Falling Off The Wagon

Hi, my name is Daniel, and I… lost track of my finances. 

I write (what is for the most part) a personal finance blog, so you’d think that I would track every penney, but I don’t.  We budget to pay ourselves first (savings/retirement), pay all of our bills, and then everything else is give and take.  One month we might go over on eating out, but we won’t touch our clothing budget, so we call it even; but over the last month as we have moved I have learned a very valuable lesson.

Once you start spending, it’s hard to stop.  It’s like the floodgates of your bank account open, and the next thing you know, you’re asking how your credit card bill got that high!?

We realized this week that we have run our credit card bills up much more than we realized.  It’s not like we have purchased large items, it’s a great number of little things that we did not appropriately budget for.  For instance, the last two weekends we have been out of town, and we did not adequately budget for food for either weekend.  Plus being gone on the weekend messed up our schedule, so we didn’t go to the grocery store to stock up for the week as we usually do, so we ended up eating out.  Then we moved, there was no point in us buying tons of food when we would have to move it, so we ate out more.  

Our move was a beast by itself.  Thank goodness I have friends and family who were willing to come help when I offered free beer (which no one ended up drinking!).  I rented the largest Budget truck available, for 24 hours, found a coupon code online to nock off 10%, and then surprised myself when I was able to negotiate another 15% off at the truck rental place.

Somehow a great number of little things added up.  The only major things I can remember buying are drapes and blinds for the house (which we came in way under our budget for!…to bad we went over everything else!)

This will serve to be a very interesting month.  We will soon make our first mortgage payment (yikes!), and we’ll get to see how close we were in our estimates for our new utility bills!  Plus, we’ll map out a plan to pay off our credit card bills.  Which right now I’m thinking will involve pulling some funds out of savings and tightening the budget to replace the money over the next few months (and hoping for a decent raise soon!)

Also, allow me to apologize for this seeming rant.  As you know it’s been over two weeks since I’ve really posted anything of substance, so A. I’m a little rusty, and B. it helps to just start writing to get the wheels moving sometimes!

Finding Opportunity in Disaster

I am the luckiest guy in the world, I’m married to my high school sweetheart, today I turn 23, and yesterday I closed on my house an hour after I found out about a leak that flooded the front bedroom. 

Why do I consider myself lucky after closing on something that most people would have not closed on?  I consider myself lucky for two reasons.  The first is because I’m much luckier to have it happen before I move in, than to have it happen later, ruin furniture, and interrupt my life.  The second reason is because it allowed both sides to come back to the negotiation table. 

I wrote last week about how once the builder had my earnest money, I had no negotiating power.  This leak allowed me to get more.  Mary and I maintained a calm demeanor, we expected random issues like this (in fact almost this exact thing happened to my cousin’s new house after they moved in).  We decided what we wanted and went back to the table.  By no means were we greedy, but we decided that we wanted an extended warranty on the house and a guarantee for when everything would be fixed.  We got both, and closed.

If it had happened in two weeks I’d still consider myself lucky, because I have a fully funded emergency fund, a home warranty, and insurance for occasions like this.

Buying A House and Maintaining An Emergency Fund

In 8 short days I will make the biggest purchase I am ever likely to make, I will be purchasing a new house.  And the closer we come to closing, the harder it is for me to practice what I preach.

Everywhere I look small “upgrades” are popping up that I know I can find cheaper elsewhere, or that I can do myself without having to pay the builders up charge for, and it pains me every time I give the go ahead for them to do something else when I know I’m being ripped off.  I can’t haggle with them, I’m not in a position to.  I already signed the contract to build the house and put down earnest money, so I’m at my builders mercy.

Why would I voluntarily get ripped off you might ask?  Because as I plan ahead for all of our upcoming expenses like drapes, blinds, rugs, random furniture (although we have most), deposits on utilities, moving costs… It’s easier to lump it all in and finance it so that I’m not out anymore cash after I seemingly drain my accounts at closing, because I will not allow us to dip into our emergency fund for these items.  Really the only thing we aren’t having them do that they can is hang our drapes and install our doggy door ($350 for something I can do myself in a hour is too much for me to bare).

At the end of the day, and especially as our country is testing the waters of economic uncertainty, emergency funds are too important to tap into for non emergencies.  And I’m proud to say that even though we may be paying an up charge on these items, our emergency fund will remain in tact and actually grow a bit due to the rolling in of some of our closing costs, so in the case of an actual financial emergency we will have money to keep us afloat.

Live On Last Years Salary

My wife and I have essentially been living as if we were making mortgage payments on our new house for the last 6 months, but instead of paying a mortgage (and taxes and insurance and Homeowners Association) it’s all been going into savings for our down payment.

We admit that we are stretching ourselves to buy our first house (I think that’s something that most people do), but as we are re-evaluating our budget (less than a month until we move in!) we have found ourselves looking forward to our raises in the fall (even if it just equates to a cost of living raise) because let’s face it…as much as budgeting is important, no one likes sticking to a strict budget, so we look towards the future at what we will be making and what we can spend (or save) at that point in time

I think our problem is that we are always looking to acquire more. We want more and don’t want to make sacrifices to get more.

As Mary and I caught ourselves looking forward at what we will be earning and what will increase in our budget I thought to myself, why not look backwards?

Why not live on last years salary? Say your salary was X last year and it increased to Y this year. If you live on last years salary and budget you inadvertently save Y-X all year. Then when your salary increases to Z you can live on Y and save Z-Y.

This concept allows you to save more and forces you to permanently (ideally) live below your means. It’s simple, but a great and easy way to save!

Anecdote: The Power of Cash

Tonight Mary and I had the chance to eat at a very wealthy person’s house in Dallas.  This house is AMAZING.  This house is probably 10,000 square feet, and they had a “mile of wood trim” throughout their game room.  It was very impressive, and it sits on one of the most visible places in North Dallas, on the corner of a busy intersection.  The house is designed like a castle, and sits far enough back where you hear no road noise and you can’t see any of the streetlights because of the size of the lot and how the house is situated.  I could probably tell most people in Dallas what house it was and they would know exactly what I’m talking about.

The couple who own it are definitely a “power couple,” he’s a doctor, she’s a lawyer.  As I walked through I was thinking about the ridiculous mortgage payment they must have for their $2+million house, until I heard the most amazing thing all night… THEY PAID CASH!    

They built what they could when they could afford it, and while this isn’t for everyone, I applaud them for being debt free and staying together for what I’m sure was a hectic process.  They started the house on January 1, 1990, they moved in to the garage apartment 3 years later, and the house was under continual construction since then.  They just recently finished about 5 years ago, and they really did a great job with it.

I have to say, I am amazed that someone in this town owns their own mansion!  It’s very refreshing!