TV or Not TV

Cutting back on cable TV--or getting rid of it altogether--should be an easy choice, right? After all, TV is a mind-sucking, time-draining evil that no right-thinking, left-leaning senior citizen should be using, right? And then to actually pay a cable company for the privilege? Better to just throw the dang set out the nearest window!


Well, it would take a stronger person than me to give up TV altogether. But I am going to cut back on my cable expenses. Right now I pay Comcast $72 a month for "Digital Classic" which includes everything except the premium channels (HBO, Showtime, Cinemax).


I can easily cut $4 a month by dropping back one catagory, and will do that. But I could save an additional $14 a month by cutting back two catagories. As it happens, if I do that, I will lose Bravo channel. If Bravo goes, so do two of my favorite reality shows, "Project Runway" and "Top Chef."


On one hand, $168 a year is way too much to be paying for two shows that run 8 weeks each. On the other hand, I REALLY LIKE these shows!

For those who think that any TV is a mindless distraction, please note in my defense that, in addition to TV, I am an avid reader. I also spend considerable time on the internet. I long ago stopped apologizing for my use of television as a tool of relaxation. But I don't always admit what shows I watch regularly. (Can we say "Scrubs" or "The 440?"--and don't ask about those reality shows!)

I want to save money. I want to pay down my debts. I have better places for that $18 to go each month than to the cable company for two limited-duration series.

OK--I know what I have to do. But bear with me while I whine a little first.

Personal Stats for June, 07

Things are going down.

This is not so great for my mutual fund holdings, which have lost about $5000 in the last two weeks.

On the other hand, my debts are going down, too, so all is not lost. My credit card and student loan debts are now $853.56 less than last month. My mortgage has been reduced by $627.37.

This means my total indebtednes is (finally!) under $100,000.

I calculate my net worth quarterly but it fluctuates with the real estate market and the stock market. Right now, I try to keep my eye on the ball, the ball being all that debt that will, please God, keep going down.

The Best Laid Budget Meets the Occasional Roadblock

So here I am, with my carefully worked out summer budget which includes a quarterly payment in July for my daughter's 2007-2008 private school tuition, and all is financially doable. When, to my shock and dismay, I get a letter from the school telling me that there will be no financial aid award to my daughter for her senior year. Say what? All of a sudden, I have a $6000 budget problem!

First, let me say that I am a fan of public schools, and they are relatively good in my city. But my daughter was adopted at age 8. She has a myriad of social, emotional and organic issues that the public schools adequately addressed in the third and fourth grades but completely mishandled after that. I worked my way unsuccessfully through special education hearings for a year, then gave up and placed my child in a private middle school for learning disabled children. It was a great success, so much so that I was unwilling to place her back into the public school system and possibly lose ground. So, on she went to a private high school for learning disabled children, where she continues to experience success.

The school is expensive. From the beginning, I received $5000 to $10,000 in annual financial aid awards. This was due to the very high incomes of the other families who had children at the school.

Two things, both good, have led to the loss of the scholarships. One is that my income increased this past year after being frozen for the previous two years. The other is that the school is trying to increase its racial diversity which means that they have more students with families whose income and resources are substantially lower than mine.

Now what? This is not something that can be handled out of my $1000 emergency fund.

Fortunately, this story will have a happy ending.

I let the school know that I might have to take my daughter out. Since she is a senior with a three-year track record, this is the last thing I want to do. As it happens, the school doesn't want to lose her either, especially since they can take so much of the credit for the growth she has shown during the past three years. We wound up agreeing that I will pay her tuition over two years rather than one year. This works for me because this is her last year of high school and any post-high school expenses will be at the lcoal community college. It works for the school because--well, I don't know why it works for the school, but I am grateful we reached a resolution.

Emergency Funds--How, When, and How Much?

