I made $780 an hour yesterday

Yesterday we got our insurance statements for the dental checkups and fillings we had done last month. With the insurance that we had at the time, preventative work is covered 100%, and we were only going to have to pay $127 for $488 worth of fillings. Except that my two year old's preventative services weren't covered for some reason, and I was going to have to pay the $78 for it.

Instead of sighing and just assuming that it was for some clause in the insurance agreement (as I might have done in times past), I called the insurance company and asked why it wasn't covered. They said that the flouride treatment (preventative work!) had been billed with an incorrect code from the dentist's office. That call took about three minutes to make.

Of course I called the dentist's office next, the checked and sure enough, they had used the wrong code for that service. They agreed to resubmit the insurance claim, and I assume that next month I'll get an insurance statement saying that the fluoride was covered in full. That took another three minutes.

Even though I hate making calls, the 6 minutes spent chasing down the $78 were well worth it. Too bad I can't always make that good of use of my time.

Moneythly Report : June / July

I'm going to start a monthly money report on the state of our finances. Each month I'll post how we did for the month (charts and category breakouts) and post our budget for the upcoming month. In future months I'll post budgeted vs. actual expenses as well.

June Report

The huge recreation fee is where we went to visit my nearing senile Grandpa-in-law. His girlfriend thought that he'd paid for the hotel for us, but we ended up having to pay for it. She had tried to be nice and put us up in the nicest hotel in town too. While we were there they probably gave us that much in camping gear, so it kind of evens out anyways I suppose. It's still a huge chunk of unexpected expenses.

July 1st Assets and Liabilities

Here 'Due' means when it starts charging interest.

Money:
ING Savings: $3891.11
ING Checking: $424.24
Credit Union Savings: $5.00
Credit Union Checking: $123.18
Credit Union Money Market: $0.14
Credit Union CD: $6,082.79
Credit Union Credit Card: -$1,145.14 (Due July 25)
Big Bank Checking: $100.08
Big Bank Credit Card: $0
401K Vested Value: $1,254.30
Student Loan: -$6075 (Due June 2009)
Car Loan: -$15,580 (0% interest. We start payments in November [$380/month]).

July Budget

Green is income or remaining positive balance. Salmon is variable expenses, red is fixed cost expenses.

We should actually save a good deal more than the $390 listed above. We have roughly $900 coming in to our account in the next few days as we cash a check and get the reembursements for child care expenses (via. our flex spending account)

You'll note the $0 on groceries. We are using our grocery gift cards and are planning to not spend any grocery money beyond the gift cards.

Credit Card Reasons Revisited

Anonymous Says No To $350

Or, How To Miss Out On $29.20 a Month By Not Using Credit Cards

I recently listed 8 reasons to use a Credit Card which caused someone under the bravery of 'Anonymous' to call my advice crappy.

I understand that Credit Cards can be trouble for some people and I have no problem with people disagreeing with me. I did however take issue with these two segments of his response:

Why not keep the money in a high interest account and transfer it online,free, to your checking account as needed. problem solved
...
Rewards,benefits. Virtually useless. For most people the rewards/benefits do not outweigh the risks with credit cards

Great idea! And if one wasn't using a Credit Card at all, I'd agree. However, I found the line 'Virtually useless' rather suspect. I decided to run an analysis and see for myself (and for you, dear reader) what exactly is the financial benefit of using a Credit Card in the manner I use it.

Remember, our financial plan says to use the Credit Card wherever possible (and to pay it off on time, every time).

My analysis involves the following three scenarios:

Scenarios Under Analysis

Checking Account Only

• One 0% interest, $0 fees checking account


• Salary goes in, checks come out

Checking Account and a 3% APY Savings Account

• Salary goes into Savings


• Money is transfer ed over as needed

3% APY Savings Account, 1% Cash Back Credit Card

• Salary goes into Savings


• All expenses go onto Credit Card


• Credit Card is paid off at the end of the month

The Results!

With a monthly salary of $3,013.26 and monthly expenses of $2,187.50 using a 1% cash back credit card and a 3% APY savings account I will make $29.20 more a month than if I were just using a checking account. I will make you $24.96 more a month than if you I were using a checking and savings account (but no Credit Card).

See the whole sheet for a more detailed look including assumptions I made to simplify the calculations.

Table: Monthly Difference Between the Three Scenarios

Blog Sized Excerpt	Checking Only	Checking and Savings	Savings and Credit Card
Vs. Checking Only	$0.00	$4.24	$29.20
Vs. Checking and Savings	-$4.24	$0.00	$24.96
Vs. Savings and Credit	-$29.20	-$24.96	$0.00

A Partial List of Flaws

• Not everything can be paid for with a Credit Card.


