The Perfect Storm - Checking Account Style (or, it's all about cash flow!)

I suppose I have gotten a pretty good handle on my finances over the past 5 or 6 months, so my charting in spreadsheet and log form has pulled back to a less difficult rate.

Because I have tuned my IRA and stock plan contributions to pretty close to "peak" my contributions, I have to be a bit careful with my cash flow. (my budget supports the expenses, but only if they come in sort of staggered and not at the same time)

As with any budget, you have to be careful with spending since your current savings account is probably higher than you expect given some of the expenses that were "baked in" but that have yet to be realized. (like real estate taxes that hit once a year, or car insurance which is the same)

But once you get the total income / spending budget in balance, you still need to watch monthly cash flow. One of the levers you have to "fix" this is your credit card....not by pushing things off to the point of paying interest....but to decide to pay something now or defer it for a month.

But be forewarned.....you can not defer things for ever.....this is a once in a while way to push payments out.

So the way I do this is to have a mental picture of all my expenses, current and future. I then have an idea of the amount of money I have in the bank, and how money is flowing in and out. (is the total increasing or decreasing over the next couple of months)

If I see a situation cropping up where I am short some money in a month...I might choose to defer a payment by slapping thing so on the credit card. (again, only if I know I will not be creating another "bubble" a month from now when I have to pay that)

Well, everything was going along fine until I ran into an expense I forget to consider. That expense was my own school tuition.

I forgot because "most" of my tuition is picked up by the place I work. But this only happens after I submit my grades. I generally choose to have my tuition bill deferred by the school until after grades are available...as that is as easy to do as giving the school $100 and showing them that the company I work for has a tuition payment plan.

So I did that last semester (about $2600), and the bill is due June 2ND. I then received the bill for this semester, which I have decided NOT to defer....and that is for about $1300.

I had planned on paying for Kristen's field School (about $1800) and Kimberly's summer classes in Copenhagen. (about $9800) with the former being paid by check and the latter a deferred payment of my AMEX card from last month.

I screwed up.....I still have the normal payments like my mortgage and car payment coming due early next month, and now I have to go in and really sharpen my pencil and check on a day by day basis. (to see when my paychecks are going to hit the account and so forth)

In the long term, this is not an issue...my budget is a good one, it is mostly a matter of cash flow. (actually, last month I had planned on needing to take money from long-term savings/investment....but an unexpected profit sharing bonus at work made that requirement unnecessary.....so this really is just a cash flow issue)

I need to perhaps create a cash flow spreadsheet to make all of this easier to track. Cheryl used to do this by simply listing it all out on a month by month basis on paper....I sort of do it in my head now....which is obviously not good enough!

Oh well.....live and learn!

Progress against the budget

Well, I am into the third month of my budget, and I decided to see how things were going. Things look OK, but here are a couple of areas that have varied from the goal. (but the net-net is good)

1) The budget for Pennachuck Water is $75 per month, and the January bill of $124 really shocked me. But this was a bill that included all the water used by all the people who were here after the funeral. The Feb bill was down to a nice $49.93 and March came in at $43.67. It looks as though I might have over budgeted there.

2) Verizon Wireless was a similar thing. I have $115 per month on the budget, and the January bill came in at $124.77. That worried me, until the February bill came in at a reasonable $95.86. It was the combination of several things. Increased calls in January after the funeral. Then I forgot that we would be returning a phone and therefore lowering the monthly bill by $20.

3) The Vonage bill came out the opposite. I had initially thought I would junk the service and stick with the cell phone only. Well, I have kept the Vonage so far...at the $17.95 level rather than the Skype $1.55 per month cost.

4) I actually had one unanticipated house expense in repairing the hot water heater for $100. Actually, it was in the budget as I have a $50 a month of house repair.....so I suppose it was in budget.

5) Fuel for the car was a big problem for the budget. I had $117 in the budget and spend $251! Yikes, fuel did go up in price, but I am not sure what happened since last month I had spent $98.00.

Those are the big differences....I will keep the budget as it is for now. A few more months will tell.

BTW: I think I am saving heating fuel but can not tell because I am on a fixed budget. Time will tell with that.

My Finance Tracking System

After thinking about how I would track things, talking with my mother in-law and trying out a few finance tracking program demos, I decided that a semi-manual approach was the best for me.

First of all, I have 12 separate envelope folders marked January through December. I have a monthly budget worked out on spreadsheet, and I print one out and glue it to the front of each envelope.

The budget form has the projected budget and space to the right to list the actual expenses. As bills come in, I pay them, mark their date and payment amount on the spreadsheet and file the receipt in the folder.