Solitary Dancer, at Bare Bones Living (See the link under "Personal Finance Blogs I read") is trying to figure out whether to pay off debt first or put money into retirement. See her comment regarding my prior posts on the subject here: http://barebonesliving.wordpress.com/2007/06/22/grace-made-me-do-it/

Consider this a case of the blind leading the blind, but what I notice is that Solitary Dancer is actually doing (or trying to do) three things at the same time--pay off debt, establish a long-term emergency fund, and save for retirement. Like me, she is in her 50's and getting a late start. My advice would be to hang onto a very basic emergency fund of $1000 and put the rest of her contribution either toward the debt or into a retirement fund. Of course, I don't know the stability of her employment situation or her health, so there might well be other reasons why it is important for her to get a long-term emergency fund (usually defined as three to six months of living expenses) set up.

For myself, I know that my position at work is relatively safe and that it is likely I can stay there until retirement. There may be times in the future, as there have been in the past, where my salary will be frozen or my time cut back, but I am not overly worried about being laid off. Fortunately, my employer also provides disability insurance which kicks in after sixty days, should my health take a bad turn. Since I have at least that much in unused sick time, I don't have to worry about using my emergency fund to support myself.

So a $1000 basic emergency fund suits me. Everything else I get, after basic (and, I hope, more frugal) family living expenses, goes to the debt and to the retirement fund.

$12--It's only $12--but. . .

Granted I'm not talking about a lot of money here. In fact, I'm only talking about $12--the "Fastpay" fee that Chase charges to make a same-day payment on one of their mortgages. But it's those niggling amounts that often get me the most annoyed.

My mortgage is due the first of each month. So long as payment is made by the 16th of each month, I'm not late. Being late would cost me $44.50 in additional fees, not to mention the effect on my credit score.

I get paid on the first and 15th of each month. Most of my bills are paid out of my first paycheck, while the second paycheck is reserved for the mortgage and 15 days' worth of daily expenses.

If I pay online, which is my preference, it takes two to three days for the withdrawal and the payment on the mortgage to be made. Therein lies my dilemma. If I don't get the timing exactly right, I wind up with bank charges--either the money comes out too early which causes my overdraft protection to kick in (which costs $10 plus a cash advance charge from my linked credit card) or the payment is made a day or so late, which has Chase charging me that $44.50 late fee.

Timing becomes even more complicated when the 16th falls on a Friday, Saturday or Sunday.

So the end result is that I often just call and use the Fastpay system on the 15th or 16th of each month--hence that $12.00 charge.

One solution would be to keep an extra $1400 in my checking account--which would be nice if I had an extra $1400. But the account, which I get for free as a "senior ," pays no interest. And there's the fact that even my emergency account, which does get 5% interest right now, has only $1000 in it.

Revamping my budget to pay the mortgage out of the first paycheck of the month is another possible solution, but that would require a major reworking of the pay dates on all my bills, which might or might not be feasible.

Sigh. Until I get better at the timing issue, it looks like I should just budget in that annoying $12!

Carnival of Personal Finance--Greatest Hits Edition

JD, at "Get Rich Slowly" (see his link on the right-hand side of this blog) hosted a "Best Of" Carnival of Personal finance that asked us to show him our best posts from the past two years. Given that I've only been posting for two weeks, I had it easier than most! See my post and all the rest at:
http://www.getrichslowly.org/blog/2007/06/18/carnival-of-personal-finance-greatest-hits-edition/

My Kinda Gal

Bonnie Daly is definitely my kinda gal--She's 71, recovering from a 1980's divorce and a long stint as stay-at-home-mom. Read about her at:
http://www.signonsandiego.com/news/business/20070610-9999-lz1b10stevens.html

Initially, when I read the article, I thought she was way ahead of me in terms of retirement savings, but then I realized that she's 13 years older, and that my retirement savings will be around the same as hers (she currently has $367,000) in 13 more years, counting stock growth and monthly contributions.

She does make about $14,000 more per year than I do, but that's including her Social Security and a military pension from her divorce as well as her nursing career which pays her $57,000 per year.

If I faulted Bonnie for anything, it would be that she still has a mortgage at age 71. I expect to be done with that at age 65. I hope to be as spry as she is at age 71.

