Emergency Fund

I've been noticing in reading debt reduction and personal finance blogs that most if not all have as a goal for 2008 to increase their emergency fund. By significant dollar amounts. This got me to wondering: How much money do people keep in their backup accounts? (Please take my poll)

My emergency fund is also my home improvement, vacation, IRA fund. I have $325 per pay payroll deducted into this account. I don't have an ATM card or checks for this account and although it's not very far away it's not terribly convenient to stop at. The balance is usually around $2000-$3000. Right now it is higher because I didn't go anywhere for vacation and the home improvements I did this summer I was able to pay for from my regular paychecks.

I'll call the credit union today or next week and request a check withdrawal for my 2008 IRA contribution and the account will be back down to it's normal balance.

If I don't go anywhere in the spring for vacation, I'll withdrawal some of the money and deposit it in my mutual account which is my new car fund. I have $300 withdrawn from my checking account each month for that fund but am thinking about increasing the amount for 2008.

How much do you have in your emergency fund? Do you have an emergency fund? Why or why not?

Car Repairs

I usually take my car to the dealership in Brooklyn which is 25 miles away but my grandmother told me to take it to "Mr. Brown". That's who she uses. So I dropped it off on Tuesday. I told him what the oil change guy said about the transmission and that my uncle said to get a flush.

I also said that it has a bunch of miles on it, it's a '98, I drive 150 miles a day and I want to have it hopefully another 6 years. If he saw anything else it needed to just fix it.

When I went back to my grandmothers, I was going to use her car while mine was being fixed, I asked if I should pay in cash or a check. She said she usually pays cash and tips because he's very cheap.

Then while I'm driving hers to the golf course it starts blowing smelly smoke from under the hood!! Yikes. I ask the guys at the course if they'll help me add water after it cools off. One of the guys looks at it later and decides it must be the thermometer.

Today Mr. Brown drops my car off to my grandmothers and I run her car over and pay him. It was only $50!! I was hoping it would be under $200 and it was only $200. I'm so glad. And he fixed the scratches on the drivers door that Jade made from hanging out the window. He didn't see the ones on the other side or he would have fixed those. It looks really good. I guess the oil pan was bent also.

I gave him $20 extra since it was so cheap and since my grandmother told me to tip.

$70 mechanic

Wednesday
$10 Woody's
$22.50 golf
$4.21 Wendy's

I overheard some girls talking at work yesterday and one mentioned that we get 3 paychecks in August. ??? Who knows these things? I didn't even know that Friday was a payday until someone told me. If they hadn't said that I wouldn't have found out until I went to pay my American Express card. (I left my Visa home one day and needed gas)

Anyhoo, people at work are funny with their money. The two times we get 3 paychecks in one month they use it as free money to blow. Which is fine for them, but wouldn't it be easier in the long run to have an emergency fund? or at least a bit of a cushion with the other bills?

Maybe it's just me, I'd freak out if something came up and I didn't have the money to take care of it.

After everything is caught up and I have a cushion, then I can think about blowing money.

$29.55 Emmons (garbage service)
$60.00 Maid

401K

Jeremy at genxfinance posted a great article titled:

Your 401(k) is Not a Savings Account.

He writes: What is probably (shocking) is that many (people) looking to take money out of their retirement plan only need a small amount (generally under $1,000) to cover some unexpected expenses and I’ve seen people take out $500 loans on three year terms.

Here at worst company, this is not shocking at all, it is the norm. So is filing for bankruptcy. They also live not from paycheck to paycheck but from this paycheck to the one after that. The not so funny part about this is that in my office we have 211 non-management employees (33 men/178 women) with an average of 17 years of service and a base pay of approximately $50,000. I don’t the statistics regarding number of children, household income, etc. I’d be interested to know what the average dollar amount of savings is. I’d bet it’s very very low. I don’t know if this is the norm for Michigan or nationwide. Most people here who talk about their finances admit to being at least one payment behind on rent and/or car payments.

Jeremy further writes: Loans should be your last resort. If your plan allows you to take a loan it should be treated as a last resort. Some people argue that tapping into your 401(k) isn’t all that bad of an idea because it is your money and you are simply paying yourself back the interest.

