidly independent sometimes to the point of stubbornness.  All of these things have led us to the comfortable arrangement we now have of just staying out of each other’s financial business.

It’s long overdue that we confront these issues and start working together but it’s taken the pregnancy for both of us to be ready to tackle this uncomfortable aspect of our relationship.  I’m writing this because I need a little accountability to make this sit-down happen.  We’ve actually “planned” on talking the last two weekends but really haven’t done anything but skim over the surface level  issues that we need to figure out.  During our last discussion we at least agreed to spend this week coming up with hard budget numbers so that this weekend we could sit down and make some real decisions.  To that end I’ve got a baby stuff list and budget, my own personal budget, my major expenses for 2013, some tentative childcare costs, and my company’s family health insurance cost.  I feel like I’m coming to the table prepared and ready to work with him to get a plan together for 2013… I’ll let you know how it goes!

Working on a 2013 budget

I don't have a financial plan for 2013 in place yet which makes me nervous for so many reasons.  I've spent the last year and a half on a mission that involved creating and sticking to real budgets, and I was rewarded by seeing my debt fall consistently.  But with the prospect of having two babies arriving mid-year I'm really flustered as to what I can even expect financially for the year.  I would love to be able to post a 2013 plan complete with specific financial goals and a solid budget but so far all I've got for the year is a list of budget items that need to be researched.  In addition to the regular monthly expenses I had in 2012 the following is the list of additional expenses I need to plan for:

• Professional expenses: My professional license will expire this November so I will need to pay for continuing education classes and the renewal fees.
• Travel expenses: We will be traveling at least twice to visit my family this year
• Maternity leave: My company doesn't have any paid leave above my vacation/ sick hours so I'll need money set aside to cover my salary while I'm out of work.
• Medical expenses: I do have great insurance but there will still be out of pocket expenses for the babies' arrival and care after, also need an eye check-up and contacts.  May need to cover a greater portion of the insurance costs during my maternity leave but will work with my job on that.
• Baby stuff: I am clueless about what the babies will need and what those things cost.  I've started to pull together a list of recommended stuff so I can begin to price these items.
• Childcare: This one is the biggest unknown on my list.  None of the centers list prices on their websites so it will take some real legwork to get an understanding of the costs.  I do know that in the Boston area I can expect some of the highest childcare costs in the country and that a coworker of mine pays the equivalent of my whole salary for childcare for his two small children.  There is the possibility of one of us being stay at home or both of us going to part time to avoid the added expense of childcare. 

Basically, I have a lot of work to do just coming up with a financial plan for this year.  Right now my goal is to have researched all of the above items and have a solid budget in place by the end of January.  

2012 Year End Review

What a year! 

At the beginning of the year I set out some pretty hefty goals for myself to reduce expenses, raise extra cash, build an emergency savings, pay off my parents, and pay off all of my credit card debt (a little over $10,500).  Let’s see how I did:

1. I paid off the $300 I owed to my parents.

2. I set aside $1,000 in an emergency fund.

3. I paid off $5,885 (or 57%) of the $10,263 I owed in credit card debt.  Not exactly what I was shooting for but I’m still happy with the amount of progress I made this year. 

Besides not really having a great understanding of budgeting and forecasting expenses when I wrote my 2012 goals, there are a number of other reasons I didn’t get the entire amount paid off.

Firstly, I became eligible for and started participating in my company’s 401(k).  I wasn’t originally planning on participating until I had paid off the credit card debt and the car loan but after a lot of research and soul searching I felt like passing up the company match of 4% plus potentially not saving for retirement for who knows how much longer when I haven’t been saving for a few years now was just plain dumb on my part.  It will take longer to pay off the debt but the extra 4% plus whatever that money earns makes up for the interest payments in leaps and bounds in the long run.

Secondly, I got engaged!  S popped the question which besides being a personal milestone also set into motion the need to have a much bigger savings account for a wedding than the little emergency fund I had set up.  I started funneling some extra money into savings instead of paying towards debt for our upcoming 2013 joint wedding expenses.

And speaking of joint expenses for 2013, we found out we were preggo in late October and then found out we were expecting twins in mid-December!  This really wasn’t  in the plan for the coming year (see above for engagement and wedding planning) and it certainly wasn’t in the plan to ever get a 2 for 1 deal but sometimes nature has its way over reason and planning!  We haven’t really gotten too far into figuring out what this means as far as other life plans go but we do know that we’re going to need some hefty money set aside.  Since we found out, I pulled back on the debt reduction and starting beefing up the savings instead.