At the end of the month I access my credit card and bank statements online, print print them and pull other assorted items out of them putting them down in the expense side of the paper. I then file those statements in the folder.

When the month is over I will take the envelope to the computer and input my expenses into my spreadsheet and this way I will have everything calculated and ready for trend analysis and an end of the year roll-up.

The various budget or money tracking software I tried were more than a bit cumbersome to use, and they sort of required me to enter the transactions into the computer as they occurred. (otherwise they it would be very hard to do it later)

This way, I get to write out checks while I eat at night, take simple notes on the front page summary and enter them into the spreadsheet all at once...when I have the time. The hand-written page still gives me a sort of "snapshot" of my activity during the month as I go along....so there is no worry about losing sight of my spending.

I have only done this for a month...and only a couple of weeks in reality. I like it so far...and everything will be in one place at years end.

So far...so good.

Eating through my food stocks!

I have a food budget of about $40 per week in my spreadsheet. I have spent about $28 in the last two weeks.....that's total for the two weeks, and about $10.00 of that was to buy a 15 pound bag of rice! (so that will be lasting a lot longer for sure)

How can this be....and I starving?

Hardly...I have been eating like a horse. I simply decided that with one person in the house, there was no need for all the food we had squirreled away in the house.

So I have taken to making different soups, or other concoctions from the various canned and frozen foods. I haven't even dipped into the real basic things yet...and I actually have quite a few pickled things I have not even moved upstairs.

Ok...so the variety will soon begin to go away, and I'm about out of meat....so I know I'm going to be hitting the store sooner than later....but still, even so, I should be able to get away with just buying the things I need to "augment" the various staples I still have lining the shelves.

I guess I'm just a cheap guy at heart....but I'm still a cheap guy who likes to eat!

My new Budget

After a little bit of noodling and a lot of looking at past expenses, I came up with what I think is a budget reduction plan that will allow me to keep my current level of 401k saving and still allow me to no spend more than I take in.

Why do I think it is important to keep my 401k savings rate where it is....especially since it is only me, and I should be able to retire on "less" than me and my wife....

Well, I figure I want to make sure I stay out of my kids pockets when I get older. I don't want to be a drag on them financially. Cheryl and I didn't come this far so that I could screw it up now! :-)

Also, if I happen to pass on before I spend it all down, then it goes to the girls, which would be fine with me too. (trust me, it's never going to be the Bill Gates fortune....they have never had silver spoons anywhere near their mouth, and any money they get from me will never make that happen either)

Up until now I have not given out any specifics on my budget situation. I guess I'm still thinking about how far to exactly go, but I guess I will wade in a little with some expense numbers. (at least those I am going to change)

I'll start by note that our house income has recently dropped by a bit over 25%. That is a fairly sharp decrease, but we are lucky enough to not be in massive debt. This means that quite a bit of our expenses are discretionary.

It turns out I am currently about $227 per month ($2723 per year) in the hole at my current spending rate. So I wanted to come up with savings that would balance that and give me a slight savings every month.

I decided on the following:

1) Cut out Vonage and move my home number to my Cell Phone: With my kids off at college, I am the only one home and so I can use my cell phone and perhaps get Skype Out for home outbound calling. (only $15 per year vs $20 per month) That is a savings of $18.75 per month.

2) Cut out all cable except for Internet access: Again, being the only one in the house, and NEVER watching TV, I am fine with this. This will lower the bill from about $89 per month to about $40 per month for a savings of $42 per month, or $504 per year.

3) Drive for better mileage: Ok, so this seems like a stretch, but I literally drive to work at 80MPH or above...and I get about30MPG in a Civic. When I was breaking in the car, I was driving it like it was fine crystal and getting about 42MPG, so I think I can gain something by driving in between those two. I did my estimates on a 9% fuel economy increase, which I think is possible. I happen to drive about 70 miles per day, so it adds up...and to the tune of about $14.61 a month for about $175 savings per year!

4) Decrease my food costs: We spent about $100 a week, and I figure that being me along, I can cut that to $60. Not only am I eating for one alone, but I also intend to cook more simple things with more inexpensive items. Stir fries, rice, etc....able to be eaten over days and taken in for lunch. This will save about $172 per month, or a bit over $2060 per year savings.

5) Take a car off the road: I currently have 4 vehicles on the road right now. I have a 2005 Civic, a 1990 Honda Odyssey, a 1998 Jeep Cherokee and a 2005 Kymco Scooter. I am going to take the van off the road. Taking this car off the road will save $4.17 per month or $50 per year. NOTE: As an aside, I am going to sell the Van and my 1999 VW Beetle that sits off to the side waiting a driver. Those sales are not really a cash flow move, but will get rid of a couple of idle vehicles and perhaps add a couple of bucks to the checking account.

