Spending


Last year we bought a riding mower and I have written before how the benefits of this purchase were getting a tan and escaping my children.

There may be one more benefit coming our way.

A class action lawsuit may put $75 bucks back in our pockets:

The lawsuit claims that the Defendants sold certain gasoline-powered lawn mowers and lawn mower engines with false and misleading horsepower ratings. The Defendants deny these claims and deny that they did anything wrong. The lawsuit does not concern the safety of these lawn mowers. The parties have agreed to resolve this case by settlement. (via lawnmowerclass.com)

If you bought a lawnmower (Ride-on $75 OR Walk-Behind $75) between January 1, 1994 and April 12th, 2009 you may be eligible.  So if you bought your lawn mower 16 years ago you can still file!  You just need the engine brand and ID Number (located on the engine itself).

You can file a claim online here.

Your lawnmower is included if your engine was manufactured by:
Briggs & Stratton
Honda
Kawasaki
Kohler
Tecumseh
Toro
Or, your lawnmower is included if your lawnmower was manufactured by:
Deere
EHP
Honda
Husqvarna
MTD
Sears
Toro
Brands manufactured by these companies include, but are not limited to:
Yard-Man, Cub Cadet, Honda, Bolens, Exmark, Deere, Sabre, Scotts, Toro, Yard Machines, Craftsman, Troy Bilt, Husqvarna, Poulan, Poulan PRO, Lawn-Boy, Weed Eater, White Outdoor, Snapper, Simplicity, Brute, Murray, and other brands.
These lawsuits tend to go on forever but I filed a claim anyway.  If someday down the road we get a check for $75 in the mail – BONUS!
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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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While in college I took mathematics courses like  – “MATH 101 – Math for Life” and “STAT 200 – Statistics for Liberal Arts Majors”. My husband on the other hand, graduated from a top 5 business school with BS in Actuarial Science. I never even had heard of that major before we met.  Even today when people ask me what my husband does I say, “Don’t ask me. I’m just a girl [tee-hee tee-hee]!”

Of course I’m trying to be a funny guy, but much like that ill-fated barbie doll, math really isn’t my strong suit.  I always assumed because I had trouble with Chi-Square tests I was doomed when it came to investing, finances and budgeting.

But Personal Finance really isn’t about math. Because even with a math-nerd husband we still found ourselves not doing the right things when it came to money.

Personal Finance, at least in its beginner stages, is about commitment, sacrifice and self-control.

When we decided we didn’t want to live paycheck to paycheck any longer and wanted to get control (FULL control) of our finances.  I researched all kinds of Personal Finance advice, read the blogs, learned all the lingo. Worked out the budget, planned for our irregular expenses. Basically, I prepared for almost a full year for the commitment we were going to make to be debt free.

It had been working out great.  We’ve been sticking to “THE PLAN”.  We no longer use credit cards.  I actually cook almost all our meals.  We have a small but growing emergency fund that we continually add to.   We gave up the Y membership, soda, name-brand coffee…

I have been waiting on the inevitable though.

And so we come to our first true test in our quest to be debt free:

The family TV broke this week.  It’s dead and it’s un-fixable.

I applaud and am in awe of those families with kids who limit TV watching to 30 minutes a day or the like.  We are not that family.   While I don’t worry for a minute that the kids watch “too much TV”  – they don’t.   I do use the TV as a crutch when I need to get something important done and having an almost 2, 3 and 4 year old under my feet is too much.  After the kids go to bed, my husband and I are *gasp* also TV junkies.  I admit it.  We don’t spend our evenings reading each other Shakespeare, we often sit slack-jawed, immersed in our favorite mindless entertainment.

In much the same way the TV was is a “crutch” so were the credit cards.   In the past we would have run out and bought a new TV AND put it on our credit card.   We had a very serious conversation (I’m not joking) discussing what to do with this dilemma.   Things like, “Will we survive without  TV?” and “After investing 5 frustrating years, will we never find out what’s really going on on LOST?!”, were said.

In the end we decided to do the grown-up responsible thing, not raid the emergency fund, and save up to buy a new TV with CASH.

In the meantime, my husband has agreed to don a smoking jacket and get a pipe.  Me and the little children will gather at his feet nightly by the fireplace, our chins resting on his knee, looking up at him with our angelic faces while he reads Dickens (my favorite!) to us…

(Full Disclosure – We do have a dinky old 19″ TV we can drag out if the above fantasy doesn’t work out.)

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If  you saw the recent Forbes list of  the Top 25 Richest counties in America, and you don’t live in one of them, you might be tempted to assume those who do all drive Porches, eat caviar like it’s pretzels or live 10000 square foot mansions.

