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Personal Finance

Even Though We Ain't Got Money...

I’ve Got Fewer Non-Cash Tax-Deductible Donations To Give This Year

It's sad for my 2008 taxes, but maybe crummy deductions is a good thing?

For many years now, I’ve used a program now marketed by Intuit called “It’s Deductible”.

It started out in booklet form, which I still consider way more convenient than the computer program, but maybe that’s just me. Anyway, this program lists the supposed fair market resale value of your used clothing and household items, so that you can come up with an IRS-approved valuation of your donations for tax-deduction purposes.

I’ve been frankly shocked by the generous values I’ve been able to assign to my non-cash charitable donations, which usually end up being carted to my local Goodwill Store. In fact, the money I’ve saved on our income tax bill each of the past five years has amounted to something of a part-time job for me. It’s made me feel a bit proud of myself to think of how I’ve (legally!) prevented Uncle Sam from getting his hands on even more of our money.

This year, though, was different. For one thing, no kids lived with us for even part of the year. Which means, of course, they weren’t here to move out, thereby not leaving half of all their stuff for us to dispose of. In addition, in the fall of 2007, after our youngest son moved into a house with his buddies, we did a major dejunking of every square inch of our property. What we didn’t sell, we gave away and took the tax deduction.

And finally, we resolved to STOP buying more stuff. Honestly, when you get to be a Late Boomer, if you’re anything like us, you’ve got as much stuff as you’ll ever need. I remember my grandmother telling us, when she was about my age, “Don’t buy me anything else I’ll have to dust.” Amen, Grandma!

So last week, I sat down to valuate my giveaway pile, and let me tell you, I was sorely disappointed. I compared the total value of all my non-cash donations to what I’ve given in previous years and wondered how on earth I could have come up with so little to give.

Was I being a cheapskate, ignoring the serious needs of the less fortunate? Was I becoming bizarrely sentimental about stuff I should obviously be getting rid of? Or could it be that my husband and I had actually succeeded in halting the flow of material possessions into our home?

Bingo! We have a winner!

Of course, that left me with the little problem of how to replace that lost tax deduction. Why, if I didn’t help out around here by continually shopping, storing, sorting, bagging up, and getting rid of stuff, I might have to get another real job!

Here’s the deal: Until the government cracks down on what they’ll surely end up calling loopholes in the tax code, there are other ways to get deductions. For me and my house, that means bigger contributions to our tax-deferred retirement accounts, fully funding our tax-advantaged health savings accounts, and writing a larger check to our favorite charity.

If the feds decided today to lose the non-cash donation deduction, I guess I could live with that. Especially since I’m finally not hauling home any more stuff.

Posted by Katy on 01/04/09
in Personal Finance

Long-Term Is Right Around The Corner

If you're a Boomer without long-term care insurance, it's time to plan

Boomers are eternally optimistic, I think. And the one thing they are most optimistic about is never-ending youth. But honestly, it’s time to get a grip.

Not only are Boomers not going to live forever—-facelifts and butt lifts and fantastic vitamin formulations notwithstanding—-a whole bunch of us are going to “do time” in a long-term care facility before we kick. They still don’t have a cure for Alzheimer’s, you know (although those brain teasers we’ve been working on are bound to help), and the US is looking down the barrel at 80 million Boomers retiring over a 20-year period.

With life-expectancies stretching into the 80s and 90s, a much larger percentage of our generation could end up facing dementia than in previous generations, if only by virtue of the fact that we’re living longer. I don’t know about you, but I hesitate to ask my children and grandchildren to fork it over for the costs of my long-term care. And I certainly don’t plan on them caring for me themselves.

So what’s a Boomer to do? I suggest we waste no time investigating the long-term care policies on the market today. And I do mean TODAY. 2008 is already half over, people! If six months can fly by that quickly, do you believe time is somehow going to start moving more slowly? I didn’t think so.

Of course, the sooner you apply for long-term care insurance, the lower your premiums will be. If you’re in your 50s when you take care of it, it’s truly not terribly expensive. But if you wait until you have to be admitted to the hospital for something like, I don’t know, a bit of a dizzy spell, the origin of which manages to elude diagnosis?

Never mind that you recover and never have another episode. Even if you’re in your mid-50s, you WILL be turned down for long-term care insurance, and kindly invited to never apply again.

