Tuesday, December 30, 2014

Money Dumb

When it comes to money and finances, I am an idiot. I used to believe I was "good with money" because I was cheap frugal and saved a ton. It was pretty easy to do when I was single and had limited expenses, and pretty much everyone I knew was in a similar situation. I've been thinking a lot about our finances recently. This post is pretty long, but it is helping me work through this in my head and I'm hoping to create external accountability for my goals.

Despite the upward swing in my discretionary spending lately, though, I still don't spend that much money. I shop at pretty middle-of-the-road retailers and always wait for sales, I'm not blowing $100s ($1000s?) on designer bags or shoes. Its hard to spend THAT MUCH at Ann Taylor Loft when they are always having 50% everything sales. I bring my lunch to work every day. We eat at restaurants maybe 2-3 times a month, and get take-out similarly 1-2 times a month. I have no expensive hobbies (my hobby is reading books that I get free from the library) and I'm not into gadgets or home decor. I get my haircut twice a year, color it at home with drugstore kits, and paint my own nails if I'm in the mood. I'll get my eyebrows waxed every couple of months or before an event ($12). I have virtually no social life, other than book club meetings rotating at member's houses every couple of months and an occasional 1-2 glasses of wine out with a friend (maybe twice a year we get around to it). We don't travel except to visit relatives, so the only cost involved is airfare. I work out at the Y where we have a family membership or I run outside with my dog.

Where I tend to spend on clothes/shoes, G buys lots of media (movies and music). Mostly cheap/used, but sometimes new. I don't know what it all adds up to, since its "Amazon" on the credit card bill. He also tends towards new and expensive hobbies every few years. Currently its woodworking. He bought a ton or equipment and tools this year on that. If he continues, and gets good enough to build some stuff for our house (or even for it to be a fulfilling lifelong hobby) it would be worthwhile. Other than those (admittedly pretty big) things, he doesn't spend much else.

We don't spend a ton on our kids, either. They are in a fairly low cost daycare (for the area). We are members of the Y and do swimming classes for a modest cost. They each will pick one other activity this year. This year was the first time I actually bought toys for the boys---in the past we had so much stuff from relatives we didn't need too---now that they are older and have specific interests, I'm trying to encourage those. We get most books from the library, but I'll buy one hardcover book every few months to add to our library. L wears B's hand-me-downs unless they've fallen apart---basically this means he gets new pants & shoes every year. B gets new clothes for each season (i.e. he got 5T winter clothes recently, and will get 5T summer clothes in 6 months)---these are ALL from Old Navy with 30-40% off or Children's Place. Tops generally $3-8, bottoms $8-15. He needs new shoes every 6 months. We don't skimp on shoes, usually $35-50. No impulse clothes purchases have ever occurred for the boys!

We don't have: a car, cable, landline phone.

There are some areas I'm sure PF bloggers would tell us we could do better on:
  • Our grocery bills are pretty high. There really aren't low cost options nearby so we either shop at TJs, WF, or delivery (which is also expensive). I don't skimp on groceries, mostly because we eat most meals at home and we send all the boys' food to daycare (they don't provide meals or snacks). We go through a LOT of fruit and vegetables every week which is pricey. We don't eat much meat. I sometimes buy fancy cheese so we can have a "date night" in. We drink wine/beer/liquor at home which some might consider an unnecessary expense (vs. water).
  • We have contracts and data plans on our (3 year old) smartphones (vs cheaper pre-paid options).
  • We have a dog, with the resultant expenses (boarding when we're away being the biggest, also she had surgery recently and whoa!)
  • We have a house cleaner come every other week.
So where is the "dumb" factor coming in? A few major things:

1) I have a huge pile of money in a savings account and in CDs. I haven't invested it. It is doing nothing for us earning <0.5% interest.
2) This is a big one and I'm embarrassed to admit it, but I think we got suckered into buying more life insurance (and I also have longterm disability insurance) than we need. A LOT of our paychecks gets direct deposited into these things. I've had the LTD insurance for about 7 years, and we've had the life insurance for 5 years. I don't know how to figure out if its "too much" or not.
3) I thought I was putting 15% into my 401K. Turns out I wasn't. I just realized this last month and upped it from 5% to 10% with plans to go to 15% when things smooth out after the holidays.
4) I have no idea how my Roth IRA, traditional IRA, 403b (from residency employer) or current 401K are invested.
5) I do stupid things with credit cards, like getting new airline cards to get the sign up bonus, but then forget to spend the requisite amount to GET the bonus, and then forget to cancel before the year's annual fee is due (this just happened).
6) Last year (2013) I completely forgot to submit receipts for our dependent care FSA and we lost $1800. LOST IT.

 What I want to do about these issues in 2015:
1) Invest all but $10K emergency fund. Where, how, I dunno. Deadline April.
2) Figure out and possibly decrease our life and LTD  policies. Again, not sure how. Anyone know who could tell us the answer to this? Deadline March.
3) Obviously, increase 401K contribution to 15% next month. Deadline Janaury.
4) Get together all my accounts, figure out where they are invested, and change those choices if it makes sense to change them (though I first need to learn what the best choice is!)  Deadline May.
5) If I decide to get new credit cards for incentives, put dates and actions to do into my calendar. I actually successfully did this with the United Credit Card. I got the card, put in my calendar to charge $1000 (and what to charge it on and when) in my calendar, and did it. I also put in the calendar to look for the bonus miles and when to call if they aren't there. And the date I need to cancel the card to avoid the annual fee. Ongoing.
6) This was added to my calendar, as well. I actually already submitted 3 months daycare bills already, which covers the entire academic year FSA maximum (its ridiculous, isn't it?) Ongoing.

