One interesting thing that a lot of us seem to deal with is unexpected or unwelcome visibility into other people's money lives; their priorities, decisions, mistakes sometimes come through loud and clear.
AS's mom asked for money again a couple months ago (I think I wrote about it here), and as part of the condition of giving it to her, AS asked to get some detailed info so we could see why she was struggling and whether she had a plan that would work.
She sent us a confusing muddle of emails where often the important piece of info would be hidden within rambling that wasn't helpful. Some attachments as well. I was rather shocked to see that she was not bringing in very much; just over $2000 a month, I believe, from disability and military spouse benefits from her ex. Her rent alone is over $1000 per month, plus she has debt payments, medical expenses and just general living expenses. She has no savings and owes about $9000. Several things were delinquent, including electricity and cable. She lives in a moderately HCOL area (DC metro part of Virginia).
It was a pretty bleak picture. We recommended bankruptcy, and I was starting to think we'd need to help with housing somehow. Someone on here (Joan of the Arch?) had mentioned considering buying some relatives a condo, and that seemed like something we could consider. Rather than helping with rent, we could just forgive rent as long as we knew we could afford the payments on our own, and we'd have something to show for it at the end (the condo). Of course we don't have money for a down payment and wouldn't want to risk that hit to our budget at this point, but I started considering it as a down-the-road contingency plan.
Well, we heard back that she has the bankruptcy in beginning stages. She also thinks next year she'll qualify for housing Section 8, as she's been on the waiting list about 5 years and it usually takes 6. It could bring her monthly rent responsibility down to about $200.
With most of her debt discharged and her housing expenses cut by 80%, suddenly her situation wouldn't seem as bleak. So we're in a holding pattern. She might need some bridge loans to get through the next year, but hopefully not. And if she can pull off these two things, we may be off the hook. Fingers crossed!
My friend who I helped with her finances seems to be stuck in a holding pattern of her own. She hasn't slipped back into NSF territory, but neither has she decreased her CC debt very much in the past couple years. One thing is that she herself brings in about what AS's mom does, and has a bit more debt than $9K, so there's not a big margin for error. But the other is that she can't seem to say no to any invitation (or mention) of a show, concert, restaurant or anything. If she could tame her social life for a year, she could probably pay down that debt and then have more flexibility to go to the shows and everything. Her debt payments are about 25% of her income, almost as much as her rent!
I hope she does buckle down at some point. She is trying, but she has this disconnect between intention and action. I see the same thing when she tries to avoid gluten, or when she's on a diet. Her hand just goes toward food and it finds its way to her mouth almost like she doesn't realize she's doing it.
I'm happy to help however I can, but it's one of those things people have to decide for themselves. Credit allows so many untenable situations to float along for years, even for most of one's life. Fingers crossed she will sort it out in time for retirement someday.
Our downstairs neighbors are pretty much our closest friends as well. I love just about everything about them -- except their bizarre financial behavior. It's bothered me for years, but now that we live together, certain things nag at me.
For one thing, NJ (the main one we talk to due to his husband working all the time) let AS know sometime last year that he hadn't filed his taxes in several years. He left law to become a freelance photographer, and after a while found a very lucrative niche. Basically he's able to book several big shoots and then coast on that income for a few months.
The first return he didn't file was right after leaving law, and typically he would get a huge tax refund. So he thinks that the money the IRS has from that year will cover most of the other years.
Which may be true, but he won't find out until he files all those years. And the more years he doesn't file -- and doesn't send in any estimated tax -- the less likely that is. If he makes about what AS makes, that money from his unclaimed refund may cover one or two years at best.
So he had a bunch of money from a big photo shoot, and he was going to use it to remodel their kitchen. Then he decided instead to work on a subscription website that could pull in a lot of passive income. His business partners flaked, and so he still had this chunk of money sitting there.
Plus, his husband just got a second (part-time) job that pulls in a ton more money.
So this would be a great time to do all his taxes, right? Wrong. First, he gave us another $4K toward buying their share of the house ... which is great, except he hasn't finished the paperwork that would make this official. And I'm not promising anything until I see the paperwork and get it vetted by another lawyer.
Second, he buys a used car for about $7,000. I was kind of pissed because they were carless when we bought together and seemed committed to that lifestyle. We were even thinking of turning the garage into a tiny home for my other friend (from section 2 above) because none of us had any plans to have a car. Then boom, out of the blue, he buys a car. Now we have to accommodate a car that I don't believe they really need. (His main reason was to be able to take his dog to the dog park because there were none nearby. When questioned, he said the nearest one is about a mile away. Wouldn't the dog be able to walk a mile each way? I don't know. My kids walk minimum half a mile each day, and can walk a lot more than that if necessary.)