There are times in life to strike while the iron is hot. The time to act on attempting to meet your own future needs is while it’s inexpensive and before you’re disqualified by some transient health concern.

You can totally ignore this advice if you believe the government (aka the next generation of taxpayers) will pay for all your nursing home expenses (and in case you believe that they pay for our elders now, they don’t!).

Or if you believe that your children are just dying to change your diapers.

Posted by Katy on 07/02/08
in FamilyOur ChildrenHealthPersonal FinanceRetirement

Tricking Ourselves

Any automatic savings for Boomers beats none

Do you have automatic savings and/or retirement plans set up with your employer?

Although we are self-employed, I can vouch for the fact that any automatic savings plan you can put into place will work wonders for your future.

So, as Vice-President and possibly even Chief Financial Officer (hmmm…I might have to check the corporation’s bylaws on that one!) of our company, I’ve taken it upon myself to automate tons of stuff. I’ve done this on the personal side of our finances, as well.

Since our health insurance is a high-deductible policy, we’ve opened Health Savings Accounts, into which we automatically deposit the maximum allowed by law each month. There is talk of Medicare being completely broke in 11 years, you know—-corresponding with the exact year Doug would like to retire. Something tells us it’s a very good idea to have a hunk of money set aside to cover our future medical expenses.

Right now, I think we’ve accumulated enough for one of us to break a bone. And it would have to be a non-complicated break, at that. No surgery required. Just a pink or green cast for six weeks and enough money left over to buy a Sharpie marker for autographs. Can’t pay for physical therapy after the cast comes off, either. But if we keep socking away money—-and we will, because it’s automatic—-maybe by next year, we can pay for a printout of recommended exercises.

Our other automatic savings are adding up online, in accounts divided into funds for emergencies, car replacement, and travel.

This travel fund is hugely important to us. We’ve been to Ireland and Scotland twice, and boy, do we want to go back again. So, even though we contribute a nice amount every month automatically, I’ve thought of a way to trick ourselves into beefing it up even more.

Both of our mothers are in assisted living facilities. They both require lots of supplies, which their kids end up purchasing. But guess what we forget to do? Ask them to reimburse us. Sometimes we’re out hundreds of dollars at a time. But, see, The Moms are good for it. We somehow don’t feel right in getting our money back—-and we should.

So Doug and I have made a deal. If we complete a transaction with our mothers, no matter how large or small, by getting reimbursed, that money is transferred directly into the travel fund. Sure, we could be more responsible and put it into retirement, but we really don’t want to be people who waited too long to travel, especially since it’s one of our passions.

I bought my mother $80 worth of Depends the other day, and immediately wrote myself a check for reimbursement. Our travel fund now looks that much better.

Makes me wish I’d bought her a boatload of groceries, or maybe a new car.

Posted by Katy on 06/30/08
in FamilyOur ParentsPersonal FinanceSavings

Every Woman Has Her Price

Boomers economize, then can afford steak

Doug and I have taken to making our movie-going experience as inexpensive as possible (Okay, cheap).

I estimate we only go to the theater maybe three times per year, like when some action flick’s showing on the big screen that just won’t translate to our 25” TV with the degree of joy my husband wishes to experience.

So, yeah. We did see the new Indiana Jones movie, which was plenty of fun. But here’s the deal: We saw it at 11:00 a.m. That’s in the morning, people! I know some of you stand in line for midnight showings of new movies, but we…don’t. We’ve found that once you’re inside the theater, where it’s all dark and cozy and nearly empty before noon, you really forget that it’s not nighttime. In fact, when you come out of the theater, you’re shocked to see the sun shining and the flowers growing and to find that your wallet still has some cash intact.

That’s right. At the theater closest to us, movies that start before noon are half price. $5 per ticket is still more that I want to spend, which is why we do it so occasionally, but $10? No way. We also refuse to purchase tickets online, since that privilege adds $1 to each ticket. Why not arrive a few minutes early (which we want to do anyway to get our favorite seats where we can put our feet up on the railing) and relax?

Every once in a while, Doug thinks he has to have popcorn, and even though I argue with him, he gets it anyway. But bottled water? No way. If you ask, they’ll give you cups of tap water, even though they do look at you like you’re cretins. And who knows? Maybe we are. All I know is that unless I’m in a foreign country and at risk of acquiring a nasty intestinal bug, I will not pay to drink water from bottles.