• Expenses aren't actually evenly distributed throughout the month


• It is possible to get an interest bearing checking account


• Using multiple savings accounts will give you finer grained control over transfers to the checking account


• Some people really really really hate credit cards, so this won't work for them


• Some limitations may apply to 1% cash back purchases


• Carrying a balance even once will wipe out months of returns

Conclusion

I stick with my recommendation to use a Credit Card. I realize that my numbers are rough estimates, but I believe that they are strong enough and close enough to show that there is a clear financial benefit to using a Credit Card.

Using a Credit Card isn't for everyone, and I respect that, but just because they don't work for you doesn't magically make them crappy for everyone.

Driving Adds Up

Driving Cost Estimates

Blah blah blah price of gas blah blah blah. You already've heard all that.

On the Road Again

Our Chevy 2007 Malibu gets roughly 24 MPG city, 30 MPG freeway. Given the cost of gas, the miles per gallon and a couple of quick lookups on Google Maps, I now know how much it's costing us to go places. Like, say, $0.48 to visit the inlaws ($0.24 each way).

I kept separate columns for City and Freeway miles, and we just have to think for ourselves which trip belongs where.

Run the Numbers

This is a stupidly simple spreadsheet, but you might as well see how much you're paying for yourself.

1. Download it as ODS, XLS


2. Enter your MPG and local price per gallon. Get your MPG estimate at http://www.mpgbuddy.com/ if you don't know it


3. Use the dollars per trip to estimate the value of using public transportation, ride sharing, getting a new car, quitting work (just kidding), etc.

View the whole thing online

Next Steps

I have no idea how many times we drive different places. We should start tracking that so we can see if we can cut out trips to the inlaws ($0.48!), to the grocery store ($0.12!), etc.

This week I will also be checking our tire's air pressure and getting those pumped up correctly. We are also working to drive more smoothly to improve our mileage.

Scooter Love?

Lots of people are getting scooters thinking that they're going to save a ton of money. At least for us, this wouldn't have been the case if we'd bought the scooter ourselves. My scooter is a 2006 Honda Helix which was $5,000 new. Since I only drive it in the city, the money saved per mile is $0.07. At that rate, I'll need to incur no other expenses for the scooter (oil, tires, insurance, etc.) and drive 71428.57 miles.

That's not going to happen, and so I don't think I can recommend getting a scooter (at least at this price) in addition to a car.

If we hadn't been given the scooter we would have needed a second car eventually. In the case of buying a scooter instead of a second car, it can make sense.

Don't forget to get a helmet.

Is It Time to Switch To CFLs?

I've known for quite a while that CFLs (Compact Fluorescent Bulbs) were cheaper in the long run, but I was ambivalent about the savings, and was under the impression that it wasn't that much of a difference anyways. Now that I'm trying to become more disciplined and save money wherever I can, I decided to do an honest evaluation of the potential savings.

We are likely moving in January, so I wanted the CFLs to pay themselves off before then since I don't know what kind of lighting our yet-to-be-found new house will have.

My plan was to a) analyze the costs and b) stick all the existing incandescent bulbs into a shoebox till we're moving out and take the CFLs with us.

We now have all CFLs, except for the two porch lights which are almost never used and which are difficult to replace anyways. If my estimates and calculations are correct, we should save about $10 a month and recoup our costs in four months.

Below is the spreadsheet I used for my calculations. Please let me know if you see any errors. The in-line view doesn't have quite the whole sheet. Please view it on Google docs or download it to see the full thing.

(Post continues after spreadsheet)

View it, Download it as ODS, Download it as XLS.



As you may have noticed, the longer you leave your lights on the sooner you recoup your costs. The obvious solution is of course to leave your lights on all day long. You'll be saving money before you know it! ;-)

There are some minor issues to switching to CFLs. If you're concerned about the color of your lighting, you may want to buy just a couple of bulbs and try them first. The CFLs, though they claim to be pure white, daylight or whatever do seem to have more of a blueish tinge than the incandescents.

I put the bulbs in our house last night, and due to the color of the glass around the light fixtures, the color temperature change isn't that noticeable, except in the bathroom, where we have a built-in vanity with six bare bulbs surrounding it.

When my two year old walked into the bathroom this morning, he said "We got new walls in the bathroom?", "No" replied my wife. "Somebody painted the walls in the bathroom?" returned my son. The color change isn't bad, but it does exist and may take some getting used to. For $10/month though, I'll do it.

