I Started My 2018 Budget . . . Have You?

It’s become a joke among my friends that I spend New Years Day doing my budget.  I usually start working on it a few weeks earlier but I get it finished up while watching the Rose Bowl Parade.

I guess it’s one of my holiday traditions–vanilla latte, parade and budgeting.  Sounds cozy doesn’t it?

I budget my net worth so the earliest I can finish up my budget is New Years Day.  Until I know my starting investment and retirement balances, I can’t budget my investment earnings.

Budgeting one month at a time works for lots of people but I prefer to budget for the full year.

Because I have some ugly months.

April is the worst.  We pay property taxes, homeowners insurance and income taxes in April.  By budgeting the full year, I make sure I save in other months to pay for these big expenses.  Before I boosted my savings rate above 50%, April was the only month when I spent more than I made.

December is tough too with holiday expenses.  Though we’ve reduced our gift giving a lot through our perfect gift policy, it is still an expensive month.  We travel to see family and friends and there are more costly gatherings.

If I were budgeting monthly, I would have to budget a sinking fund for these once a year expenses.  By budgeting the whole year at once, I make sure I meet my savings goals in spite of the ugly months. If my cash was tight, I’d still set up sinking funds for those big expenses even if I was doing my budget for the full year.

Seeing my year end budgeted net worth helps me stay on track. 

I like (ok, I admit, I love) seeing my net worth grow.  When I do my budget, I can see how much my net worth should be at the end of the year.  If the investment markets cooperate and I control my spending, I know I can get to that number.

Budgeting for just a month’s growth in net worth wouldn’t work as well.  It’s hard for me to get excited about an increase of a few hundred dollars but easy to get excited about thousands.

It’s the middle of December so it’s time to get this party started!

There are no hard and fast rules of budgeting, finding one that works for you is the tough part.

Does a detail budget make you think brain damage and drudgery? Then budget in summary.

Are you a detailed person and do you look forward to tracking your expenses by detailed categories? Then budget in detail.

Are there certain things you like to track closely but others that can be summarized? Then prepare a hybrid budget.

Need some more information about how to budget? Check out MoneyPeach.com to get started.

A hybrid budget works best for me. I like to track my vehicle and home related expenses in detail but I’m fine with a big total for most of my “spending”. It doesn’t matter to me whether I’m getting my hair done, buying groceries or a new shirt–that’s “spending” in my budget. When I track the actual expenses in quicken, I break them down a bit more. For my budget, a summarized amount is just fine.

So grab a latte or maybe a glass of wine, a cozy blanket and get started!

How do you budget?  What works for you?

Photo credit Ms. Liz taken from our back deck–lucky us!

I’ve Stopped Wishing My Life Away

My Dad used to tell me not to wish my life away.  I was always looking forward to what was coming, what would make my life better.

When I was 7 I couldn’t wait to be 10–double digits!
When I was 10 I couldn’t wait to be a teenager.
When I was a teenager, I couldn’t wait to drive.
When I could drive, I couldn’t wait to graduate.
When I graduated I couldn’t wait to go to college.
When I went to college I couldn’t wait to graduate.
When I graduated, I couldn’t wait to hear if I passed the CPA exam.
When I passed the CPA exam, I couldn’t wait to start my real job.
When I started my real job, I couldn’t wait for time off.
And for the last 22 years, I couldn’t wait for summer.
While I also couldn’t wait to retire.

Now that I’m retired, I look forward to various events in the future but I no longer find myself wishing my life away.

Even when we were getting ready to migrate to the desert for the winter, I wasn’t longing for it like I had in the past.  It was more like a balancing of what we would be losing (I miss you my mountain friends!) and what we would be gaining (mmm-warmth, and desert friends!).

I think that means I’ve finally found my happy time in life.  There’s no longer the need to wish my time away.

When you have BIG financial goals like early retirement, it’s difficult to find the right balance between living for later and living for now. And that right balance will be different for each of us.