I’ve never really understood their rational of “I’m borrowing from myself”. My ex-boyfriend would borrow against his and spout this as his justification. The amounts he borrowed would be small (less than $1,000) and his payback would be around $15. Who spreads out $1,000 over 5 years? At least if he would have borrowed from the credit union the payment would have been higher and forced him to pay it back sooner and build good credit. He never learned NOT to get into trouble in the first place which would have gone a long way in itself. (by the way within a year of our breakup, he filed for bankruptcy)

Actually this is what I’ve noticed about most of the people at work. They run up bills, borrow from their 401(k) or file bankruptcy then in a few months are back in the same boat again.

Some of the exact same people who were claiming to wanting to purchase a house (or buy a car or go on a fab vacation) still have the same “goal” 5 years later. They haven’t made any changes to their spending/saving to actually achieve their “goals”.

Personally, I have my contributions to my 401(k) automatically deducted and I glance at my quarterly statements. I have a general idea of how much money is in my account but I don’t consider it part of current assets. It is strictly for retirement (which I hope to be in 6 years when I’m 45). I suppose if something dreadful was to happen and I absolutely had to use the money I would but it would have to be a catastrophic event.

Sunday

$1.75 pop/snacks at work (you can always tell when it's time to go to the store)

Saturday

$18.00 golf--9 holes Hankerd Hills

$11.00 dinner

Friday

$788 concrete steps

Good Finance Habits

EVERYDAY CHEAPSKATE, Apr 18, 2007 - Mary Hunt (click here to signup for everyday email tip)

Six Habits of Financially Responsible People

Funny thing about habits. Bad ones just happen while good ones are usually the result of considerable effort.

Habits are what personal character is made of, and basically they come in just two varieties: good and bad.

Some people act as if their habits were as predetermined as their blood type and are about as likely to ever change. But there are a select few who live by the truth: It is possible to learn good habits and unlearn bad ones, no matter how ingrained they are. It's all a matter of choice.

The secret of learning good habits or breaking bad ones is in choosing to repeat—or refrain from doing—something over and over and over again until it becomes a natural response, a habit.

Want to become more financially responsible? Here are the habits of those who are. Consciously focus on these actions, then repeat them over and over until they become natural responses.

Habit 1: Financially responsible people regularly balance their checkbooks. They calculate a current balance after every transaction and always know the exact state of their money.

Habit 2: Financially responsible people think first and spend later. Thinking means weighing needs and acknowledging wants. It means exercising discipline and delaying gratification—saving the money first and then buying the item.

Habit 3: Financially responsible people save money consistently. They never spend all they have because they are habitual savers. They see saving as a long-term process and make the sacrifices necessary to reach their goals. They are patient, steady, consistent and find saving money to be a necessity.

Habit 4: Financially responsible people fund their own emergencies. They don't buy into the notion that the purpose of credit cards is to pay for unexpected emergencies. Financially responsible people realize that life happens, and so they maintain significant emergency funds. Just in case.

Habit 5: Financially responsible people know their financial condition precisely. These folks usually know within a few bucks the current balance on their mortgage or other secured loans. They regularly update their net worth, which is the difference between the value of their assets and their liabilities. They make each financial move in light of the effect it will have on their net worth.

Habit 6: Financially responsible people refuse to live under the fantasy of entitlement. While others feel entitled to run up huge credit-card debt simply because they have an approved limit and uncontrollable desires, financially responsible people don't approach life with this feeling of entitlement. They are not driven to keep up with their neighbors at any cost. They are content to live within the limitations of their income.

Becoming financially responsible is a process. I sabotaged myself for many years, convinced that I could never change. But I was wrong. I have changed and continue to make new progress every single day.

It all starts with a single step: A decision to become financially responsible. And then it's just one step at a time—again and again. One good habit after another.

I'm very good at all of these except occasionally #2. Usually I'll wait forever to buy something. For instance, I had a TV in my bedroom, it was a hand-me-down from my aunt. It was so old it still had a knob to turn the channel and another one to turn it on and adjust the volume. Hee. Well it finally died. I kept checking ads and the internet for a year waiting a rock bottom deal.

One day I went to a bicycle shop with my brother (he was there to get something) and I was bored and tried on a pair of sunglasses. I didn't need them but I bought a pair for $183.

I'll wear a pair of canvas Keds until the tread on the bottom is smooth and they have holes in the toes. (I've been tempted to then use duct tape but I haven't done it yet)

As you can see I really need to work on #2 on my impulse items.

$1.25 Pepsi from machine
$0.25 snack box

Work is Just a Job

I mentioned in passing that I had been off work for 8 weeks. It was actually a medical disability leave. Stress leave. Which is one of the top reasons for medical claims in my office, probably the whole company. The other reason is gastric bypass surgery. Yes, we are a bunch of depressed, stressed out fat people.