Categorizing My Monthly Spending

When we used our accounts at Wells Fargo, we could see a categorical breakdown of our expenses, but only for the Credit Card. My current Credit Union doesn't offer this functionality, but I had a driving need to know where my money was going.

Initially I would download the .csv (comma separated values) files, and manually sort them out into categories on a spreadsheet.

Of course, that grew old quickly, and I was forced to search the internet for something better. Coming up empty handed, I wrote my own script to sort out my different expenses into categories.

You run it on the command line like so

./statementToCategories.pl list.csv of.csv account.csv statements.csv

It will ask you how to categorize different expenses, and when it sees them again, it will remember what you entered last time. When it's done, it will ask you what to save the file as, and will create a .csv file with the different categories, and how much was spent in each category. It will also tell you how much you spent in each category in an average month.

With that data you can make charts, make plans and moan about how much you wasted on eating out....

You can find the script here:

http://richerandbetter.blogspot.com/2000/01/statementtocategoriespl.html

The script is in Perl, since that's what I'm comfortable with, and it probably won't work as-is for you, unless your bank/credit union lets you download .csv files with the same format as mine does, and you're running Linux. You are free to edit the script however you want and redistribute it.

I have no idea if the .csv files I download are some banking standard, or if they're just the way my credit union decided to make them.

ING Direct

I finally set up a savings account at ING Direct today. As you know, part of our plan is to move money to the highest interest rate account it can go in, while being as liquid as it needs to be. We had accrued $2500 in our Money Market account, so it was time to move some of that into a higher interest account.

Since we have to pay rent tomorrow, and we have $318 on the credit card which is due on the 25th, I decided to only put in $1000 into the ING account for starters. In a week or two when rent is paid and we're closer to our next paycheck, I'll transfer another $500 in.

How accessible will our money be? From what I've read, a transfer from ING takes about 5 business days. At my credit union, I can cash in the CD at any time, and I only lose the last 60 days of interest on the CD. So, I'm exchanging urgency in an emergency situation (where I could use my credit card anyways) for lack of penalties really.

Depending how well I like the ING Savings account, I will probably open an Electric Orange checking account as well. We use an average of 5 checks a month. Any of those things which couldn't be paid with a check from ING could be paid with cash, and then we wouldn't have to worry about changing our bank account whenever we move.

What Does a Pay Stub Look Like?

How Much Do You Really Get From Your Paycheck?

What does a real world pay stub look like? When I finally started getting real paychecks, I was initially let down. I had very naively divided my salary by 24 pay periods and imagined all the cool stuff I was going to buy.

Reality is a bit of a letdown sometimes. I actually only end up with a little over half of my salary coming to me.

So, without further ado, here's my current pay stub (with certain data blanked out!)


Green is income, red is expenses.

At the top left, Salary is the amount I supposedly get each pay period (every two weeks). It works out to be about $50,000 per year.

At the bottom left is the amount that gets deposited into my bank account every two weeks.

43% of my salary doesn't end up in my pocket!

It would be difficult to argue with the taxes portion of the paycheck, but let's take a closer look at the section titled "Deductions From Gross" and "Non-taxable Company Items".

Deductions from Gross

Deductions from Gross are voluntary amounts I choose to have taken out of my paycheck. As much as it stinks to get that much less cash, there are good reasons to get those amounts removed.

Less Taxes:
These deductions are taken out before taxes are calculated. It appears that the taxes are about 15% of the taxable amount. If this is correct, then I pay about $100 less in taxes each pay period by deducting these amounts from my gross paycheck.

What are these accounts though?

Health Insurance - Employee:
This is a medical 'flex spend' or 'cafeteria plan' expense. We estimated how much we were going to spend on medical costs this year, and are having that amount removed from my pay over the course of the year. This account can be used for dental work, eye doctor visits and glasses, birth and related expenses etc. Since we knew we'd be having a c-section baby this year, we knew at least how much we'd be spending.

FSA:
This Flex Spend Account is for child care. Since I'm at work and my wife is at school, we needed someone to watch our kids for part of the day most days of the week. With this account we can pay for child care from our pre-tax money.

401(k):
We are currently putting in 15% of my gross salary into our 401(k). We'd like to retire well, so we've got to make sacrifices now.

Even though these deductions don't come home with me, two of the three are or will be used by me during this year.

Non-taxable Company Items

This is the section which shows non-salary benefits that the company is providing. It appears that they company is paying $306.07 per pay period for insurance for my family.

They match 100% of my 401(k) contributions, up to 3% of my salary. It's true then that I am not being matched completely with my 401(k) donations, but at least it's something.

Take Home Per Year

In all my excited imagining about how to spend my money, it turns out that I should have been thinking about taking home just less than $30,000 per year instead of the $50,000 gross salary figure.