But the main reason I was pissed is because he STILL hasn't handled his taxes; I feel like both of those big outlays of cash were partly to avoid that further. And I feel like I'm stuck in this place where I'm worried about that, and wanting the documents for the house to be drawn up but wondering if I will need to say I can't go into this agreement with you knowing you might be evading taxes and digging a big hole for yourself. But at the same time, until they start to buy their share of the house, I'm paying $150-$160 per month for water/sewer/gas, and not feeling like I can ask them to pay their share (2 fifths) until/unless they begin to co-own the place.
I feel like I can't talk too much about the home ownership thing until I know he's handled his taxes, but I'm not really in a place where I can make him do his taxes either. I've offered to help, I've given him the name of my tax guy; I don't think I should push it anymore since ultimately he's an adult. But waiting on the home ownership thing is making me feel a bit taken advantage of from the utilities standpoint among other things. I'm keeping track of what we pay into the house and what they pay into the house, so I'm hoping they would want to pay to make up for the utilities paid, since they've always declared their intention (and we've always agreed to it) to purchase a share of the house.
Petty, petty, petty. That's how I feel. I just try to deal with it in my own head, but I feel like this is a fairly safe place to air said petty thoughts. This post may self-destruct; I'm not sure.
Archive for July, 2016
One interesting thing that a lot of us seem to deal with is unexpected or unwelcome visibility into other people's money lives; their priorities, decisions, mistakes sometimes come through loud and clear.
Now that my finances are feeling more under control than they have been since about March, I'm feeling optimistic and forward-looking. I idly wondered, when will I (well, my household) become a millionaire, and how is that technically defined?
I looked around online and the consensus seems to be that you can either be a net-worth millionaire or an actual-money millionaire. Either your net worth is at least a million, or you have at least a million in bank and retirement accounts.
By the first measure, my household could conceivably attain millionaire status in about 4 years, if things go well and we gain about $10K per month in net worth.
By the second measure, I'd think it would be more like 8 years, since the majority of our assets contributing to net worth are our two properties. So getting to a million in cash and retirement funds will take a lot more time, and debt reduction won't help with that one.
Just some idle Friday musings.
I checked NT's UK account, calculated how much we need to cover August mortgage payments (plus 25-pound cushion) and transferred the remainder--750--to his UK savings account. It makes barely any interest, but moving the money into savings makes it feel more official that the money is saved.
I've decided to use the UK savings account as our EF because A) it accumulates painlessly without coming out of our normal cashflow, B) the money is harder to get to since it's in the UK and C) we don't have any plans for that money except to use as spending money for our next UK trip, which won't be for over a year, so we should be able to save up a good EF plus a good amount of vacation money before then.
GBP750 translates to $1125, which means we're over 10% of the way to my $10,000 EF goal!
In the U.S., we finally saved up enough to hopefully fund the next phase of AS's dental procedure thanks to her latest freelance payment. We had some money left over for once! NT has been itching to spend, so I got him to articulate what he wants most. A) paint for several rooms in our house and B) new underwear (which we could all use). So I set aside $300 for paint and $75 for underwear.
There was still some money left over, so I stashed $250 in our nearly-empty U.S. savings account, bringing it up to $255.74. No specific plans for this money; just a vague idea that we'll probably want to put it toward a larger renovation project at some point, whether it's redoing one of the bathrooms or installing ductless A/C.
Feels good to have money in both savings accounts again! We cleared the US one to help pay our tax bill in April and drained the UK one during our June/July vacation. The last time we had really big balances in both of them was spring 2015, when we emptied our savings over the course of a few months to renovate the UK flat, sell the US condo at a loss, and refinance the US duplex mortgage.
Sometimes I revisit those days on this blog and marvel at it all! Our tax and medical/dental bills this year were a cakewalk by comparison.
Updated my goal based on NT's recent raise and downgrading AS's annual income expectation, and added our recent retirement gains to the balance.
Goal: $479,875 by 2019
(As a reminder, this is to get me to 3x my current salary, which is now $66,625, so $199,875; NT to 3x his, which is now $60,000, so $180,000; and AS to 2x hers, which this year is projected to be $50,000, so $100,000)
Current balance: $279,380
May 2016 balance: $269,301
Progress: $10,079 (over 2 months)
To reach the goal by our birthdays in 2019, that's 31 months, so we'd need to contribute (or have assets appreciate) $6,468 per month to reach it. We came somewhat closer to that level of progress with about $5K in gains these past two months!