I'm never sure what the company's disability department is looking for in the documentation that the doctor submits, but they always deny claims. This time it was initially denied but then because there were "extenuating circumstances" to my situation it was decided that it would be approved. Yippee!!

Well all but one day and I can appeal that. I probably won't win the appeal but it won't hurt to submit the forms.

Last time I was off, I was denied and lost the appeal. I was happy to have enough money in the checking account to pay expenses but it sure would have been better to have been getting a paycheck.

I work in a call center for the Worst Company. The job is so easy my 2 1/2 year old niece could probably do it. It's just all the office conflicts and horrible management that make it hard to work there. Luckily (or unluckily) they pay well, the health benefits are good and they have tutition reimbursement. Unemployment in Jackson, where I live is 8% so I put up with the 150 mile a day commute and tolerate the problems at the Worst Company until I have the next breakdown.

It could be worse, at least I don't need the gastric bypass. Hee.

In the meantime, I'm saving up and going to school so I can retire early or get a different job closer to home. Although if I retire altogether I'll have plenty of time to work on getting my golf handicap down to a respectable number.

ETA: So a guy that left this office maybe a year ago came back while I was gone. I saw him for the first time the other day. OHMYGOSH!!! He looks really great. He used to be a chubby but now he's normal looking. So I mentioned it to the girl over the wall from me, who is on a diet (a real diet/exercise kind) that he lost weight.

Well, I'm sure you know where this is going. He had bypass surgery. Ugg. That's the first male that I know of.

$1.17 pop

Basement Update

So these are pictures of my basement after the washing machine hose broke and after ServiceMaster dried everything out for $2,000. It was such a mess that I couldn't muster up the energy to even try to clean it up more than this.

I took the pictures before the remodel started on Monday. As you can see in Picture #5, that wall had some water damage that ended up being about 4 feet up and around the corner to the left. Also that wall extends a few more feet to the right (Picture #3 but to your right ). The opposite wall isn't damaged because for some reason when he put it in the ex left a space between the concrete wall and the wall he built.

Pictures #1, 2 & 7 are of my laundry room. The wall behind the washer needs a coat of paint, the opposite walls have exposed insulation (I call it stuffing) and I want a utility sink installed.

My guys are back from New Orleans and they are doing the work in the main basement that's covered by insurance and the laundry room, I'll pay for and that will be an extra Spring project. Extra because I really need to get my concrete done, I've put it off too long.

Monday was tear out. Then we purchased supplies. Tuesday I had to run around and look for paneling I liked. The color I had was grey and I really liked it. I don't want a dark color and I don't drywall and paint. I went to Home Depot but they only had maybe 5 to choose from and I didn't like any at all. But the man there recommended a place in Vandercook Lake so I went out there. But they don't stock it, and I didn't know how much I needed. So they had 23 pieces at the wholesalers, the salesman called back and I paid for 40 pieces, we all drove out to the wholesalers and picked up what they had and will get the rest on Tuesday. I've lived in Jackson 38 years and I never knew this place existed. My handymen are from Charlotte so they don't know where anything is. Luckily per Yahoo Maps it was easy to find.

They've got most of the walls up and it looks really good. I'm excited that insurance agreed to pay for tear out and re-install because idiot ex did the original and he didn't know what he was doing. Now it will be done professionally. Even though I don't spend any time down there, I still want it to look nice. And now that everything is moved over to one side in a pile it'll be easier to throw stuff (clutter) out or freecycle.

So far excluding the Service Master, the plumber was $190 (from emergency fund) that I had to pay. Supplies are approx $1300.00 that insurance will cover.


$15.00 parking ticket (parking in my own front yard!!)
4.20 postage
2.19 candy/pop

Easy Way to Save

A very, very easy way to save everyday is to put all your change aside everyday. I use the ashtray in my car and empty Christmas tins in the house.

Every night, I put all my change and sometimes singles in my tin. Once or twice a year, I roll the coins and deposit them at the credit union.

This year I'll put it in the account that I've earmarked for charity. You could just as easily put it into your emergency fund or pay a credit card.

I rolled my coins last week and I have $89. Not too shabby since I try not to use much cash. It's about $1.72 per week or a bottle of pop and snacks at work.

Good looking out!!