Help me:
Investing books or guides?
Guides for how much life insurance one needs? (or how to figure this out). Guides for how to GET OUT of a life insurance policy, or reduce it, while minimizing penalties?

I want to be money smart by 2016.


  1. It sounds like you're doing really well! You've just passed to the I think "third stage" of personal finance is all.

    I know that I will never remember to do the things I need to do to get a CC bonus (from experience) so I always say no to offers. I have a 1% back card and that is that. I gave up trying to game systems after I had DC1 because I just do not have the mental load for that anymore.

    I love that you have deadlines on your money goals. One thing that we did about 3 years ago when we found we had enough money that things like where our retirement savings were going mattered was to both take a day off from work with the kid in daycare and we figured everything out-- what our options were, what the fees were, where and how everything was invested. We also called our providers and asked for discounts. We saved more than a thousand a year in terms of fees and discounts.

    My kids and the family are going out right now (so I'm going to work, which is my personal area that needs work), but if you want to email grumpyrumblings at gmail, we can do a series of Ask the Grumpies on your specific money questions. In terms of investing, you want to go Bogleheads. The Vanguard way is, from this expert's perspective, the best way according to people in my field. The answer to how much insurance is a lot longer answer, but the essence is that you will want to go through a lot of "what if" scenarios in your head. What if the worst happens, what would you like to see monetarily?

    1. Specifically this Bogleheads book: http://amzn.to/1Ak2X15
      The one on retirement planning isn't as straight-forward or useful -- it's more like a book of short stories than a novel, if that makes sense.

      Another general finances book that lays out a lot of different options and explains terms (usually without taking a stand) is JD Roth's Your Money the Missing Manual http://amzn.to/1I2kafX . But you're probably at a point where you don't need that anymore. Still, it does briefly discuss the insurance question.

  2. When I started learning about money, I read a lot of finance blogs. They're not as popular or active now but it was a good way for me to learn stuff on a week-by-week (or day-by-day) basis instead of trying to read lots of finance books. Oftentimes the reader comments are useful too. Unfortunately I don't know which blogs are popular and still personal right now.

  3. Wow, you are leagues ahead of me as far as all of this goes so I don't have any advice to give, I just wanted to applaud you for being in such a good place on all of this and for still wanting to do better. I'm impressed.

    Also, you clearly don't subscribe to Suze Orman's 6-month emergency fund idea. I was curious how you came up with $10,000 as your emergency fund amount.

  4. If it helps, you're not the only one who has too much capital sitting in fairly useless places (not much better than under the mattress). I know I should be allocating to my various ETFs, but then I feel like everything's starting to be overvalued and I know that I need to be disciplined about just doing it (if I'm taking the money out in 35 years the next market dip or even crash doesn't really matter) but still.

  5. I've been lurking for a long time - love your blog and especially how honest you are about the tougher parts of life.
    One investment option that is all automated and involves zero thought is Betterment.com. They suggest an allocation and use an algorithm to invest.
    Great if you don't have the time or interest in doing a lot of legwork (me).

    Best of luck with your wishes for 2015!

    1. From their FAQ: "Betterment charges a management fee of 0.15% to 0.35%"

      You're much better off picking a target date fund from Vanguard and just leaving it at that. http://nicoleandmaggie.wordpress.com/2012/03/05/target-date-funds-primer/

    2. Though doing some research, it looks like betterment is a lot better than say, Edward jones. So not horrible to go with them.

    3. Thanks, I've decided to go with Vanguard just to keep everything (employer plans & person plans) together, but I've heard about Betterment and it seems like a good option, too.

  6. Another long time lurker. IMO Vanguard is a great start. Like you, I finally moved all but 8 months of an emergency fund (covers 8 months worth of living expenses in the event of a major financial change) and invested into Vanguard. I also have a Roth IRA through Vanguard using a Target retirement date (which Suze Orman isn't a huge fan of but it's great if you just want to put your money some place with little maintenance or knowledge about where and when to invest etc.). Just make sure invested money is money you don't think you will need within the next 10 years. If you're maxing out your 401k - great - but if you're not, I would contribute up to whatever the employer match is (if there is one) and then invest the rest into a Roth IRA (you can contribute up to $5500 per year - $17,500 for 401k). Also what about 529 plans for your kids? I have found this guy's blog pretty helpful, too: http://www.thesimpledollar.com/ He really does talk about everything - especially saving and how to save.

    1. I'm really not a fan of Suze Orman. She has some good things to say about money and emotions, but some of her advice, especially for the "young broke and fabulous" is really bad advice.

      Interestingly, she doesn't invest her money in the same way she recommends other people invest their money. She's heavily over-invested in safe securities (but recommends that others do growth), which she can do because she has so much money.

  7. also mint.com is a great budgeting tool I have used for years. Takes some calibration and some effort but once you get it up and going, its really simple (and addicting for some!). You make tweaks along the way, which is time consuming sometimes but if you're serious about figuring out where your money is going, this was a good start for me. You can even split items so if you know how much your husband spent on whatever he bought at amazon, you can indicate that - again, a bit time consuming. But it's become a meditative task for me now - crazily enough.