Much of the population is too focused on living for now. Just have a look at current personal debt levels and that is clear.

I was too focused on living for later.

What should have been a huge wake up call didn’t even change that balance. We lost Mr. Ms. Liz’s Mom when she was 64–a year before she intended to retire.

Living for later doesn’t always pay off. 

So how do you find the right balance for you? We started using the die tomorrow test.  If we were to die tomorrow, would we be happy with our choices? When the answer was no, we would talk about what we needed to change.

Among other things, those conversations led to us buying a boat.

If we hadn’t bought that boat, we would have reached financial independence earlier. But at what cost?  We could have been hit by a bus before getting there.

We would have missed out on countless weekends at the lake with our friends. And those friendships wouldn’t be as rich.

Our lives are rich in so many ways and each decision we made to get here created that wealth.

So think about your balance between living for later and living for now.  Ask yourself that die tomorrow question, tweak that balance and repeat. It’s a never ending process.

I’d love to hear your stories! Have you been really out of balance? What have you done to correct it? I look forward to your comments.

Photo credit – Ms. Liz at The Linq, Las Vegas, Nevada


Are You Protected?

I’ve had a few questions lately about insurance.  Particularly about Umbrella and Long-term Care policies.  I’ve had this post in draft mode for about six months so I thought I’d dust it off and put it out there for y’all.  Hopefully it’s a quick scan if you think you’re in good shape or a careful read if there are some things you need to look after.

Insurance is best used to protect against low probability, high cost risks.

Low probability means the bad thing you are protecting yourself against doesn’t happen often.  If it did happen often, we couldn’t afford the premiums to protect against it.

High risk means the bad thing you are protecting yourself against would be financially devastating for you.  What is financially devastating for each of us is different and could change over time.

And our need for insurance changes over time.  As we age and add dependents, property or just wealth, our needs can change.  So what insurance do we need as we get older? Continue reading “Are You Protected?”

Who Are You–Really?

I’ve found one of the real benefits of retirement is being able to be 100% me, all the time.

I remember my surprise 30th birthday party like it was yesterday. Partially because it was so damn stressful.

In the same house (ours that thankfully my Mom had cleaned) were my work friends who knew Liz version 1.0, my college friend who had become very religious who knew Liz version 2.0, my party at the lake friends who knew Liz version 3.0, my family who knew Liz version 4.0 and Mr. Ms. Liz who knew them all.

I felt a bit like Sybil (now I’m really dating myself) with all of her personalities in the same room. Though each personality wasn’t completely different from the others, they were different sides of me.

As I got older, my non-working personalities merged and I landed in a job and in a company that allowed me to be, well more me. But there were still a few work personalities. The Liz that my boss knew was a bit different from the Liz that my staff knew and both were quite different from the Liz that my Boards of Directors knew.

At times, these versions of me didn’t feel authentic.  Because you can’t tell a staff member to shut up and get to work and you can’t tell a Board Member he’s a psychotic self serving ass. Well, you can’t say those things and keep your job anyway. So there was still a bit of tongue biting going on. Continue reading “Who Are You–Really?”

$10 Can Be Life Changing

I tried out a new stylist this week.  I was long overdue and my regular stylist was booked up.  We started with the normal salon chit chat, where you live, what you do, and in our small town who you know.

She asked about being retired. I try to let people know I did it by saving a lot.

She said her Dad had recently been to a class about personal finance.  I’m hoping it was a legit. one at the community college and not a sales seminar.  But anyway, he was telling her everything he learned that he wished he knew when he was her age.

He told her if she invested $100 a month she could have a million dollars.  Super, seriously, impactful to hear that in your mid-twenties.  Not completely accurate (more about this later) but impactful.  He wished he knew this stuff when he was her age so he was doing his best to pass it to her.