NT's UK pensions:
#1: 17,105 pounds ($25,658)
#2: 20,501 pounds ($30,752)
#3: 5,523 pounds ($8,284)
NT's 401(k): $44,207
NT's Roth IRA: $10,327
AS's trad. IRA: $15,528
AS's Roth IRA: $29,607
AS's SEP IRA: $9,633
CJ's 401(k): $91,931
CJ's Roth IRA: $13,453
NT's flat: 180,000 pounds ($270,000)
CJ/NT/AS house: $470,000 (value -6%)
Total Assets: $1,019,380
Total Debt: $475,634
Current Estimated Net Worth: $543,746
May 2016 estimate: $529,251
Change in net worth: +$14,495
Summary: I was shocked by this huge jump! I went back to make sure it was accurate, and it is. About $9K of it is due to retirement fund growth and contributions (including $2750 to AS's Roth). The other $5K is because I realize that last month, I switched the exchange rate on NT's pensions and home value but not on NT's mortgage debt. So changing the exchange rate from $1.60 to $1.50 gave us another $5K jump. Hard to believe it was that much!
Notes on the numbers above: House value estimates are approximate. UK pension values updated about once a year. UK asset values and debt amounts are calculated figuring $1.50 for every British pound.
I only get updated on NT's pensions once a year, and the last year they stagnated in value. But this year one of them is up about a grand, to 5523 pounds. I'm noting that here so when I do net worth at the end of the month, I'll have that number.
I can't believe it's getting late already! I basically spent all day lazing around. Well, a lot of it budgeting and other organizational stuff on the computer, but it felt like a lazy day.
We got in yesterday evening from our trip. The flight home and getting through customs is always terrible, but it wasn't any worse than usual.
The trip itself was fabulous. Probably the best we've ever taken as a family. Lots of traveling, but worth it for all the experiences. We flew into Heathrow and had to drive about 4 hours to Exeter to spend a week with NT's family. We had a little outing or two every day, visiting different towns.
Here's a rocky beach at Dawlish Warren:
Babbacombe Model Village (a vast miniature world, this is just one small part):
The pier at Paignton, which had arcade games and other fun stuff:
Exeter itself was lovely:
We also visited a sandy beach, an otter sanctuary and butterfly farm and an archaeological museum. We mostly cooked at home (NT's parents had rented us a lovely 4-bedroom house) and brought picnic things out, but we did eat at a couple places.
After about a week, we left the kids with NT's dad and stepmom and drove about 3 hours to Oxford to our friends' house. That night they had people over so we could see some of the people we know there.
The next morning we left for Barcelona (me, NT, AS, our two best friends and the girlfriend of one of them); we took a bus to Gatwick airport, then a plane to Barcelona, then bought a 4-day pass for the trains and subways and found our way to our AirBNB, a nice 3-bedroom condo.
It was incredible there. For one thing, it was sunny and in the 80s (England had mostly been in the 60s and drizzly). For another, the place was just so beautiful. Everywhere had ornate iron railings:
There were tons of little alleyway-type streets that no car could go down, and tapas bars about every 5 feet, it felt like! The tapas was amazing. There were also a number of vegan restaurants; although none of them blew me away, it was nice to have so many options.
There were living statues in some areas that just blew me away:
We were close to the beach as well:
We got out to Parc Guell, a weird and wonderful park featuring architectural touches by Gaudi:
It was high on a hill so we got great views of the city from there.
And basically we spent hours sitting at various outdoor cafes having chilled wine and snacks. Everything was so amazing. The only drawback of the city really was that it could really stink of sewage in places. But you'd keep walking and the smell would go away in a minute.
Meanwhile back in Exeter, things could not have gone better with the grandparents. We Skyped once but it seemed to simultaneously bore and upset the kids, so we just relied on Facebook photos from family members. It was easy not to worry when we saw shots of the kids having fun all over the Devonshire area:
Our Barcelona jaunt went by in a flash; it was only four days, three nights. We flew back to England and took the bus back to Oxford to spend two more nights with our friends. The one full day we had there, we spent in the city itself (our friends lived on the edge in a more suburban area). One friend showed us where he works, the impressive Oxford University exam schools, full of rooms like this:
Then we walked around Oxford, basically just soaking in the atmosphere. It's such a beautiful city:
That night we ate at a nice Italian restaurant and went drinking at a scruffy but charming pub, one of NT's old haunts.
The next two days were no fun, but we were prepared: We left Oxford around noon and drove 5 hours (traffic was awful) to Exeter, met up with the kids and grandparents for a dinner out (luckily there was a play area because the food took forever and was only so-so), spent the night at NT's mum's house (the kids still had to stay at his dad's because of space issues and that made one of them weepy), got up super early, drove to the car rental place with two emotional kids, dropped the car, lugged our stuff on a shuttle to the airport, waited out a delay, flew to Iceland, got straight on the next plane which was already boarding, flew another 7 hours or so, went through the awful customs line, got a taxi home, and put the by-now hysterical kids straight to bed. That was around 8pm last night, which would have been 2am in England, so they were a wreck (even though they were really good on the plane).
But today was a good recovery day. I almost feel ready to face work tomorrow. Almost.
