sahm


Would you ever gamble with your personal finances?

Is there room for informed risk with your family finances if you feel the cards are stacked in your favor?

I expect to get completely slammed for this but:

I’m thinking about gambling a little with our financial future…

While in debt do we need/should we have a LARGE emergency fund?

There is a delicate balance between saving money for emergencies and getting out debt.  It’s a race against the unknown.  You try pay off high interest debt as quickly as possible, all the while saving money for the inevitable little emergencies that are certain to pop up along the way.  Therein lies the catch-22.  The more debt you have, the more emergency savings you’ll need to keep up with your debt payments if a BIG emergency such a a job loss loss occurs.

Next month, barring any major/minor catastrophes, we will have $1500 in the emergency fund.  At that point, I’m not sure whether I want to keep adding to the fund our use the monthly amount I would put towards the emergency Fund and instead put it towards paying off high interest debt.

Is a $1500 emergency fund enough?

Why in our case I think may be:

My husband’s job will end at some point (the company has been ‘in liquidation’ for over 9 years) but senior management has assured him his position secure for at least another year, probably 2, maybe even 3.   They need him to keep working at his job TO MAKE his job obsolete – how’s that for another catch-22? When the company does finally close, he will receive an extremely generous severance package (including paid medical coverage).   Companies with similar dire financial  positions have implied they would love to have him when his company finally does go kaput.   (It seems he may never work for an actual viable company but someone has to clean up the mess of the imploded businesses these days.)

The experts recommend 3-6 months living expenses.  But saving this amount would prolong the debt and greatly increase the interest amounts we pay.  It would split our focus, and I feel the severance package and the $1500 in the bank is enough for the one year it will take to pay off the credit cards.

Is this plan too risky?

Possible Outcomes of my Gamble – Would you put your money on RED or BLACK?

GAMBLE ON RED:   $1500 Emergency Fund – earmarked emergency money now goes towards Debt

Worst Possible Outcome of betting on RED:

Over the course of the next year every appliance breaks down, someone gets so sick where we must meet the $500 deductible, a tree falls on the house.  We have used up the $1500 emergency fund.  If another emergency occurs we must resort to using a credit cards  because the emergency expenses have outweighed the fund balance.  This possibility exists , although I believe small, and we are right back where we started.

Probable Outcome of Betting on RED:

Next month the emergency fund has $1500.   We roll the money we are currently adding to the emergency fund amount  towards the high interest credit card debt.  Throughout the year, the house needs $500 in repairs.  An appliance kicks the bucket – $500.  One or two ER visits @ $75 each.  All covered by “$1500 emergency fund.”   In March 2011, the credit cards are paid off. At this point we have freed up a tremendous amount of discretionary income, and are no longer beholden to outrageous interest rates and can reassess “the plan”.

GAMBLE ON BLACK – keep adding towards emergency fund/diverting money from debt until at least 3 months income is saved.

This really isn’t a gamble.   It’s the safest possible choice.  I would assume most people would recommend this plan.  But it is also the most costly – both in money and time to be debt free.  (It would take us close to 10 months to save up 3 months income.)

I hate casinos, the few times I’ve been in one, I put a $20 bill in the nickel slots.  Cash it out and physically place a single nickel in an old-school one-armed bandit.  I milk that single $20 for as long as possible.    So it’s not like I’m some adrenalin freak who can’t function without taking risks.  But I’m leaning toward betting on RED. The risk feels calculated.   The odds seem to be in our favor…

Would you take this gamble?

Suburban Dollar was kind enough to host “The Carnival of Money Stories” this week.  Check out his “Final Four Edition” with some great reads, including one from me.

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If you didn’t get a chance to read Ninja’s post yesterday at “Punch Debt in the Face”, you should.

He tells a great story about the letter he wrote to himself, prompted by a high school teacher, that would be sent to himself to read six months later .  He admits while he didn’t take it that seriously at the time, it’s a great time for a proper re-do.

What would you say to your future-self?  He asked for some company in his mission:  Read his initial post and add your letter too.  This one goes out to: “FUTURE SELF” sahmCFO.

Dear sahmCFO plus 10 years,

You have been married for 15 years.   You have lamented to each other many times over the past three years how much you “miss” each other.  “With the kids so young,” you both have said, “once they are a little older we will have more “just us” time.”  Well now that they are, I hope you guys are living it up, and are back out in the big wide world.   Traveling, enjoying new places, experiencing everything and keeping open-minds (even if you do have to bring them with you sometimes).  He is so patient with you, I hope you have cut him some slack by now.  And if you are still leaving your old coffee cups on your bedside table, you’re a jerk. It really is the only thing he complains about.