I started gushing about how cool it was that she was having these conversations with her Dad.  How important this was.  What an amazing legacy he was creating for her.  I wanted to nominate him for Dad of the Year–is there such a thing???

And then I came home and checked the math. Continue reading “$10 Can Be Life Changing”

The Math Is the Easy Part

Achieving financial independence is hard in spite of the math being surprisingly easy.

Here’s the math: 

Mr. Money Mustache tells the shockingly simple math behind early retirement much better than I can.

Save 5% of your take home pay and you’ll need to work 66 years; save 20% and you’ll need to work 37 years; save 50% and you’ll need to work 17 years; save 70% and you’ll need to work 8.5 years.  Yep just 8.5 years.

This is a bit simplistic–but close.

I have my retirement mapped out in mind numbing detail.  And you should too.

But for the smarty pants readers of this blog, it’s not too hard, right?

But here’s what’s hard:  Continue reading “The Math Is the Easy Part”

My Lovely, Inefficient Life

I read a lot of my fellow bloggers stuff.  Some, I read because I love how they write (frugalwoods), some, I read because I love how they think (OurNextLife),  some I read because they are irreverent (BitchesGetRitches), and some, because they have such great hacks.

Many of the hacks are to help people save time.  Because these bloggers have to fit a lot into each day.  They often have full time + jobs and families and successful, money making, blogs.  I run a money losing blog and it still takes a lot of time.  I can’t even imagine how much time is devoted to a money making blog–oh the pinterest pins, the facebook groups, the tweeting that is necessary . . . it’s so daunting, I haven’t even attempted it.

And, I have to admit, when I read about hacks to save time, I kind of giggle inside.  I’m still celebrating that I don’t need to be so damn efficient.

I’ve created a life for myself that has a ton of inefficiency built into it . . . because I can. Continue reading “My Lovely, Inefficient Life”

The High Cost of Marriage

Please don’t think I’m questioning my relationship or my life partner.  Mr. Ms. Liz is truly my best friend; he makes me a better person.  There’s no one I’d rather have along side me in this adventure of life.  We’ve created a life, together, I could not have created without him by my side.

But that doesn’t mean I won’t examine what marriage has cost us . . . financially speaking.

First, some history.  I was married at 24–crazy and amazing that I found the person who would make me happy over these last 28 years at such a tender age.

When I married, I changed my name.  Mr. thought it was unnecessary to do so but I wanted to be MARRIED and changing my name made me feel MARRIED.

In fact, Mr. wasn’t all fired up to be married, he was perfectly happy to cohabitate.  Smart guy.  But, I wanted to be MARRIED and he wanted me to be happy so we were married.   And we’ve been quite happy.

My frequent readers know we keep our money completely separate.  I never thought we needed to combine finances in order to feel MARRIED.

For the first 25 years of marriage, we split our house related bills based on our incomes.  When Mr. made twice what I did, he paid 2/3 and I paid 1/3 toward these bills.  As my income grew, I paid more.  This allowed us to live at a blended lifestyle rather than at the lower earner’s (mine) lifestyle.  Over the last few years, we have split our house related bills based upon our relative net worth.  Again, he pays more than I do because his net worth is higher.  This has always worked well for us.  We’ve always split groceries and other joint purchases evenly.

Because we keep our money separate, I’ve always split our income tax bill based on what we would have paid if we were single.

You see, the U.S. tax code is set up for a family where there is a high wage earner and a low or no wage earner.  The tax code penalizes families where both partners have similar or high earnings.  This additional tax cost is referred to as the “marriage penalty”.

The penalty exists because the upper earnings limits for the married filing joint tax tables are not two times the limits in the single tax tables.

Then, at higher income levels, an alternate minimum tax kicks in which makes the marriage penalty even worse.  Oh and Obamacare added some pesky charges when your income is quite high and we hit that.

And because I am a strange money nerd who looks at this stuff, I can tell you how much marriage penalty we’ve paid over the last 22 years.