About that popcorn thing? Have you ever figured the per-ounce price for that classic film-munchie? Smart Money’s article “9 Ways to Save on Movie Tickets” did the math:

“Per ounce, the smallest size of popcorn is twice the price of filet mignon.”

Look, there’s a pretty swanky steak joint in the same parking lot with the movie theater. By the time the show ends around one, we’re hungry. All that adventure burns a lot of calories! And by one, the lunch crowd is clearing out of the restaurant, but the lunch prices are still in effect.

If you’d rather eat popcorn than steak, I’d like to hear about it. As for me and my hubby, we’re happy with early movies and late lunches—as long as the price is right.


Posted by Katy on 06/18/08
in Personal FinanceSavings

You Can’t Always Get What You Want

Some Boomers imagine working forever, but life surprises them with early retirement

We’ve all heard about Ed McMahon’s woes by now. I’ve tried every which way to understand what went wrong with his thinking, but it’s hard.

I get that he’s generous and gave away tons of his money to others in need. I know he has previous wives to support and a current one whose clothing design business he invested in heavily before it went belly up. And word was he might lose his McMahonsion to foreclosure, since he owed nearly $700,000 in back payments.

What I don’t get is how an 85-year-old man can say his financial woes are due to the fact that he broke his neck and couldn’t work in recent months. Tell me the truth: do you honestly see yourself working for a living in your mid-eighties? I’m not saying it’s a bad idea—-heck, it might be a great idea, if you’re doing something you love.

But how on earth could you count on being physically and mentally capable of working at that advanced an age? Wouldn’t you want to, say, have a paid-off house by then, just in case?

U.S. News & World Report, in an article aptly titled “Getting Ready for a Surprise Retirement,” says:

The vast majority of baby boomers want or plan to work in some capacity as long as they can. Eighty-four percent of people between the ages of 51 and 70 expect to work after they formally retire, and nearly two thirds say they can’t see themselves ever retiring completely, according to a survey by management consulting firm McKinsey Global Institute. The McKinsey analysis also indicated that 60 percent of boomers will need to work in order to maintain something like their current lifestyle.

But what if the world doesn’t turn out to be perfect? What if something happens that makes it so you can’t continue to work?

An Urban Institute analysis offers a sobering look at what can go awry with your retirement plans. It looked at people who were 51 to 61 years old in 1992. A decade later, over three quarters of them had lost their jobs, become widowed or divorced, developed new health problems, or were confronted with frail parents or in-laws. Any of those circumstances can take a bite out of retirement plans, if not force workers to scrap them altogether. A third of the participants had a health condition that limited their work, and 19 percent went through a layoff or business closing, the study found. And laid-off employees who managed to get a new job were less likely to get health insurance and earned about 25 percent less per hour, says Richard Johnson, a coauthor of the study.

Look, I love the stories of the geezers who walk to work every morning, put in twelve hours six days per week because they want to, and then die happily during a coffee break. It makes me happy to think of people well past the age we’ve come to think of as “retirement age,” still useful and fulfilled, doing exactly what they love and what they planned to do.

I’m just sayin’, you might wanna have Plan B in place.

And if you’re positive you’ll be working until you’re 85, I’ve got a McMahonsion to sell you.


Posted by Katy on 06/17/08
in LifestylePersonal FinanceRetirement

Don’t Stop Thinkin’ About Tomorrow

Retiring Boomers must plan for a life, not just a 401K

Evidently, boomers aren’t giving enough thought to how they want to live their lives if and when they’re no longer working full time.

We all remember stories from our parents’ generation. The stay-at-home wife made her peace with the idea of her husband being “under her feet” (that’s the expression my grandmother used) all day, well before her man got the gold watch and the glass of punch.

But then, way too often, the retiring man would spend his last day at the office, wake up the next morning, and not have a single idea of what he might want to do with his time. Or maybe he’d decided that a life of golf would suit him, and found out within a couple of weeks that he needed something…else. Something…more.

Sometimes, these gentlemen would find their minds and bodies in a rather rapid decline, if they didn’t find worthy and fulfilling occupations. Now it’s the Boomers’ turn.

ABCNews is reporting that unless our generation of retirees has interests in place, depression can easily set in. And in the absence of the social network provided by work mates, we’d better have some great friends.