6) Taking the Van off the road will also save me insurance money. This means a savings of about $29 per month ($348 per year). I also suspect that with one less driver, the total rate may also go down a bit too...but I have not estimated this at all.

My final savings total per month is $271, which means I end up with my saving about $3256 a year.

NOTE: It was noted that I made a serious mistake typing this in so late and tired.....having made a ton of typo mistakes. (I did my budget spreadsheet in terms of a monthly budget, and really botched things going to years here)

Anyways...in looking back over my spreadsheet, I find that I have forgotten two fairly major expenses.....one being church donations and the second some money I transfer to my daughters every month. This results in a spreadsheet change of about $300 per month, so I am not again about $163 per month in the red.....so I need to sharpen my pencil a bit more!

Yes, I know I didn't give you all the numbers.....and I know that my savings doesn't really come up to the level of my wife's salary, but that is the best I can do without doing a total zero based budget. I will be doing that over time as I get my own payment history documented.

So back to the calculator for me....but not right now!

I hope to keep you updated on my experiences in 'Saving'.

Oh, BTW...being the Engineer that I am, I have been thinking about how I was going to track and follow all my spending activity, and I have been considering Quicken, Microsoft Money, etc.... I think I might play with quicken, but I think the most straight forward system is a manual one that my mother in-law described to me. It has the benefit of not only being simple, but it also will leave a much better "paper trail" for anyone coming along when I pass on...so they can better pick up the pieces.

My wife did a very good job of this with a fairly manual system she used....and the only things I have screwed up on (mostly double paying) are the two or three items she took care of online of with auto payment from checking!

My next post will probably be about an "issue" I have just had with Mastercard. (and I'll be looking for suggestions on another card....NOT Mastercard and NOT Citibank...but more on that later)

Thank God for our simplicity and my wife's organization

I wrote a post along the same lines a week or so ago, but I thought I would update people on the progress to date.

Money does NOT make the world go around:
My wife's passing has been an emotional roller coaster, and I have commented on that quite a bit in my Journal....but I wanted to keep this BLOG at least somewhat related to personal finance....so I don't mean to make our situation sound like it is all about money....far from it....it is MOSTLY about family, and as my father ALWAYS told me: "Money does not make the world go around....but it sure greases the wheel."

Translation....doesn't doesn't buy happiness, but life is sure harder if you don't pay any attention to it at all.

Well, I want to report that I have not quite finished a month and I feel a bit more in control of the finances. I did have an initial problem with cash flow....not having enough money in the bank to feel safe about writing checks against any bills....but once I pulled a little from savings in as a buffer, I felt a lot better. (actually, there probably was enough, but not having an actual knowledge of what we really expected for bills, it made me unsettled to be as close as $200 from zero)


Bloated Mastercard Bill:
I fully expect about a $14,000 Mastercard bill coming in about January 15th....but that is mostly due to the funeral expenses of about $11,000. That is the largest credit card balance I have ever had....though there was one time we paid part of my daughters college semester on the card in order to grab some of the cash back we get from Mastercard. (but we always paid it off)


The Roll of Insurance:
This brings me to the topic of insurance. Get some....make sure it at least covers burial costs. it isn't all that expensive, and it helps your survivors. We have a fairly large policy on me, and only the policy my wife had at work on her.

The concept behind our doing that was that I am the big bread winner, and it is "mostly" my salary that ran the house. In fact, for a number of years my wife stayed home with the kids because we both agreed this was the best thing for them....so my salary was critical and had I died back then, she needed to replace that salary in order to live. (and not in a cardboard box)

So we really had little insurance on my wife...but enough to make a dent in things we owe in all this. But let me be clear, the big problems in life are not money problems.....they are generally emotional in nature and are often connected with health, love and people.

Oh, and our insurance only covers us for our daughters time in school. We bought term policies for just a couple of years longer than they would be in school. Term was cheaper, and we were trying to guarantee the viability of our payment for school....after that and we figured we could live on our own savings. (but our daughters education was very critical to us)


Current Cash Flow & Long Term Investment:
My short term cash flow is under control....I need to focus a bit more on my long term investment situation, since I think this will be changing given our new family configuration. Also, my youngest daughter wants to change schools, and keep going for her PhD....which I want to support in some manner. (for tuition)

We certainly are NOT millionaires, but Cheryl and I had goals to get our daughters into school and to pay for their education. So this is part of the plan. (I just need to make sure things are "tuned up" to maximize our opportunity to do just that)

Recovery after your wife passed away

If you read my last BLOG post, you will remember that my wife Cheryl (of 24 years) passed away on December 21st. I have written several Journal entries in my online journal, but I have yet to talk about the difficult emotional problems and the deep sadness involved.