You have 3 teenagers/almost teenager now.  How’s that working out?   They may be all hormonal and “too cool” to want to hang around you much anymore but remember this…They asked you to read them “Someday” by Alison McGhee again today.  They love when I read them that book.  All three of them sit in a little circle around me, they don’t fight, or scream “so-and-so is touching me!”.  They just study my face and listen to my voice.  It’s not story they care about,  it’s your feelings for them, on full display they seek.  They hear my voice crack at certain parts and scoot closer.  They watch my cheek intently for when the tear does fall and squeeze me a little bit.  I fight through it, relish it actually, finish, and they say happily, “AGAIN!”   Don’t you doubt for a second that you “didn’t show them enough” how much you love them.  They see it , they glowed in it, they know.

Today (well 10 years ago really), you worry about your debt, but 3 months ago you decided it was really time to take your family finances seriously.  You made a plan and then, a commitment.   I don’t think you are a millionaire by now, but if you have a credit card and use it you better pay it off in full every month.  Do you still stay up at night sometimes worrying about money?  You better not.  You’re an “older woman” now, you need your sleep…

Love,

“young” sahmCFO

I also have been accepted into my first Carnival (Thanks for the encouragement Out of Debt…Again!). Please head over to: “M is for Money” to check out the latest “Carnival of Money Stories”!
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It was 5 years ago today we were married in Iceland.

The ceremony was short and sweet.  The “reception” was unplanned and nontraditional, but we wouldn’t have done it any other way.

Maybe not the most beautiful setting but it got the job done.

Maybe not the most beautiful setting but it got the job done.

They said some stuff in Icelandic and we said "I Do"

We had a few drinks at the ICEBAR...

Me and this guy sang you our "wedding song", "Nothing Else Matters" by Metallica

Happy Anniversary - I love you.

Happy Anniversary. I Love You.

In honor of my anniversary I’m sharing the love.

Here are some of my favorite YAKEZIE posts of the week:

Little House in the Valley shows you the Mathematical Method – “Borrow and Payback” that we used to teach our children but no longer do.  Other countries do though!  Could this help explain why the United States is so behind in MATH and in DEBT? You may never look at simple subtraction the same way again.

151 Days Off asks “Is Travelling Worth your Money?” I guess you can see from above how I feel about travel.  I’ll use any excuse to travel.  My divorce is planned for Bora Bora. (kidding)

Want to show off how smart you are and feed the hungry at the same time for free?  It’s simple, painless, no registration required.  Check out Cool to be Frugal – Expand Your Knowledge and Feed the Hungry.

Simple in France wants to know “What do Gain by Living Simply?”. She also details some of the sacrifices she needed to make to gain the “simple” life.  Is it worth it in the end?

Your kick in the butt for the week: “Hope WILL NOT get you out of Debt” by Deliver Away Debt. If you’ve been crossing your fingers that it will all work out for you, you better read this post.

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This is a story of the troubles that ensue when you live paycheck to paycheck and your paycheck is late.

My husband has been at the same job for 15 years and has without fail, been paid on time via direct deposit.  Paid on time and in full every 15th and last day of the month for the past 15 YEARS!   And even-though, with all my technophobia (my budget is still on paper), I have had such faith in the timely paycheck deposits that I automated ALL of our payments, bills, investments.  The mortgage is automated for the 1st and most of the rest of the bills (car insurance, car, electric, phone, credit cards…) are all set up to be paid on the 15th.

This was all going along swimmingly, until this Monday, March the 15th.

I had a feeling something was amiss on Saturday when the paycheck wasn’t listed in “pending”  on the banks website.  If payday falls on a Monday it ALWAYS has been deposited after midnight on Friday night, although it won’t actually “clear” until Monday.  I really felt uncomfortable on Sunday morning when it still wasn’t there.  I stayed up Sunday night into the wee hours of Monday morning because the knot in my stomach was getting larger by the minute and was hoping against hope it was going to go in there.

I had 16 scheduled payments automated to come out of that checking account on Monday the 15th.

I freaked, it wasn’t there Monday morning by 7am.  I scrambled to every website where a payment was scheduled to be made, canceling the payment, hoping it would cancel this late in the game.   Trying to remember 16 logins and passwords and clumsily navigating websites I hadn’t visited in months.  One website was “Experiencing Technical Difficulties” – “Try Back Later”, *sigh*.  I was picturing an endless, disgusting cascade of bounced checks. 16 Bounced checks would = $576 in NSF Fees!!! I eventually figured out how to, and did cancel all the payments.

I called the bank.  “No, we see no incoming deposits”.  CRAP, the Ides of March got us.

As a SAHM, I say all the time, “I work, I just don’t get paid.”  Apparently now, my husband does too.

He gets to work Monday morning, with the office all abuzz and comes to find, “a glitch with the payroll company and the problem will be resolved and deposits will be made by end of business.”  And it was, at around 3pm the deposit went in the bank.  Magically, it bypassed “pending deposits” and went straight to “available balance.”  He was paid in full and on time (it was the 15th).

Now I had to login back in to 16 different websites and redo the payments.