Social worker Sherry Parrish says:

People who stop working tend to lose that sense of being part of a team. For example, if you don’t show up for work, someone calls looking for you. But when you’re retired, nobody comes looking for you if you stay in bed all day. So whether you volunteer, get a part time job, or you work in your garden — it doesn’t matter what you do, it’s just important that you do something.

So. Maybe you’ve got a so-called retirement plan in place. But if it’s just about the money, it’s not gonna’ cut it. Do you have a plan for your time and for your mind? Do you have friends and interests and maybe even a cause?

Something to think about, eh?


Posted by Katy on 06/17/08
in Personal FinanceRetirement

To Work Or Not To Work Might Actually Be The Question

Boomers may have less of a choice than previous generations in whether or not to continue working

The only thing that kind of freaks me out about suspecting that our retirement accounts aren’t currently what they should be is wondering how long we’ll be able to work.

Doug and I are both self-employed. He owns and operates a web design firm, for which I work part-time. I am also an aspiring author, having (finally!) completed my first novel.

He loves what he does, and he’s brilliant at it. He never was very thrilled with “working for the man” until the man turned out to be him. I, too, have spent most of my lifetime resisting the lure of the cubicle. I’m hoping to have a late booming career as an author, a hope my agent believes is not misplaced.

But our freewheeling work lives don’t come without a price.

We have, of course, no pensions. And no vacation days, or sick days. Doug has long-term disability, which would kick in if he was totally disabled for more than 90 days. For the first 90, we’re on our own.

And then there are those fantastic “matching funds” we hear so much about. We don’t have those, either. No matter how things turn out for us when it comes time to finally retire for good, we will have provided all the dough. Doh!

Philosophically, we have no problem working long past the age of 65, especially if our work continues to be satisfying. In that, we aren’t alone. As MSNBC reports:

William Zinke had plenty of resources to retire when he reached his early 60s. He didn’t want to stop working but did want to get away from the hectic pace of New York, where he ran a human resources firm. So Zinke moved his firm to Boulder, Colo., where the pace is more relaxed. Seventeen years later, at age 80, he continues to put in full work days. “I’ve had a very good life,” Zinke said. “I’m proud of what I’ve accomplished, but I’m not done.” Zinke said he is fortunate to own his business and to be able to set his work schedule. He has formed a nonprofit organization, the Center for Productive Longevity, that is working to encourage other employers to help older workers with flexible schedules and other accommodations. “We need to change the way we think about retirement,” Zinke said.

The only difficulty we have imagining working well into our senior years is that we haven’t had this lifestyle modeled for us. Both of our fathers were dead by age 62, and our mothers moved into assisted living at much younger ages than we hoped they would.

So I’m wondering: Have you seen gainful employment successfully modeled among the elderly people in your lives?

And if you think you’ll be healthy enough to work far beyond the age of 65, what exactly makes you think so?


Posted by Katy on 06/10/08
in CareersPersonal FinanceRetirement

As Usual, It’s All About Balance

What about semi-retirement, with deferred gratification not quite so deferred?

Financial columnist Humberto Cruz has long been a model for me of deferred gratification. I remember reading his stories twenty years ago, about how he and his wife gave up something in the here-and-now in order to have something in the seemingly far-off future.

But eventually, the future arrives. Even for Humberto Cruz, who must sooner or later face the fact that he’s done an outstanding job with his money. And that—-even though he’s still working—-it might not hurt to spend some of it now rather than wait until he’s too old to enjoy it.

Without enough money saved, you may have no choice but to postpone retirement. But that doesn’t mean postponing gratification, at least not all of it.

Cruz recently had a conversation with Christine Fahlund, a senior financial planner with T. Rowe Price in Baltimore. They discussed how many aging Boomers are being dealt the hard news that, because of the economy, they might not be able to retire as soon as they planned. And how the news affects them. Some, apparently, go into denial and retire anyway, insufficient funds notwithstanding.

There’s an alternative way to approach this dilemma, says Cruz:

Say you had your heart set on retiring next year, but a review of your finances shows you will need to keep working a few more years to build up your savings. At the same time, and making sure you stay within your budget, you could start to indulge in some of the “wants” you were putting off until retirement.

In other words, according to Fahlund, maybe it’s time to lighten up a little.