But I don't think any of that belongs in a Personal Finance BLOG...but there is actually a very important aspect of my situation that does, and that revolves around what I have had to do in order to take control of the family finances and keep everything rolling along well.

First of all, it is far too early to day that everything is going to go well...but I have to say that my wife left things so well organized that so far I have been able to pick-up things, find all the accounts, the current state of bills, understand our bill paying calendar and continue on without any late payments. (so far)

First, you must understand that I took care of our retirement finances, and my wife Cheryl did all the day to day nuts and bolts bill paying. I literally did NOTHING in that regard except to keep my credit and ATM card receipts in my wallet so that Cheryl could reach in to my wallet and grab the slips in order to reconcile the account.

So when she passed away.....I thought I was totally lost. We don't have an incredibly complex financial situation having only two major credit cards (we rarely use one of them), three checking accounts (one is tied to our large investment account and is mostly only used to transfer in and out of there...and another is a small credit union account with $30 in it!)

But we have a fairly complex number of bills with odd schedules having two daughters in school and several different loans and tuition plans coming into play. (along with dutch debit accounts, car payments, house, utilities, etc....)

Some of our payments are made online, some by check, and some are automatically withdrawn....

We also have a safe deposit box in which as have some of our more important family documents. I could have just let things "roll" and dealt with any missed or skipped payments by paying their late fees....but I hate late fees and I didn't want to be late on any payments!

It has only been about a week, but I have to say that my wife Cheryl had documented and left organizing instructions that a child could understand, and it was all clearly done in the above pictured rack of file folders.

Here are the keys to her organization:

1. A single sheet of paper that lists all our money accounts (ins and outs) by name, institution, account number and has a contact name and number of a person or department to call. This sheet included a location for the safe deposit bank keys, the address of the bank and instructions on how to access the box.
2. A single sheet of paper that lists all our normal monthly expenses, the day or week of the month they are due, how they are paid (online, check, auto-withdraw from which account) and the typical amount of the bill. (or the range)
3. A single sheet of paper listing all online accounts, the login names, passwords and any specific information needed to access the account.
4. A single file folder with all unpaid bills needed to be processed. When a bill came in, she placed it in this folder, When she processed it, she marked it paid on which date...made an entry in whatever checkbook or payment instrument and placed the marked up invoice into a file folder for that "bill" in the larger file cabinet. (There was an sort of paper trail that I could follow to see if past bills were paid and when)
5. The odd and important expenses, like my daughters college loans, tuition and misc non-periodic bills had their own file folder where past payments paperwork were kept for easy reference. She also had a single sheet of paper in each folder that outlined any past and projected future payments....with an estimate of the next required payments and on which dates.

The only thing Cheryl might have included in her information might have been the name and phone number of our tax accountant, since I will have to be contacting him to work on taxes before you know it....and since getting our tax information prepared was also Cheryl's work, this is something I have to get working on sooner than later! (I was the money spender....Cheryl took care of all the bookwork :-)

So we have only just begun the task of adding my daughters onto my accounts and to the safe deposit box....but at least the family machinary is set-up to receive and pay bills...and this only because my dear wife was not only organized, but created and left a great documentation trail.

None of us wants to think about our own death....but if we really love those who are left to pick-up after us and if we want them to "keep going", we would take the extra time needed to document the process we go through.

May you be every-ready but never need to use your preparations.

Our Electric Bill Savings is visible!

It was only about a month ago (October 17th) that I BLOGGED about an energy measuring device called the the Kill A Watt, and it was with that post that I became conserned about our energy bills.

Our electricity costs had risen to about $100 or more a month and this was quite high for us.

Well, we just received our bill for the period of October 13th through November 10th and I am happy to report that it was only $74.86! (495 KWH) Also NOTICE that we missed 4 days of savings at the start of the billing period!

In fact, the bill has a little graph of electricity usage (to the right) and you can see that we have in fact been trying to save for the past 2 months or so and that our average daily consumption this past month is way down below the prior 11 months!

I think tools like the Kill A Watt made it crystal clear that things like computer monitors are bit money sinks, and that it REALLY makes sense to shut them down.

I think the Kill A Watt cost me about $29, and I almost paid for it in a month. (of course, not all the savings should be attributed to that device, but you get the picture)

Anyways......our basic savings routine now includes:

1. Turn off all computers and monitors when not in use. (we still leave two computers on all the time, but the monitors OFF)
2. Turn off all lights when you leave the room, and minimize lights while in room.

I guess you can save money if you put your mind to it!