We live in number 24 on the list of richest counties but we are as middle class as it’s gets.   I wonder how living here, surrounded by immense amounts of highly concentrated wealthy families effects the way we approach money, at least psychologically?

Everybody has heard of the “Keeping up with the Joneses” phenomenon.   Originally proposed by James Duesenberry as the, “Relative Income Hypothesis” stating that, an individual’s attitude to consumption and saving is guided more by his income in relation to others than by an abstract standard of living.

So living amongst rich people MAY provide a more powerful motivator to consume and save than our own internal reality of how we approach wealth.

I’m really not sure how much outside influences have on how my family saves and spends.  I like to think it has ZERO influence.   But c’mon, no man is an island and all that.  It has to effect us in some way.

How much does environment play into our perception of wealth and how does that effect our pursuit of wealth?

I can only speak anecdotally, but I do wince a little inside when my daughter’s new friend invites her over to play and her garage is bigger than our house.   Our kids will attend the same blue-ribbon public school so we also benefit tremendously in spite of any inferiority I may feel.

I think as long as you don’t fall prey to “conspicuous consumption” the benefits of living surrounded by wealth outweigh any downsides.    At this point of our “financial enlightenment” we don’t feel the need to buy stuff to prove anything.  And we never really did “just buy stuff”, we were sloppy with our money and let it control us instead of vise versa.  We are now  focused on our own financial house.  What may have been feelings of envy towards the 20 BMW’s in the preschool parking lot  have been replaced with motivation.   The motivation is not for us to “be rich” but for us to live for ourselves, and never mind the masses.

The wince of inferiority I feel in the face of all the wealth I see on a daily basis WILL SOON be replaced with the pride of having control of the money and the future we do have.  And all the while our family will live simply and take advantage of the amazing schools, the safety of the community and it’s beautiful parks.   Thanks richy-riches!

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My mom’s dishwasher has been on its last legs for a while now.  It finally died this past weekend and she and my dad were hoping to take advantage of the “CASH FOR APPLIANCES” AKA the “Energy Efficient Appliance Rebate Program.”

But it’s “NO GO” for them.   The program is administered by each individual state and it is your home state which decides what appliances are eligible for the rebate (or not).

Turns out in PA, dishwashers are NOT eligible for the rebate.  In fact, no classic “white goods” are eligible for the rebate in Pennsylvania.  (List of what is eligible in PA. Basically only dull stuff is eligible like, “boilers” and “furnaces”.  No cool new shiny stuff with tons of buttons and options, but I digress.)

And if you live in Iowa, Minnesota or Kansas you’re out of luck too.  Their rebate program already ended.   Some states reserve rebates for low-income participants or only if you are disabled.

So if your planning on buying a new appliance and taking advantage of the rebate, make sure your purchase is eligible and you qualify. You also need to make sure that your state has remaining rebate funds because when your state’s funding is exhausted, the program is over – no more rebates…

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FIRST COMES LOVE, THEN COMES MARRIAGE, THEN COMES CHOOSING A HEALTHCARE PLAN….

My sister’s employer recently presented them with new health insurance choices.  They can pick from a Traditional Plan (PPO) or a High Deductible Healthcare Plan (HDHP) with an Health Savings Account (HSA) savings account.

I’m the “big sister” and as such, a bossy know-it-all – so of course she asked me for some advice on which plan makes better financial sense for her.  I’m kinda at a loss here.  Very complicated stuff even when you do try to plan ahead.

She getting married in July, will add her husband to her plan and they hope to start a family soon after they tie the knot.  In regards to healthcare, the question for her is, “WHAT WILL THE MATERNITY COSTS BE” under each plan?

“Which plan will cover more pregnancy related costs?”  The Traditional Plan or the HDHP with HSA?

It took her while to flush out the true costs for either plan.  Insurers and provider’s don’t make it easy for you gauge what is covered, what is considered “preventative care” (what the IRS will allow as Preventative Care under HSA’s – not necessarily what YOUR plan will cover as preventative care), what is subject to deductibles…

After much back and forth with her “Policy Rep” she finally felt confident enough to do a cost comparison of the two plans.  If she chooses get pregnant under a HDHP with an HSA , she COULD pay less than the PPO plan, it all comes down to how much risk you are comfortable with (and a little bit of gambling).

Imagine you have “Employee + Spouse coverage” and plan to have baby.  Your “POLICY YEAR” runs January 1st to December 31st (why that matters later) and you get pregnant in February, have a pregnancy with NO complications and deliver with NO complications in November:

This is quick look at cost she had to consider (only in regard to maternity coverage) with that hypothetical in mind.

