The Car is No More

I got some very bad news on Friday - something went horribly wrong in the engine of my 1998 Chevy Cavalier, and it will take at least $1500 to fix it, in the best case scenario. The Blue Book value of the car, if it was in "Fair" condition is $1900, but to call it Fair is a stretch, and that's only if it still worked. To add insult to injury, I just invested $600 in new front wheel bearings and brakes two months ago.

For the next couple of months, my wife and I will have to share her car. It isn't a huge inconvenience, since we both work similar schedules and we were carpooling two days each week anyway, but it will make it difficult for us each to take care of personal errands without a good deal of advanced planning.

I haven't decided how to handle the replacement cost yet, nor have I invested much thought in the replacement vehicle either. I know this much so far: definitely not new, definitely searching for the lowest price while maintaining a modicum of reliability, and definitely want to pay cash for it. Unfortunately, I haven't gotten too far into building our savings.

I had planned to put our tax refund towards debt and a mini-vacation, but it looks like I will be using it towards the car. The other possibility, which depends largely on how the carpooling works, is to hold off on the purchase of a new car for a while, save some more money, and take more time to hunt for the right deal.

Until next time,
Jonathan

a.k.a. Debt Magnet - I just seem to attract it.

Foiled - Car Trouble

In The Plan: Savings, I wrote that I was going to wait a while before I start building our "Long-Term Emergency Fund." I mistakenly considered that Emergency Fund a buffer against lost income. Had I been paying more attention, I would have seen the value in that Emergency Fund as a buffer against unexpected expenses that overwhealm our budget.

One unexpected expense jumped into our financial picture today. I was driving from Albany to West Hartford, CT to spend a couple of days at my Reserve Unit tidying up some issues before I transfer to a new unit. As I was clearing the toll plaza in Canaan, the last toll plaza in New York before crossing onto the Mass Turnpike, my car just stopped. Luckily, the tow back to Schodack didn't set me back a dime, thanks to the AAA. I am waiting for a call on the extent of the damages.

I need to revisit our savings plan, so I can start building that Emergency Fund. As of this last paycheck, our Short-Term Emergency Fund sits at $300.41, just a couple of months away from the $500 goal. Once I hit that goal, I will shift that contribution to the Long-Term Emergency Fund.

Until next time,
Jonathan


From My Blogroll:

Karen Datko gives a simple approach to budgeting at MSN Money's Smart Spending (originally posted at The Dough Roller).

Shannon Christman talks about insulting advertising at SavingsAdvice.Com. I have to say, I agree with her assessment.

The Plan: Live Frugally

In Our Feelings on Spending, Debt, and Budgets, I outlined the four main categories of our financial planning: establish savings, pay off debt, live frugally, and get real about the future. Since then, I've gone into more depth about savings, to include retirement planning, and debt reduction, but I haven't talked much about my ideas on frugal living.


I don't have too many ideas on frugal living, since I really haven't been living frugally. As I've said before, that is the biggest reason that I carry so much debt. Over the last year, it has become increasingly apparent that we need to plug some of the leaks in our spending, save where we can, and generally make better financial decisions. My lack of experience in budgeting and frugal living makes that quite the challenge.

The biggest struggle we face in forming a budget is finding the right balance between reducing expenses and still having enough "fun" money. In forming the budget, I am keeping three key factors in mind: flexibility, simplicity, and reality.

Flexibility - If the budget drills down to the last penny, it is doomed to fail. There needs to be enough room within the budget categories and within the budget itself to allow for unexpected rate increases, changing needs, etc. In addition, if the budget is too tight, one small expense that runs over budget throws the entire budget off balance.

Simplicity - If we can't figure out the budget, track the expenses, and know when we're reaching the upper limit of a budget category, it can't possibly work. To have too many categories, too many moving parts, or too much money shifting from category to category will result in failure. We may consider switching back to cash for our living expenses, instead of the debit cards, so we can track our spending by putting designated amounts in different envelopes. However, that introduces its own challenges and requires the discipline not to spend the cash out of category.

Reality - If the budget doesn't allocate enough money for certain things, it is doomed to fail. For example, expecting to buy enough groceries for the two of us for $25/week is unrealistic. Expecting to fuel both cars for two weeks on $20 is a joke. There needs to be enough money in each category to comfortably cover the expenses - and this is the biggest challenge we are facing.

Where does frugality enter into this conversation?

I want a budget that offers flexibility, simplicity, and reality. All three of these goals require one thing -- enough money. For the budget to be flexible, there needs to be enough money to go around. For it to be simple, there can't be a lot of moving money from one category to another to compensate for overspending -- there needs to be more money. For the budget to be realistic, there needs to be enough money to comfortably cover all of our expenses, and then some.