The bills and payments were in no danger of being late, but I liked paying them early and the money left over on the 16th was “uncommitted money”.  Our milk money, if you will.   I never doubted it would be more than 2 days or so that he would get paid, but the drama of having A LOT of money set to come out of an account where there was NO MONEY was too much stress to bear.

I’ve UN-automated all our payments.  No more “scheduling payments” or “automated bill pay”.  We’re going old school.  Well, I’m not going to write actual paper checks or anything that crazy, but I will pay each bill individually after I make sure the paycheck is in the bank.

We can’t afford to take the chance…

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“If only one spouse works do I still qualify for the full $800 “Making Work Pay Credit”?

The answer, in MY CASE is yes, because:

We are Married filing Jointly.  Single filers max out at $400.

We make less than $150,000.  Credit starts phasing out over this amount for Married Joint filers.

My husband held only one job in the 2009 tax year.   Having more than one job may result in the credit being withheld  from both paychecks.

Because this a CREDIT on the amount of tax you owe, it may even give you refund even if you do not owe federal taxes.

I’m having a hard time wrapping my head around the fact that we qualify for the full $800.  I mean I’m not complaining, just a little shocked.  This is the first cash value I’ve ever received for being a stay at home parent.

But it doesn’t even matter if we have kids or not.  We would still qualify if we were childless and I did not work  – because we are married.

I mean highly doubt those who are legality entitled to get married would choose to do so for $400.  Especially considering there is no longer a Marriage-Tax penalty.

But I’m surprised this hasn’t opened a bigger can of worms in the endless tax fairness debate…

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I have a confession to make:

Sometimes I feel VERY jealous when I read or hear somebody’s “I PAID OFF ALL MY DEBT AND YOU CAN TOO” story.

I make comments like, “Way to go!” or “That is AWESOME!”.   Deep down though, I’m a little resentful.  I want it to be me.  I can’t help it but I read their story and pick apart the ways it was so much easier for them and how it is so much harder for me.

“OOOH, I see they don’t have kids.  No wonder they could put so much towards their debt.  They don’t have 5 mouths to feed.”

“Yep.  Just as I thought, they make double a year what we make.   Of course they could pay off their debt so quickly.”

I wish the stories were inspirational but at times I am a little stuck in the “whining phase” as opposed to “accepting personal responsibility phase”.   Most days I can visualize the finish line, when all the debt is paid off, those are the days I search out the “I Paid off my Debt” posts.   But some days, it feels like it will never happen and that is when I whine.  Or maybe it is better to say, “I get discouraged.”

I’ve never heard those who got themselves out debt say it was easy, but I can never get a good handle on how hard it was for them either.

Their story always ends the same.  They write the “final post”.  They are out of debt.

Where is the “Personal Finance” blogger who starts the journey, makes the commitment, posts everyday about how they are saving money on this or that, shows how their debt is going down with graphs and spreadsheets and fails in the end, never gets to write the final post?  Does that happen?   Will it happen to me?

(OK, now I got Stuart Smalley going in my head.   “You’re good enough, you’re smart enough and gosh darn it, people like you.”)

So I get discouraged.   This is not a good enough reason to quit.  We push on.  So right now we pay 24.5% interest on our credit card while others are making double mortgage payments.

They all started somewhere too…

I’ve stopped playing the world’s smallest violin for myself.

And when my time comes for “THE POST”, I’ll try to remember I was once like this.

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The “great debate” that centers around whether it makes financial sense to get a tax refund or not usually entails one of two perspectives:

The “No Refund” crowd loathes the fact that you are loaning the government your money for free.  Your monthly overpayment in federal taxes could be put in a high-yield savings account and earn you interest throughout the year.

The “Pro-Refund” people usually argue that getting the big refund allows them a forced way to save money that they wouldn’t otherwise save.  The refund can be used to pay down debt or put away for a rainy day.

I’m a reformed “Pro-Refund”.  We used to get the big refund and pay down the credit card.  The same credit card that we were forced to use throughout the year for necessities.  There was no end in sight, the credit cards would never get paid-off because the take-home pay was not enough to cover our lifestyle. What a crazy cycle, we were giving our own money away(letting the government hold it), and then we would have to use credit cards (at about 18% interest over the year) to borrow our own money, pay off the credit card with the refund and start it all over again!

Last week I asked my husband to bring an updated W4 to HR so we can avoid a refund.  Not so we can put this extra money per paycheck in a savings account or use it to pay off debt.  We will use it to avoid using credit cards. We are a paycheck-to-paycheck family.  We are fed up with that lifestyle.  For us, not getting a refund will result in an extra $200-$250 a month.

The majority of our credit card purchases were made because there was not enough wiggle-room in the budget to pay for our monthly expenses.  Even with our cost cutting measures, we were still one small hiccup away from using a credit card to get us through. Maybe down the road, when we have better control of our finances, this money can be used for a “Vacation Fund” or the like.  For now, I’m looking forward to NOT putting groceries or gas on a credit card.

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