“If that is a cruise, take it now,” Fahlund said. “If you wanted to build a better workshop in the basement, start investing in the equipment you want. Do not delay gratification. Focus more on the cruise and the workshop” rather than on having to keep working.

Whatever you do, Cruz and Fahlund agree, don’t retire before the time is right. For every six months to a year that you remain in the workplace, you have that much less time to provide for during your non-working years. And if you can begin to really enjoy some parts of life you’ve been postponing, it might just make going to work much more palatable.



Posted by Katy on 06/09/08
in LifestyleDreamsPersonal FinanceRetirementSavings

Staying The Course, But Maybe Not The Golf Course

Downsizing to weather the recession.



It’s really hard not to worry a bit about the effects of the housing bubble burst, high-priced commodities like food and gas, and a stock market in the doldrums on the ability of Baby Boomers to retire as planned—if at all. I’ve read stories of Boomers in the first year or two of retirement who’ve been hit so hard by declines in the value of their holdings that they’ve been forced back into employment, and these were folks who planned well and did everything right.

Today I read this at The Daily Dash, written by Ed Coury, senior editor and Midwest bureau chief for the Wall Street Journal Radio Network:

Fear of a long recession has hit the affluent baby boomer segment of the population, prompting many of them to downsize their lifestyles and tighten their belts, a new survey finds. A quarter of affluent 60-year-olds are cutting back by contributing less to charity, canceling vacations, reducing retirement saving or postponing retirement altogether, according to a national survey conducted by Bell Investment Advisors in Oakland, California.

I can understand canceling a vacation, but I figure in bad economic times, charities need our help more than ever. And while postponing retirement in today’s environment might be a plan, is reducing retirement savings a brilliant idea? Maybe halting savings and giving to good causes explains this:

The financial woes have also lead to mental anguish, the survey finds, as thirty percent of those polled say they feel more stressed than they did six months ago.

Um, yeah. Cutting out the giving and the savings would definitely do it for me.


Posted by Katy on 06/06/08
in Personal FinanceRetirement

What’s In A Name? Not Nearly Enough, Evidently

Two-thirds of Baby Boomers unprepared for retirement

Maybe it’ll end up that our generation has been sabotaged by its very name.

The Baby Boom, of course, refers to the idea that post-World War II, there was a whole lot of baby making going on. If our parents are known for their greatness, we are known for our…large quantity. Yeah, there are a lot of us, all right. And it looks as if the majority misunderstood the moniker.

The name was never meant to encourage a gazillion people to act as if they expected their entire lives to be Boom Times. Nancy Trejos with The Washington Post says:

Most of us have probably painted a rosy financial picture of Boomers. We think of them as the wealthiest generation. But it is only a top tier of Boomers that holds much of the generation’s overall wealth. And while it is true that boomers make more money, they also tend to spend more.

According to a study just released by the McKinsey Global Institute, it looks like a whole bunch of boomers are about to go bust.

In fact, more than two-thirds of early Baby Boomer households, meaning those between the ages of 50 and 63, are financially unprepared for retirement…The fall in home values and stock prices is not helping matters. For the past few years, especially, Boomers have been relying on the wealth in their homes and on stocks and they haven’t thought much about saving, said Diana Farrell, director of McKinsey Global Institute. “There was a sense of I don’t need to save. I have assets.”

It’s a shame, really. We’ve never complained about the fantastic name “The Greatest Generation” ended up with. And as much as some of them turned out to be scoundrels, I’ve never heard a single one admit that maybe he wasn’t exactly the greatest. But whoever the powers-that-be are who sit around making up this stuff over skinny lattes at Starbucks need to, for the sake of every as-yet unnamed generation, get a grip.

Next time the Generation Namers name a generation, I really think they ought to be more considerate, don’t you?


Posted by Katy on 06/05/08
in Personal FinanceRetirement


Enormous disparity in sibling's retirement

How thoroughly do you know the financial circumstances of even your own family members?

I was recently invited to a party and as the guests dwindled, the five siblings ended up openly sharing with each other (apparently for the first time) what their retirement years would look like from a monetary perspective.

Three of the five siblings have traditional pensions in place, which would essentially replace nearly their full incomes upon retirement. When two of them stated how much money they’d be receiving, I saw another sibling start to appear awestruck.

“I’ll only have however much I’ve put into my 401K. I don’t even understand what a pension is.”