All in all 2013 is going to be a wild ride and I am currently working out the plan for handling all the financial and personal changes going on.  I’m still very motivated to pay off the debt, just need to figure out what is going to be possible with all the new expenses and changes coming our way! 

Here’s where the 2012 numbers came in:

Student Loan: $36,284

Car Loan: $8,605

Credit Card 1: $0

Credit Card 2: $4,261

Credit Card 3: $117

Parents: $0

Total: $49,267

Here’s my starting point back in October 2011:

Student Loan: $38,339

Car Loan: $11,684

Credit Card 1: $10,577

Credit Card 2: $3,635

Credit Card 3: $0

Parents: $600

Total: $64,835

Paid off to date:

4th Q 2011: $5,051 + $0 in savings

1st Q 2012: $1,298 + $150 in savings

2nd Q 2012: $2,771 + $506 in savings

3rd Q 2012: $3,195 + $344 in savings

4th Q 2012: $3,253 + $1381 in savings

Total: $15,568 paid off + $2,381 in savings

Double Whammy

I’ve been absent from blogging for a month because I’ve been holding onto a huge secret and can finally get it out there.  Back in early October S and I took a little romantic getaway.  In addition to the surprise engagement proposal, that weekend yielded another even more shocking surprise!   We confirmed at the end of October that we were expecting!  Then, as if that wasn’t big enough news on its own, we found out at our 12 week ultrasound that we were expecting twins!

Since we were not planning on having kids for at least another year and never expected that when we did there might be the possibility of having two at once, the whole experience so far has been a little bewildering!   Even though we are now into the second trimester and have shared our news with our friends and families over the holidays, we are still reeling from the news.  I have about a zillion questions bouncing around in my head and a mental to-do list that gets longer by the minute… I’ve been reassured by family and friends that all soon-to-be parents feel this way, even the ones that were prepared to be expecting but going through the experience myself is eye-opening.  How are we going to manage it all?! 

Obviously, S and I have a lot of work ahead of us and this impacts every aspect of our lives but one thing I am so grateful for right now is that I am in a much better financial place than I have ever been.  Taking control of my finances and debt has been more life changing than I ever expected it to be.  In some ways I feel like discovering that I could manage my finances and make positive changes in that aspect of my life has shown me that I can do that in all other the other areas of my life too.  I’m not really sure how S and I are going to handle everything with the pregnancy and babies yet, but I do feel pretty confident that we can handle everything… and I don’t think I would have felt that way a year and a half ago!

Gave myself a raise

I’ve gone back and forth on the 401(k) issue quite a bit but I finally decided to enroll and put a 5% contribution into my retirement.  My company matches up to 4% to my 5% so I effectively just gave myself a nice 4% raise.  My hesitation to enroll at first was that I didn’t want anything to detract from my mission to pay off my debt, following Dave Ramsey’s advice to put off investing in the future until all debts are paid off.

The more I thought about it though the more uncomfortable I became with the idea of potentially not putting anything aside for retirement for another 5 years (my original estimate for how long it would take to pay off all credit card, car loan, and school loan debt).  I then thought I might at least pay off the car loan and credit cards before enrolling which would take two years.  After crunching the numbers I realized that in those two years I would be missing out on the 4% “free” money plus any interest I would be earning on the whole 9%.  By enrolling now, even if my rate of return is low, I would still end up adding roughly 11k to my account in those two years.

Besides the pure numbers, I also thought about the other factors in my life.  Life has been changing pretty rapidly for me lately and it’s made me realize that there will ALWAYS be some excuse for me not to put money away for retirement (just like there used to ALWAYS be an excuse to not pay down my debt).  The past year’s journey has taught me some valuable lessons and the biggest is that I can achieve a better financial future if I can just take one tiny step at a time!

Energy savings

I’ve been looking back at some of the changes I’ve made over the last year to reduce my expenses and free up more cash to pay towards debt.  Besides the food bill which I looked at last post, the energy bills are also a big chunk of the monthly budget.  To cut energy costs I made the following top five changes:

#1: Cold water washing:  This was an experiment at first to see if cold water washing would get our stuff as clean as using hot/ warm temps in the washer.  I was pleasantly surprised to find that I couldn’t tell any difference in the cleanness of the laundry and have noticed that our darks are staying darker which can also be due to my next change…

#2: Line drying: Our washer and dryer are out of the way in a corner of the basement so we hung a couple clothes lines from the ceiling, put a stackable flat racks for sweaters, and a folding rack for the smaller stuff and started letting our clothes air dry.  Sheets and towels still get tossed in the dryer.  It’s more work but it saves electricity and is also easier on our clothes. 