In the highest year, our marriage penalty was over $7,100.  Yep, $590 a month not for a car payment or a fancy trip but for the privilege of being married. Continue reading “The High Cost of Marriage”

The Bad Guys are On Their Way . . .

You’ve probably heard a bit about the Equifax breach.  In light of this breach, I thought it may be useful to remind everyone about the things we can do to protect ourselves from unauthorized access to our financial accounts.

Equifax is one of the three major credit reporting agencies in the U.S.  They maintain credit reports for 143 million American consumers.  Hackers were able to access Social Security numbers, birth dates, addresses and drivers license numbers.  There are also a small number of people whose credit card numbers were accessed.

S-U-P-E-R   S-C-A-R-Y

With that information, scammers can obtain credit in your name, file a tax return and obtain your refund and basically wreak havoc on your life.  If they successfully do this, you’ll spend years and countless hours working to restore your good credit and obtain your tax refund.

What the experts say you should do to protect yourself: Continue reading “The Bad Guys are On Their Way . . .”

The Joy of Working . . . When Working Is a Choice

The job I retired from was with a terrific company.  I spent 17 years working with some of my best friends and even my fake kid.

Each year, the CFO would gather her leadership group–the accounting, HR and IT professionals who reported to her for a “Summit”.  A gathering to share knowledge, communicate updates and, frankly, to spend some time wining, dining and team building.  Attending these Summits was always a highlight in my year–a paid vacation with my buddies.

I retired 14 months ago.  But this year, I was asked to attend the summit.  And wait, it gets better.  I was asked to ***geek alert*** present a short class on one of my favorite subjects–Excel.

Initially, I was both terrified and thrilled.  Terrified because I HATE public speaking.  My hope was that my short speech at my retirement party would be my last.  Thrilled because it was an incredible honor to be asked to return.  I was excited to see my former colleagues and I love teaching people about Excel.  Helping people with Excel was my favorite thing about my old job.

I got over my terror by convincing myself I’d just be sitting at a table behind my laptop screen.  And I was–it didn’t end up being scary once I got started.  It helped that the room was filled with my friends.

It was really invigorating.  The group was super excited to learn new tips and make their processes more efficient.  There was more than one “wow” comment while I was presenting.  How often does that happen?!

And I was asked to stay over–in a beautiful resort and join the group for dinner and shenanigans after my session.  The shenanigans included sake bombs that sent more than one person stumbling back to their room–thankfully, not me.

Oh, and I got paid to do this!  It will help me fund my IRA this year.

I spent a ton of time preparing.  I developed an agenda that allowed both novices and experts to walk away with a couple new tips.  And being ultra prepared helped me get over my fear.  It was so worth it!

If I thought I had to take this on because I needed the money, my fear of public speaking would have been more than a bit paralyzing.  I would have resented the amount of time it took to prepare–especially because I spent way more time on this than I could bill.  Since it was a choice, I could focus on my excitement.

Not needing the money transformed the way I thought about the entire situation.

There are more benefits to being financially independent than I ever expected. 

I expected my financial independence would mean I could replace work with fun activities.  And, yes, I have.

I didn’t really think about being able to pick and choose money-making opportunities based on whether I thought they would be fun.

Last week was a perfect example.  Hanging out with my old friends, making some new friends and being able to contribute again was a rush.  Having people thank me and tell me how they would use what they learned to improve their processes was incredibly rewarding.

Oh and at least one of them wants to hire me to help them one on one.  That sounds fun, so I’ll do it!

But even before I quit my job, my financial independence paid dividends.  My boss was doing everything he could to keep me around.  This gave me a lot more control–I took advantage of it by working from our desert home as much as I felt comfortable.

So I’d say whether you want to retire early or not, save your money.  Save a lot of money.  Save as if you were pursuing financial independence.  The rewards go beyond the ability to replace work with fun–and that’s pretty awesome on its own!