So, if you just barely landed that dream job with the huge salary, don't make too many plans till you carefully review what you're actually bringing home each month.

Time is Money

Would You Pay $16.67 to See the Latest Simpsons Episode?

I hadn't planned on starting time management posts yet, but today I had an experience that made me say "doh!". Here for your enjoyment is a short story about how I paid $16.67 to watch The Simpsons online.


Hulu is Pretty Cool

We don't currently have a cable or satellite subscription, because we don't really have time to watch TV right now, and that $50 a month should be going towards our house down payment anyways. That doesn't mean we can't watch a lot of our favorite shows though. Hulu.com is a pretty cool site. You can watch all sorts of shows, current and old, as well as movies. We use it to keep up with The Office and a couple of other shows we like.

Consulting Makes For Extra Bucks

I've been doing some programming on the side to help increase our income, and for the job I am working on right now I get $25/hour. There's plenty of work to do, and I got up at 5:00 to get a start on it before heading in to my real job.

After I'd been programming for a couple of hours, I decided to head in early. Then I checked my email, read a few blogs, then decided to see what was new on Hulu.com. In a moment of weakness, my drive to go to work early disappeared...and I watched The Simpsons.

Of course my browser crashed part way through, and so the episode took almost 40 minutes to watch. That's 40 minutes I could have been either at work or doing consulting. 40/60*$25 = $16.67. On my way to work I started thinking about all the time I waste and realized that
I could be bringing home a lot more if I would just buckle down and work.

The Value of Time

How should I be balancing my time then? Different activities have different values of course, and spending all my time on the highest value thing would mean other important things would fall by the wayside.

My family is the most important to me (highest non-financial value). Working at my job makes me the most money (highest financial value). Spending time on either of those pursuits would usually give the highest returns to me (happiness or money). Relaxing is important too of course, but losing $16.67 in opportunity costs just to watch a mediocre episode of the Simpsons just doesn't make logical sense.

Improving My Time ROI

In order to make better use of my time, I've created a schedule for myself. I decided that during the week I will try to be more strict on my time usage, and that the weekends will remain unstructured for the time being.

Each of my time blocks are color coded to reflect why they are important and so I can see if I'm at least trying to live a balanced life.

The Personal Projects entry is orange and green because I have hope that a couple of my personal projects will eventually act as extra streams of income as well.


Tell me what you think about my schedule, and leave any stories you might have about time you've wasted and regretted.

Our financial strategy

Goals
Before figuring out a financial strategy, we had to figure out our goals. Our goals are:

1. Live within our means
2. Pay off debts before they cost us interest
3. Save for a house, and for emergencies

Summary
Here's a high level summary of our specific strategy, based on those goals:

1. Pay off debts first
2. Keep money where it will earn as much interest as possible while remaining as accessible as needed
3. Use a budget to maximize the amount of money we can save

Implementation
And here is our specific implementation, as of May 15, 2008:

When we get a paycheck:

1. Put tithing and offerings (10% of paycheck + offerings) into checking (we pay with a check)
   
2. Pay off the balance on the credit card (also use funds from the Money Market account, if needed)
3. If it is the start of the month, put $600 for rent into the checking account
4. If there are any other bills, pay those
5. Put $100 "we don't accept credit cards" money into checking account
6. Put remaining money into the Money Market Account

Spending:

1. Pay with the credit card when possible
2. Remember that there is only $100 spendable in the checking account
3. For non-standard expenses (medical, tuition, etc.) which can't be paid with credit card, transfer needed funds from Money Market to checking.

Money Market Surplus:
When more than $500 accumulates in the Money Market account after paying all expenses, transfer that money to a higher yielding (but harder to access) account. We are currently putting our money into CDs, but we have been looking at high yield online accounts, such as ING's.


Results

1. We earn 1% back on Credit Card purchases
2. We earn 1.144% on the money sitting in our money market account
1. 1 & 2 together effectively create a 0% loan from the credit card which is paid off each pay period (bi-monthly).
3. We keep enough money liquid to pay expenses for each two week period. This reproduces the paycheck-to-paycheck feeling we've lived with for so long
4. Money we don't need immediately goes to higher earning accounts while being protected from our merciless spending

We have been operating with this strategy for the past two months (April, May) and have found it fairly efficient so far. We know how much we have to spend because we can compare our credit card balance to the amount in our money market account.

We will likely modify some of the details going forward, for example we are looking at options to maximize our 'extra' money. CDs aren't giving a very great interest rate right now. We will also consider getting a credit card with better rewards once we determine which one will be the best for us.