#3: Thermostat battle: The one thing we did that is still a constant battle for me is turning the thermostat up in the summer and down in the winter.  The summer’s not too bad for me but S hates it when the thermostat is set at 78.  During the winter we have the opposite problem where I’m freezing at 60 and he’s loving it.  But in the name of savings we have toughed it out as much as possible.

#4: Smaller energy items: We switched all our bulbs to compact fluorescents and have been making sure we turn off the lights when we absolutely don’t need them on (which is a lot harder to do than I would have thought).  We are also turning off or completely unplugging more of our smaller electronic items when not in use.

#5: Cook wiser: This is probably a teeny amount of savings but we’re trying to be more aware of the energy we use in the kitchen for cooking.  Like when I heat up the oven I try to use it for multiple meals instead of just the next one we are preparing to eat.  This has actually been really helpful in having lunches ready for work and already prepared dinners for the nights we are too busy to cook.  Also, we’ve been making sure we’re using the lowest temp on the stove or oven required and using the right size burner on the stove. 

Because we’ve only lived in this place for a year and I implemented all the changes when we moved in plus we moved from Florida to Massachusetts where energy costs and consumption are different, it’s hard for me to estimate how much these things have actually saved.  However, the elderly gentleman who lived in our place before us shared some of his previous year’s bills with us before we moved in to help us budget so I’ve been comparing the costs.  Our January bill for electric was $114 and gas was $69.  His bill from last January was $162 for electric and $147 for gas.  His bills for April were $170 and $33 while ours were $77 and $11.

I know it’s not really accurate but using his cost as a baseline means we saved around $120 per month by making relatively minor changes to our lives or at the very least we are $120 smarter about how we use energy!

November update

I haven’t been feeling particularly bloggie for the past month, life has been a lot more hectic than usual and I’ve found myself taking on too many extra responsibilities and getting burned out in the process.  Add to that some pretty big curveballs that S and I have recently experienced and I’ve just turned into a big mess (and turned back to some of my old nasty spending habits)!  

To remind myself of the journey I’ve been on for the last year with the debt pay-off and financial overhauling, the next few posts I make are going to be dedicated to the ways I’ve changed over the past year.  Hopefully, reminding myself of all the big and little things I’ve done in my day to day life to get me where I am today will get me back on the straight and narrow.

I’ll start with the food, one of my biggest areas of weakness!  Here are the top 5 changes I’ve made over the last year that have reduced my monthly expenditures in the food department:

#1: Reduced the junk food and meals out.  When I started a year ago I was spending a small fortune every month on junk food and eating out.  I calculated around $250 a month went to completely non-essential food like soda, chips, lunches, drinks and dinners out.  In retrospect, now that I actually know how to track my spending, that number was probably a lot higher.  I’ve cut that amount in half and am still working on whittling it down by packing plenty of food including snacks for work, making more interesting food at home, and just plain saying “no” to my food cravings!

#2: Amped up the meal planning.  Part of cutting back on spending for eating, drinking, and snacking out was to be better prepared with food on hand at home.  I was already pretty good at making and sticking to a list for the grocery so making an actual meal plan was just one step further.  By planning out meals and snacks I’ve been able to really reduce the amount of food waste we have and be better prepared for all our meals and snacking urges!

#3: Discount shopping.  The nice thing about having a meal plan and list of household items that are needed is that I can now hunt for sales, coupons, and cheaper alternatives.  I’ve pretty much mastered the art of maxing out the discounts at my CVS and get most of the household goods there.  I’ve also got a handle on what stores have the best deals for the staple food items, I regularly use coupons (which I previously thought was such a time-hog it couldn’t be worth it), and I shop the discount rack at my grocery store and then prepare/ freeze the soon to expire food ASAP! 

#4: Went  vegetarian (kind of).  Meat is freakin’ expensive so we have been experimenting with a mostly vegetarian diet.  I was kind of shocked the first time I did a “meat-less” grocery run, my grocery bill was automatically cut by at least a third!  S was already comfortable with a vegetarian diet since pre-me he was a strict vegetarian and my transition was actually kind of fun getting to look up all sorts of new recipes to try out!

#5: Making it from scratch.  Sure opening a can or box of something is convenient but making things from scratch has really saved me a ton of money over the past year.  Take beans for instance, a great and cheap protein staple for the new semi-vegetarian diet we are trying.  A can of beans is somewhere around $1 but a bag of dry beans is also around $1 and makes the equivalent of 4 cans.  Dry beans are not at all hard to make and, unlike the canned beans, don’t come with a ton of salt already mixed in. 

So that’s how I’ve reduced my food spending each month in a nutshell, looks good to see it written out and definitely is the reminder I need right about now that I can stick with the positive changes I’ve already made!