In order for the budget to succeed, we need to minimize our expenses wherever possible. I do not want to pinch pennies, but I know there are many ways we can reduce expenses with minimal work on our part. I've gotten many good ideas from other blogs, and I plan to throw them up here as time allows.

So, my Live Frugally plan is still pretty vague.

Until next time,
Jonathan

Debt and Savings Update 2007 #1

I am trying to decide what format is best for providing financial updates. Between my wife and I, we have three checking accounts, two savings accounts, an investment account, four credit cards, one student loan, one healthcare loan, one miscellaneous debt account, and one car loan. To post the entire list every couple of weeks would take a great deal of time and, frankly, nobody really cares about the specifics.

I thought about posting every detail about our recurring monthly expenses, but instead I will only post information about those if there is a change from the norm. As for balances, I will only post the balances that have changed.

So, here is Debt and Savings Update 2007 #1 - 12/3/2007

Checking - $2,120.99

My Checking (USAA) - $87.45 - Usually right after pay day I have about $100-150 remaining for two weeks worth of personal expenses. I drove to Mass. this past weekend for military training, and with the price of gas it hit hard. I need to drive to CT this coming weekend for more training, and may have to dip into the short-term savings to pay for the gas. I will pick up a couple extra days of pay for the training, so it will not be hard to refund the savings account.

Her Checking (KeyBank) - $89.99 - Again, right after pay day Jen should have $100-200 remaining for the two weeks. However, her friend had a baby shower over the weekend that Jen contributed to both the planning and financing of, which took its toll on the balance. She also bought cat food over the weekend, which actually comes out of the grocery budget, so I'll end up transferring that money back to her checking account once we're done with the grocery shopping. If she is careful with the next two weeks, though, she should be able to make it through.

Billpay Checking (USAA) - $1,943.55 - This is right about where it should be. After all of the scheduled payments, there is about $47 extra in the account. Once I am certain that money is clear, it will go towards the credit cards.

Savings - $450.94

Short Term Savings (USAA) - $300.41 - I moved $50 from the last paycheck into the Short Term Savings account, the low yield account destined to bail us out when we underestimate our expenses between paychecks. The goal is to reach $500, which should be right after the first of the year.

Goal Oriented Savings (ING) - $150.53 - The high yield account will start its automatic funding on 12/14, at $20 per paycheck. Any extra money after expenses will be split between debt snowflakes and goal oriented savings. We still don't have any goals established for this money, but I'm leaning towards a few days of R&R this spring.

Investments - $1,770.12

I have had one investment account, we'll call it "Primary," since my grandmother started it as my graduation present. She continues to add to it for birthdays and gifts for other occasions -- probably the best gift anyone has given me. Starting in November, $50 each month will automatically transfer, to start to build the account so that, one day, it will fund the downpayment on a house. I haven't done the math yet, but $50 per month over five years is $3000 invested, and the fund's 5-year average return is 15.33%. It won't be the entire downpayment, unless I can up the $50/month contribution substantially, but it should take care of some of it.

I recently opened a second investment account at Sharebuilder, and I was planning on using it to diversify my investments a little. There is $100 sitting in their money market account waiting to be invested, but I've been second guessing that move. I think it would make more sense just to send the money from Sharebuilder to the other investment account. Still working on this one.

Credit Cards - $22,297.03

Broken down, it is:
Universal - $8,360.00 @ 1.99% - Paid $136.52 today.
Capital One - $435.00 @ 15.40%
CitiSimplicity - $3,000.00 @ 10.24% - Paid $185.98 today.
USAA - $10,502.03 @ 11.65%

This week, $202.03 is posting to the USAA account, bringing it down to $10,300.00. The balance on the cards continues to drop, though not as fast as I would like it to.

Other Debt - $10,098.68

Student Loan - $4,462.21 (6.97%) - Making the standard payments. ($70.00)

Medical Debt - $5,636.47 (0%) - This is actually a composite of several major accounts, one healthcare finance account and a collection of what started as six medical bills that we are making payments on.

The healthcare finance account was going to pay for Jen to get braces, before she decided that she really didn't need/want them. The balance remains for now, but the orthodontist is supposed to be refunding the money to the creditor soon.

We started with six medical bills last year, totalling $3,995.00, and we've knocked it down to three bills remaining for $2,005.13. We are scheduled to pay $150 monthly, but I usually try to put in a little extra.

12/3/2007 Net Worth - $27,994.99 (-)

Comparison:
10/2007 Net Worth - $30,175.92 (-)


That's my update for now - I'm still working on the format and the "right" amount of information to put with each update.

Until next time,
Jonathan