A fifth sibling joined 401K-only girl, but this last sibling was in much more favorable current circumstances and would have the opportunity to invest much more money than Sibling Four. In fact, anything Sibling Five said to try to comfort Sibling Four did not hit its mark. The only thing they really shared in common was the lack of pension.

It was when Pension Number Three got specific that Sibling Four nearly lost it. Because Number Three not only has an extremely adequate pension, but already had a huge 401K in place at a young age.

“I think we’ll be able to live on our pension pretty well, but it might be a little tight,” Number Three said. And then Number Three went ahead and named the guaranteed monthly amount. It’s more than four times the monthly amount Sibling Four earns WHILE WORKING.

Sibling Four looked truly shocked. And amazed. And dismayed. “You mean, they’ll pay you that much for not going to work?”

Five siblings. All started out relatively (ha!) equal in life—-with the same advantages and disadvantages. And yet in their so-called Golden Years, an enormous disparity will exist among them.

It made me sad, but I’ve got to wonder how often this happens across America every day?

And if siblings very often share the particulars of their situation with each other like those kids did?

Do you know how well-off your siblings will be when they retire? Is it better not to know?

Posted by Katy on 06/03/08
in Personal FinanceRetirement

Everybody’s Talkin’ At Me

Here’s a situation I’m just not happy with: our cell phone/land line/Internet charges.

Because we have a business and because I simply cannot hear using a cell phone (I’m deaf in one ear, which complicates things considerably), we have a line line. In fact, we currently have two land lines. Plus Call Notes (AT&T’s answering service) on both lines. We share one cell phone, with 450 minutes per month plus 5000 weekend and anytime minutes. We don’t come anywhere close to using our 450 minutes. NO WHERE close. And we never text, although I noticed that on my most recent bill, we got charged for six such messages.

Our land lines, cell phone, and Internet fees are all bundled with AT&T. The taxes, surcharges and other “special fees” alone add up to $33/month! (Of all the fees I resent, I resent the special ones the most.)

We don’t make many long distance calls. But since I can’t hear on the cell, I usually pick up the land line to make them. And it’s usually in a quasi-emergency situation, like when I need to call my out-of-town sister over my mother’s hospitalization. It does add up. What I need to do (I guess) is call my person and then ask them to call me back, using their cell phone minutes and free long distance. Then I would pick up my land line and be able to hear. That’s the best plan I can come up with at the moment, although Skype would also work, I’m sure.

I’m voting for immediately losing one of our land lines, and relying on Caller ID to notify us of calls we need to return. Additionally, I’m voting to ditch AT&T CallNotes and go back to a phone with an answering machine component. CallNotes costs WAY too much money, and yes, it we dump it we won’t be able to call in remotely to hear our messages. But if we carry a cell phone, why is that so important?

As a Late Boomer, I feel like I need to get a handle on some of these ridiculous expenses. None of my adult kids have land lines, and I envy their freedom. I doubt if that will ever completely work for us, but we need to know some alternatives that are working for others.

What are you doing to keep your telephone/Internet charges under control? How low can we go, dollar-wise, and still enjoy the services we need?

Posted by Katy on 05/30/08
in Personal FinanceProduct Complaints

Time’s Not On My Side

If you’re as old as I am—54 as of this writing—there’s still a bit of time. Not much, but I’ve heard tell that it’s amazing how much one can accomplish toward a goal if she puts her mind to it.

If you’re older than I am, I hope you still have a mind to put to it! Ha. Doug and I are committed not to waste these minds a moment longer. If we put our heads together, maybe we can come up with some great, implementable ideas that just might save our sorry behinds when the day comes—and it will—when we’re even OLDER than we are now.

If you’re younger than I am? It’s almost too late for you, too, but there’s still hope. Lots of hope. You can definitely turn your financial situation around, assuming it’s currently facing the wrong direction.

And once we get ourselves turned around, it’ll be all about the mo. I’m counting on the mo working in my favor, even if it must work really hard for a very short time.

Never mind the old boomer songs. Time is NOT on my side. If you’re fortunate enough to have it on yours, don’t let that sucker get away from you.

Posted by Katy on 05/29/08
in Personal FinanceRetirement

Emergency Fun

Here’s something you might as well know about me up front. Until nine months ago, my husband Doug and I had never had an emergency fund.