One of the ways I was able to pay our tax bill in full was by putting other purchases on some 0% credit cards we had. I probably could have paid them off a month ago, but I wanted to be able to officially say the money had come in to cover the tax (and dental) bills.
Now that the on-paper deficit is wiped out, I feel comfortable paying them off. So I set up the payments today. I have 0% interest rates until early 2017, but I feel more comfortable not carrying debt if I don't have to.
I never counted them in my debt totals because I felt confident I'd pay them off quickly, so this doesn't change the total household debt. But it does feel good!
The total balance we were carrying across four cards was $6,133.07. There are also some new purchases on one of the cards, but I'll pay that in full when the next bill comes, as I typically do with credit card balances.
Another bonus to being done with the tax bill is that we can start maximizing our rewards by using the Target card for Target purchases (5% off each purchase), the Amazon card on Amazon (5% rewards you can redeem toward future purchases), and the Amex for groceries (6% cashback). The cards we were using only had 1%-2% rewards.
As you may recall, our goal got a big boost when our neighbors gave us $4K toward buying their share of the house, and I decided to just count it toward the debt. Any other time I probably would have put it toward our mortgage or into an EF, but we're just so sick of having to make up our tax bill and dental expenses. So that cut it down quite a bit before we left.
While we were gone, AS got two more freelance payments: $1226 and $758 net. We had to take some travel expenses out, but NT's raise hit with a $50 boost to his paycheck, so even with the travel expenses, our current deficit was reduced from about $1800 to just about $100.
Then I checked the Chase Sapphire rewards card. The bonus had hit and we could either get $601 cash or $775 travel rewards. Again, any other time I'd have saved it to use on travel expenses for our next trip. But seeing the end of the tax bill in sight, I couldn't resist: I cashed it out for $601.
So the upshot is, we've fully funded the tax bill and current dental bills and have a current surplus of $507! Our future projected surplus including all the money AS is anticipating from booked work: $7950!
Now, we still have a few dental bills expected later this year, and with how crazy this year has been, I'm not counting on that money at all. I'm just going to leave it there and we'll use it if we need it. But I declare the tax/dental challenge officially completed.
So what's next? Well, honestly, after about four months of this, there are so many deferred wants that it's hard to choose just one. But generally, we're going to continue to examine our purchases and try to be sensible for the rest of the year, so we don't get caught out by something like the tax/dental double whammy again.
I stopped tracking our spending on vacation once it became clear we weren't going to go over our limit, so I'm not sure exactly how much we spent from our UK account. Somewhere in the ballpark of 2,000 pounds or $3,000, about $200 per day. This included about $300 for car rental insurance, some bus journeys, souvenirs, groceries, eating out, petrol (gas), etc. We also spent some on our US credit cards, but that's already been taken from the budget surplus mentioned above. So I don't feel the need to do a detailed spending tracker, but I'd estimate it was:
UK flights & travel insurance: $5500
(UK lodging paid for by NT's parents)
Rental car & insurance: $900
Barcelona flight and lodging: $1300
Other spending: $2500-$3000
So, roughly $10K or $11K all told. Wow! But it really was an incredible and unforgettable trip, so no buyer's remorse there.
I can't tell if we're still waiting for some pending charges to hit NT's UK account, but I think they're all accounted for. If so, we have about 437 left over ($655). If so, we're saving that as the first drip toward building an emergency fund again. Yay for EFs!
Speaking of, I've decided for now that the EF goal will be $10,000. My reasoning is that we do tend to have a big surplus each month so could conceivably lose one income and still survive. (Technically we could probably survive if we lost one full income and half of another.) So we don't need a massive EF at this point. But I want to have at least enough to pay off our downstairs neighbors if the house deal were to fall through for any reason, plus a little extra. We "owe" them $9K, so I figure $10K is a reasonable figure.
I don't know that we'll go full tilt at this goal or just add to it incrementally. But for now I'll count the $655 in the UK account and go from there.
I'll try to post a more fun travel wrap-up with a few pictures later!
I'm back! Probably going to do several entries today to get all caught up. But first, our July debt payments. All mortgage payments hit, and at our old exchange rate for the UK mortgages, we paid:
US: $675 to principal
So $999 total.
I could calculate it at the old rate, but I just didn't bother. I'll do it next month. We were so close to having $1K per month be the minimum, but now with the lower exchange rate, that won't happen for a while.
However, I'm now switching our debts to the $1.50 exchange rate, plus adding the $4K our neighbors gave us (they said it was toward buying their share of the house, but until we all sign a proper contract, I'm considering it a debt to them). So our new debt totals are:
US Mortgage (duplex) $403,626
Loan from friends (duplex) $9,000
UK Mortgage 1: $43,976
UK Mortgage 2: $9,270
UK Mortgage 3: $9,762
TOTAL DEBT $475,634