But what I loved most about the article was the "permission" to cut back her hours. I love my work, and there's no restriction on age where I'm employed. I guess my big worry has always been that I would somehow be foregoing Social Security monies if started working part-time. That's something I'll have to check out someday. But right now, when I still have a 17 year old at home, working less than full time is not an option.

Carnival of Personal Finance is Up

Matthew is the host and you have 78 Personal Finance posts to choose from. Mine is the last one.

Check it out here: http://www.financeispersonal.com/2007/06/carnival-of-personal-finance-104.html

If you came here from the carnival, scroll down. Better yet, read your way down. And by all means, comment as you go.

Needing a Special Needs Trust

I have five wonderful daughters. All were adopted through the state foster care system and all have varying degrees of emotional issues. Four of them are now adults. Three are functional citizens. But one is not. Her emotional issues are such that she has been receiving Supplemental Security Income (SSI) since she was 19.

This raises estate issues for me.

In my will, I have left the bulk of my estate in equal shares to my five children. But because the one child receives SSI, her share is in a Special Needs Trust (sometimes called a Supplemental Needs Trust). Why? Well, if I didn't put her share into a Special Needs Trust, she would lose her SSI, Medicaid and other benefits that she needs. Besides that, although she is bright and independent, she is hopeless with money. Anything I would leave her would likely be gone within a year.


The Special Needs Trust was easy--a two page document that is imbedded in my will. I chose an Elder Law specialist to draw up my will which included the Special Needs Trust. A general probate attorney could have done so as well.

The most difficult issue was picking a trustee.

I chose not to make any of her sisters the trustee. My daughter has Severe Borderline Personality Disorder which makes all relationships problematical. I didn't want to do anything that would jeopardize the tenuous relationship between the sisters.

Fortunately, my state offers me a solution. We have a statewide Special Needs Foundation that will, for a nominal annual sum, be the trustee. I am curious how this will all work out with my daughter, though obviously I won't be around to find out. Most of the Foundation's clients are developmentally delayed or have specific mental illnesses such as schizophrenia. But my child has a personality disorder. When one meets her initially, she appears to be bright (which she is) and normal (which she is decidedly not). I expect her to spend a lot of energy trying to get at the money and the poor trustees spending an equal amount of energy fending her off.

Here are a couple of informative links about Special Needs Trusts.

http://www.nsnn.com/frequently.htm

http://www.fragilex.org/html/financial.htm

Pay Debt or Pay into Retirement--That IS the Question

A friend pointed me toward J.D's blog, Get Rich Slowly (see Personal Finance Blogs I read at right).

In April, J.D. dealt with the same "pay debt or contribute to retirement" issue on which I last posted (read his comments at http://www.getrichslowly.org/blog/2007/04/09/real-life-choices-retirement-savings-vs-debt-reduction/), and got a slew of responses. Interestingly, he came to the same conclusion I did, even though his circumstances are different from mine. He's young, married, and thinking about a family, though he has no children yet. I'm not young, never married and the last of my five children is on her way out the door, give or take a couple of years.

Not a Strict Dave Ramseyian

I enjoy listening to Dave Ramsey's radio program (listen to his archives here: http://www.daveramsey.com/radio/home/index.cfm?FuseAction=dspContent&strMode=dspShowArchives).

I've also read his books.

I follow his "debt snowball" plan and I can attest that it works.

But I do have my criticisms. First, and most obviously, he is way too conservative politically for me; second, I could do without all the overt religious messages. But those are trivial compared to the third: I disagree with his advice to fore go payments to a retirement fund in favor of paying debt.

I think that for someone like me, who is getting such a late start on retirement savings, I cannot afford to put off those payments even longer while I pay my debts. Right now, I contribute $1000 pretax per month to my retirement 401 (k). Theoretically, if I paid that same amount toward my credit card debt, I could get rid of the indebtedness in the next 14 months. It doesn't quite work that way because I do use pre-tax dollars for the 401 (k). If I stopped the contributions tomorrow, I would not have an extra $1000 per month in my paycheck to apply to my credit card debt. But more importantly, I would also lose the advantage of 14 months of compound interest and (I hope) increased value in my stock mutual funds.