I know, I know. It flies in the face of all that is good and sensible not to save up at least three to six months of your monthly expenses, in case you lose your job or become disabled. But somehow we always managed to have a baby (*ahem*, this is a very old excuse!) or need a car or have all the roof shingles blow into the backyard during a freakish wind storm. We always thought paying for the new furnace, thereby not freezing our patoots off, trumped stone-cold cash in the bank, and while we didn’t exactly put the furnace on a charge, we didn’t save up for it, either.

An emergency fund, you see, is not an account in which you save for FORESEEABLE expenses like car repairs (cars do break down, you know) or new appliances (these days, those darned washers and dryers have a predictably short lifespan). No, THOSE items we’re supposed to be saving for all along. An emergency fund is for those items and events we can’t possibly foresee needing, like an impromptu trip to Ireland or a yacht. You get the idea.

If you, like me, have focused more on your emergency fun than your emergency fund, hang with me. As improbable as it seems, we might be able to do better. We might be on track to actually grow up sometime before we croak.

So, if you still hesitate to bite the deferred gratification bullet, wait no longer! Set up an automatic withdrawal from your checking account into one of those online savings accounts like HSBC (currently paying 3.5% interest), and start your very own emergency fun.

I mean FUND. Honestly, I do.

Posted by Katy on 05/28/08
in Personal FinanceSavings

Guaranteed ROI On Meat Purchase

Here’s the deal: I’m a meat eater. In fact, as of eight years ago, meat has displaced chocolate as the most important food group in my home.  :)  Now, of course, I can get my all-important protein fix with thank-God-they’re-still-not-as-expensive-as-gasoline eggs, but eventually a girl gets tired of eggs. Sometimes, a chick wants steak. I’m just sayin’.

That said, it’s been awfully difficult to afford meat in recent months. So if I ever see a grocery store loss-leading with a humongous meat sale, I’m so there. Recently, Price Chopper had hamburger for $1.29/lb. We hosted a huge party for our Sunday School class and their families. I made enormous kettles of chili to feed fifty, plus a few other items. This sale was a lifesaver. I bought a case of Mexican chili beans at Aldi’s and was all set.

The way I look at it, buying food that I know I’ll use when it’s on sale for practically nothing provides me an instant return on investment the likes of which I can’t get anywhere else. So my grocery shopping is all about loss leaders. I purchase what they’re giving away, and plan my meals around those foods.

It may not be as exciting as plunking $50 down on a share or two of stock, but it’s a sure thing. And with the money I save, I can put us in an even better financial position by paying down a debt, adding to savings, or—yes—contributing to our retirement account.

Are you taking advantage of the rate of return you can achieve instantly by purchasing groceries at a steep discount? The bargains are still out there, even though prices across the board have definitely gone up. Grab them while they’re hot, and don’t burn your tongue enjoying some good old-fashioned meat.

Posted by Katy on 05/22/08
in Personal FinanceShopping

Rely On Recommendations

Doug and I have been taken to the bank and robbed so many times in thirty-plus years, I can’t even count them.

If there’s one thing I’ve learned, it’s to keep a notebook or a computer file or some easy-to-access record of all the vendors and services you’re actually happy with—and then remember to use them again!

Sometimes, in a desperate and stupid moment, we pull out the Yellow Pages, close our eyes, and call the plumber on whose name our fingers happen to fall. Is that the dumbest thing you’ve ever heard, or what? The trick is to NEVER be that desperate. And to ALWAYS have available the contact information for someone in each type of business you’ll eventually need—preferably someone who’s come HIGHLY recommended by those whose judgment you truly trust.

Here in Kansas City, we just recently were referred to Anthony’s Heating and Cooling, and I can’t tell you how much we liked the repairman they sent out. He was thorough, honest, respectful, and clean. He earned our trust and our repeat business. We will NOT be playing pot luck anymore, when we know that Anthony’s can meet our needs.

Don’t be like we’ve been in the past. Save yourselves some SERIOUS time, money, and frustration by keeping a file of dependable service people. You will be SO happy you followed my recommendation!

Posted by Katy on 05/21/08
in Personal FinanceProduct Recommendations

Prove It

So if it’s likely that our lifestyles might be somewhat, let’s just say, reduced during our retirement years, why not try to absorb some of the shock by voluntarily reducing our circumstances now?