Choice #1 – TRADITIONAL PLAN COSTS (PPO) – 100% Coverage after Deductible is Met

Yearly Premiums (deducted from paycheck pre-tax) – $5460

Co-Pays (Prenatal exams – $20) (Ultrasound – ($20) – $40

Deductible (Delivery is considered an “In-Network Hospitalization”  and subject to meeting deductible) – $500

Co-Insurance  – $0

COST OF UNCOMPLICATED PREGNANCY= $6000

Choice #2 – HDHP with HSA – 100% Coverage after Deductible is Met

Yearly Premiums – $3016

Co-Pays – $0 (but all “non-preventative” care is subject to deductible)

Deductible – $4000 (Paid from tax-favored  HSA account – Employer contributes $1500 a year to HSA)

Co-Insurance – $0

COST OF UNCOMPLICATED PREGNANCY =($7015-$1500 employer HSA contribution) $5516

You would save $484 with the High Deductible Plan in the above scenario.  So is it a no-brainer?  The HSA all the way?

But what if you get pregnant in JUNE instead of JANUARY? The pregnancy now spans “TWO POLICY YEARS” and therefore you now have to meet the deductible twice before any coverage is paid out.   It’s very likely that with a pregnancy with no complications you won’t meet the full deductible for the pregnancy during POLICY YEAR ONE, maybe only paying out from the HSA account for an ultrasound or a few tests.  But that’s the GAMBLE.

So the choice to get pregnant money-wise becomes:

1.) Prepare for a “TWO YEAR POLICY” pregnancy but hope for the best.

HDHP Plan – AS MUCH AS $8016 –  AS LITTLE AS $5516

OR

2.) Know the costs beforehand but pay more.

Traditional Plan – $6000

Which would you choose?  I’m pretty risk-adverse so I’d probably pick #2 – the PPO. Ironically, I’ve had three uncomplicated pregnancies, three uncomplicated deliveries and somehow completely unintended on our part THEY ALL spanned  only ONE POLICY YEAR.  We have an HMO so it would have been a  moot point – but if we had the same choice we would have saved some money by going with option #1!

If you have an HDHP and had a baby did you actively try for that “ONE YEAR POLICY” window?  That’s a lot pressure the get pregnant in very specific timeframe!

Is maternity care/pregnancy the only “health issue” treated with such a risk-reward scenario for the insuree?

If you find yourself with a similar choice you may want to read the “Kaiser Foundation” report on Maternity Care and Consumer-Driven Health Plans. (Long but VERY informative.)

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I can’t believe it’s snowing again.  This is the 5th snow day so far this winter for my two preschoolers.  They only go twice a week for 2 1/2 hours as is!  While I am all about safety first, my own mental sanity has been compromised from being cooped up with 3 little ones this winter.  Not to mention, we are paying tuition for school that does not get made up like it does for”real” school….C’mon Spring!

Some good posts to read if your stuck in your house for the 500th time this season…

Credit Card Chaser asks: Will The new CARD Act turn credit card users into PAYDAY loan users?  What are the unintended consequences of the CARD ACT? One consequence for my family is.  We carry over $11,000 on our credit cards that we are actively paying down, and not adding to – but can’t PAY OFF in full right now.  The credit card companies used the time before the CARD act went into effect to raise the rates on our existing balances.  I can’t wait to be free of this racket!!!

Rainy Day Saver wants to know: What projects are on YOUR to do list? Something is wrong with our fridge light switch.  It stays stuck on.  I’ve taped it so it stays off for now but we were wasting electricity and buying new bulbs at a crazy rate.   Need to find a permanent fix for that.

Ultimate Money Blog: Where Have all the Housewives Gone? I’m right here!  But I call myself  the real fancy sounding STAY AT HOME CFO.  I’ve even heard that there has been a big rise in STAY AT HOME DADS because of the recession.   I think whatever works best for YOUR family be it, financially, logistically, circumstantially and/or emotionally, THAT is the ONLY choice.

Monevator writes: Get out of Debt to Unleash your Inner Money Maker. Sure, it makes logical financial sense to get out debt.  But giving away your money to credit card companies and other debt is not all you give up nor it is all you will gain when you are finally free of your burden….

And after my recent WHINE FEST, I just have to give props to Jeff @Deliver Away Debt for this inspiring post!!!!!

ONE LAST THING

Check out these great Personal Finance Blogs well known and not, they are all members of the YAKEZIE ALEXA CHALLENGE!  Keep up the great work guys.

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