I can see why, for simplicity if nothing else, Ramsey sticks with a "one size fits all" financial plan. But I can't see that his entire plan quite fits me.

CNN Money on Risk and Late Retirement Saving

Walter Updegrave counsels a late-bloomer on Late Retirement Saving and risk at CNN Money (http://money.cnn.com/2007/05/29/pf/expert/expert2.moneymag/index.htm?section=money_pf).

Jo is 55 years old, with only $15,000 in retirement savings. Wow--she's in worse shape than I am.

I found myself in agreement with most of Updegrave's advice, especially about the need to increase monthly contributions.

He does say she should keep 25 to 30% of her retirement funds in bonds, which is not what I do. While I agree that eventually I will need to become more conservative and have more bonds in my portfolio, at the moment, I am 100% invested in stock mutual funds.

Why I Love Financial Engines

I discovered Financial Engines (http://www.financialengines.com) several years ago. Created by Nobel prize winner, Bill Sharpe, the site and the advice it gives, come closest to my own investing philosophy.

Although one can pay for higher levels of advice, I've always stayed on the free side of Financial Engines. It took less than an hour to put in my financial information and to set my goals.

I did not count either of my houses--just my stocks and the amount of money I'd be adding to my 401 (k) each month. The latter has changed over time.

What I love is that I can ask Financial Engines what the chances are of making my retirement goals at any given time (or play around with the times or amounts contributed) and the site will give me a general idea of how close I am coming. For example, I know that at my current savings rate, I have a 69% chance of reaching my goals ($50,000 per year in retirement income) at age 67 but an 85% chance if I wait until age 69.

I have changed my mutual fund allocations a few times based upon advice from Financial Engines. However, I don't always take the advice I get from the site. For example, for the last year, it has advised me to move money into life-cycle funds available through my employer. I've chosen not to do that because I think those funds are too conservative, given my late start on saving. I also know that I can tolerate a fairly high level of risk.

In general, I think Financial Engines is a great way to monitor one's investments and I do recommend it to others.

What's A Nice Girl Like Me Doing In A Place Like This?

Does the world really need another personal finance blog?


In a word, YES!


Most of the personal finance blogs I've found (check out my favorites on the right hand side of this blog) are written by folks younger than me, who make more than me, who have saved more than me and who have less debt than me.


Am I the only middle-aged, middle class wage-earner who should have gotten her act together a long time ago?

Ah well, better late than never.

So here's where I stand right now:

I'm a 58 year old single parent of five children, who range in age from 39 to 17.

I live in an urban setting in the Pacific Northwest.

I work in social services and make $73,000 a year.

I have $167,166 in retirement savings. My employer contributes 6% of my income to my 401 (k) and I've now started to contribute $1000 a month pre-tax from my salary.

I own two homes--a small, paid-for single family residence that I rent out, and the home in which I live. Housing prices have taken off in my city which means my net worth has increased considerably. But I still have monthly mortgage payments, and no interest in selling my houses so the increase in value is largely irrelevant to my financial life.


I owe $14,996.54 on credit cards, $1,841.31 on a student loan for one child's college expenses, $81,376.66 on my mortgage and $2,152.22 on back taxes for my rental house. The grand total is $100,366.73. My mortgage will be paid off when I'm 65 if I stick with the current payments.

My net worth, as of 3/31/07 is approximately $553,985.

I love my job but I don't want to work forever. My health is generally good but I'm diabetic, which means I have to be reasonable in assessing future health complications. Right now, I'm projecting that I can retire at age 69 with an income of $50,000 but I'd prefer to do so at 67. Within this blog, I'll be exploring what retirement means to me, how much money I'll need in retirement, how much money I have to save before I retire, and pretty much anything financial that I think pertains to my retirement.

Join me on this journey and feel free to comment, anytime.