What if we earned $80,000 per year right now, and managed to spend each and every cent—and then some? We could, with a bit of gritting our teeth, turn our lifestyle on its ear and end up not only happier in the here-and-now (a girl can dream, right?), but also in better shape in the future.

What if we got even with the world (read: no debt, except maybe a house, in which we’re building equity fast because of a low interest rate and a short term) and then began saving and investing like there’s more than one tomorrow? And then, after successfully relieving ourselves of debt, what if we took the 10% or so of our income we were spending on debt repayment and, additionally, found a way to cut our regular annual expenses by another 10%?

I don’t know about you, but I could make tremendous financial headway with $16,000/year. I’d have a dandy emergency fund, a beefed-up car replacement fund, a thrilling travel fund, plus a fair amount going into pre-tax retirement accounts.

Not only would I be guaranteeing more adequate provision for our later years, I’d be making the kind of almost imperceptible shifts in our current lifestyle that will make “living on less” during retirement feel like living on not quite so much less.

A lot of folks say they know they’ll be able to live on much less during retirement. Like maybe half as much as they live on now. If I believed that, the best thing I could do is start proving it to myself by making the kind of adjustments today that I’d supposedly have no trouble making in the future.

If I’ve got something to prove, I might as well prove it to myself right here, right now.

Posted by Katy on 05/20/08
in Personal FinanceRetirement

Can You Really Live On Less In Retirement?

Looking forward to retirement years, we’re all faced with the challenge of income replacement. There’s the generalized hope that Social Security will remain around for a while, or at least that neither our generation nor the next will be caught off guard by the timing of its demise. But no one really imagines that they’d be able to have more than a meager existence on SS alone, do they?

Some folks will have traditional pensions, though these are gradually going the way of the world. I know one couple who will have four pensions between them, since they both retired young from their first careers and then went on to acquire second pensioned jobs. Even without Social Security or a 401K, their pensions will cover their retirement needs, especially since their health care will also be provided. Granted, they never made enormous salaries during their working years, but still, as retirees their incomes will continue at nearly the full amount into perpetuity.

But what about those (such as the self-employed) whose 401Ks must be funded without matching percentages from an outside employer and who are responsible for raising the entire amount of the income they’ll need in retirement?

Here’s the basic plan we’ve settled upon: Decide how much $$$ we’ll need per year in retirement. We’ll base our decision either upon one of the many formulas found on the Internet, or by the tried and true method of guessing. We’ll plan to need a LOT for health care, way beyond what we’re imagining, since we have no idea what to expect from Medicare and will certainly need to supplement those benefits substantially. We won’t count on Medicare Part D (the prescription drug benefit) hanging around, just because today’s retirees are enjoying it.

And we’ll remember the enormous cost of long term care must somehow be planned for, also. If we don’t pay for long term care insurance, we’ve got to have lots more money put aside than otherwise, unless we decide that “going to Medicaid” is an acceptable alternative. (And that assumes Medicaid will still be providing long term care to the indigent.)

Once we’ve arrived at a yearly amount we think we can live on, we’ll do the rest of the math. Most financial advisors suggest retirees can withdraw 4% of their savings per year without touching the principal. So, if I think my husband and I can live comfortably on $40,000 per year (not counting Social Security), how much will we need to have set aside in retirement funds? We’ll need a cool million. If we need $60,000 per year, we’ll want to accumulate $1.5 million. And if $80,000 per year suits us, we’d better be shooting for $2 million.

(By the way, we’ll be looking at some of these formulas—-like the 4% solution—-in the days to come.)

For Americans who must come up with the loot on their own, these figures can seem overwhelming. Sometimes, for a bit of relief from the sticker shock, I like to come at it from the opposite direction. Here’s the way I think about it: For every $4000 per year we can cut our expenses in retirement (and yes, now would be a good time to begin practicing!), we’ll need $100,000 less in retirement funds when we begin withdrawing. If I planned on withdrawing $80 grand, but somehow pared back our budget to where we could make it work on $72 grand, we’d only need to shoot for accumulating $1.8 million instead of $2 million.

Whether it’s more difficult to stockpile that extra $200,000 or to live on somewhat less each month in retirement, it’s hard to say.

The only thing easy to predict is that no matter how you look at it, we’ll need a boatload of money.

And, by the way, when I say we? I mean you, too.

Posted by Katy on 05/19/08
in Personal FinanceRetirement

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