BTW--my two items on eBay are doing ok, (Item #1--Wilton Floating Tiers Cake Stand Item #2--Wedding Party Midge Barbie Doll Gift Set MIB) and I have 4 more items to add tomorrow. That will be a total of 6. Then I only need to find 10 more!! Remember the challenge??

Emergency Home Repairs

The year didn't start out too well. I caught nurovirus. If you haven't had it, be thankful and hope you never get it. It's the worse.

So I was home from work, sleeping when my mom stopped over to drop off a key and she starts yelling. (1st thought--What the heck kind of dream is this?) My basement was flooded!!! About two inches of water all over!!! Oh no!!

The hose from the washing machine broke off and water was gushing all over. (Evidently now I find out that the hoses are supposed to be replaced every 5 years. Mine are 20 years old)

ServiceMaster came out and cleaned it up, took the rugs back to the shop to clean, and left 4 huge blowers on to dry things out. It took 8 days to dry everything out, some wall damage was found and so far the bill is $2,000 but insurance covers it.

I've never had a claim before so the insurance company waived my $500 deductible so that saved me a bit.

So anyhow, if you haven't got your emergency fund together yet, better now than never. Something ALWAYS comes up that we don't plan for and it's better if the money is there.

Frugal

Living within your means. But what exactly does that entail? Well for one, don't spend more than you make. Pretty easy actually. If you bring home $500 per paycheck, spend less than that, not more. Don't use credit cards if you are tempted to overspend. Set up a budget then stick to it. Put money in an emergency fund so that you don't have an unexpected expense which will set you back. Use a spending journal to track where EXACTLY you can cut unnecessary spending.

I'm not sure if the term "Keeping up with the Jones' " is still used but I'm sure you know what it means. Who are you REALLY trying to impress by driving a Hummer and/or a Cadillac that you can't make the payments on? Why have a $200,000 with 4 bedrooms 3 baths for a couple with no children? Especially if you then have no money to keep up with maintaince?

My two favorite sayings are, "Anyone can make a payment" that's my original saying. Yeah you may drive a Hummer but is is PAID for? Can you sleep at night? Or are you tossing and turning worrying about how to pay the bills? Are you afraid that when you get home from work that today will be the day that the electric company turns off the power and you'll have no lights? Life is stressful enough, why add extra unnecessary stress?

My other saying that I read in a finance book (can't remember which one) is, "Big hat, no cattle". Yeah you LOOK successful, but you aren't. You're just pretending. Posing. Big deal. I'd rather be the frugal little old lady that people think is poor but when I die my will is read and it's discovered I'm a millionaire.

I prefer to live BELOW my means and not worry about how I'm going to pay the bills every payday. The stress is really not worth it.

Trust me.


$1.25 Cherry Coke

Savings

Save Small, Save Often

Ramit drew up a clever graph to explain why you can't keep your long-term savings goals.

You're trying too hard.

Instead of eating only dry pasta for a month, try this. After you get your paycheck, immediately put 10 percent in your savings. Do whatever you want with the rest. If ten percent is too high, try five. Maybe next month when you realize you can still buy all the Pokemon cards you need, you can bump it up.

As Ramit points out, extreme changes usually aren't sustainable. "When I make a change, I almost always make the most incremental change of all and work iteratively from there," he writes.

Merlin Mann says something similar in one of his podcasts, referring to habits as strands of silver thread. The more you do something, the strands multiple and become a stronger rope.

Ergo, it's more important how much you do something rather than how much you do of it. So if you're having trouble getting started on a savings plan, save small, and save often. — BEN POPKEN

It's true. If you put the money in savings, then budget off the remaining balance, you won't miss the money. It's also a great idea to automatically add any raises to your savings account. There really is no reason to start spending more money just because you are earning more.

Of course, in my opinion it also better to live BELOW your means rather than at or above it. There is nothing wrong and everything right with being frugal.

Emergency Fund

Even if you are juggling bills now, it's VERY important to start an emergency fund. I recommend $100-200. This is money that is set aside for things that come up that need to be taken care of right away. For example: car repairs, furnace breaks, waterheater gives out, etc. Either keep it in an account where it would be easy to either transfer to checking account or transfer as payment on credit account or if necessary, in cash.

Since we are keeping a spending journal it should be easy to see where to cut down on spending and put that money into an emergency fund instead. Most areas where it's easy to cut spending are eating out (especially lunch),clothing & entertainment.


$10.00 doctor co-pay
3.69 Beaner's (coffee)