personal Finance Story

My fiancé and I have lived together for a little more than a year now. We are both engineers and are well paid for our work. I end up bringing home slightly more than she does. It is never an issue for us because we have a system that we follow that makes sure all of the bills are paid and our money is combined constructively without actually combining everything.

We both have our own checking accounts where we deposit our paychecks. We have our own separate credit cards for spending and ING Direct accounts for saving. We have one joint checking account at ING. This account is where all of our bills are paid.

We conservatively estimated all of our bills and joint expenses. These include rent, utilities, cell phone etcetera. Instead of dividing these expenses equally between us we split them according to the ratio of our salaries. I make more than she does and thus, I contribute more money out of my paycheck towards the joint expenses. It is in our view, a more fair way of dividing expenses since we each contribute the same percentage of our salaries instead of the same dollar amount.

For example:

Assume a couple has joint expense of $1,000 (make for easy math). Let’s say one partner makes $50K and the other makes $100K. The higher earner would contribute 2/3 of the joint expenses because he/she earns 2/3 of their combined income. The lower earner would contribute the other 1/3.

The added benefit, for both my fiancé and myself is what happens to the excess each month. When we estimated our expenses, we were careful to add an additional 15% just in case. That money goes into our joint checking each month and stays there. If we happen to not spend as much money on groceries, we don’t take money back. Any and all surplus is earmarked for vacations and apartment purchases.

I normally don’t see all the fuss in buying things like salad spinners or photo frames. If not for my fiancé, I probably wouldn’t buy them at all. That’s at least once instance where I cross the line between frugal living and just plain cheap.

In my monthly budget I have a line item for joint expenses. It is very simply labeled Orange Checking Account Deposit. As far as I am concerned that money is gone each month and I mean that in a good way. It is allocated for joint and apartment spending which I acknowledge is a very necessary budget item.

So when my most beautiful and smart fiancé goes out and buys that lovely OXO salad spinner or a new set of kitchen towels I never knew we needed, I don’t feel the pain because the money doesn’t come out of my own account. My fiancé has the freedom to make necessary purchases without having to convince me every time.

I trust my future wife and she trusts me to make good financial decisions. Together we have made this system work. We actually made a first attempt at combining our finances in a more traditional way but ended up arguing and debating long into the night. We decided to keep things the way they are and revisit the issue after we get ourselves past the wedding.

For the time being, it isn’t broke, so we have no intention of fixing it.

Photography is very important to me. Photos help to capture a moment. I love looking through my own photographs and reminisce from time to time.

As far as wedding photographers go, there is a wide range of skill and prices. I don’t know a lot about the concepts of photography but I do know how to spot talent. I wouldn’t be able to define what makes a good photograph versus a poor one but I know the difference when I see it.

After looking at a few photographers that work in our area, we found that a talented photographer comes with a higher fee. Usually a very good one runs north of $3,000 while a mediocre photographer would cost $500 to $1,000. This is to be expected, but still, we are on a budget and would like to get the best value we can. We looked over the available photographers over the course of several nights. It was an agonizing process. We knew that we could not afford a $3,000 fee just for photos. But we did not want to have bad photos either. We have two friends who got married recently and it is very obvious to me who paid more for their photos.

We eventually saw a local photographer who we loved. His work was unique and different and showed his natural talent for the art. Out of every photographer we saw, he was the one we liked the most hands down. However, his fee was up in the higher range of prices. We lamented for a while and then got bold. What if we just ask him if he can do it for $1,000? The worst that would happen was for him to say no, and we would understand completely.

So thats what we did. We layered on some genuine flattery and waited patiently for a response.

He said yes.

Simple as that. We took a chance and it paid off. We will have an absolutely amazing photographer at our wedding and we will have paid a fraction of the cost for his talent.

I have to admit that there may very well be other factors at work here. We are planning our wedding on comparatively short notice. Most weddings are planned a year in advance. We are also having our wedding on a less popular day, Sunday. If a photographer has not filled up a particular day by this time before wedding season, I should think that there is little chance that he could. Unless that is, a short planning couple arrives with an offer. Filling up that Sunday afternoon may very well be gravy for his income.

I am very happy to have such a great photographer at our wedding. It shows how frugality can happen in different and unique ways.

As a complement to an earlier post, there are some worthwhile purchases I plan on making in the near future. Frugality is a very good thing in moderation but I am not letting it get in the way of buying items or doing things that make me happy.

Inline Roller Skates

For exercise, I do a lot of running. I ran my first marathon last year and am looking forward to my second perhaps in the fall. The practice sessions can be brutal. I occasionally suffer from shin splints and sore knees. I’ve actually noted that my joints have a warm up time just the same as my muscles do.

I plan on getting inline skates to allow me to exercise in a slightly different way. Skating uses a different form than running and is less jarring to the knees. I can break up my running training with less impact skating. I’ll be saving my knees and other joints for more years of running later on in life.

Investment Books

Frugal living is important but it’s only one piece of the puzzle. In order to be wealthy you need to learn how to invest. Pouring all of your retirement savings into index funds will only go so far. It is just about guaranteed to provide a comfortable quality of life in retirement but in order to be wealthier than you current salary allows, you need to go beyond what is safe and accepted.

Books are a simple way to invest in my education. I want to learn more. Books are a great way to introduce myself to a new way of thinking.

Kitchen Storage Containers

The other day after a shopping trip to Costco, we realized we had two and a half packages of spaghetti in our pantry. We had just bought a bulk pack of spaghetti. So now we have lots and lots of spaghetti!

Obviously, we want to keep duplication of grocery purchases to a minimum. Spaghetti isn’t too much of a problem. Eventually we will eat it all and it won’t go bad. However, a few extra sets of containers to help us organize our food stuffs would help us identify what we really need on grocery day.

A Wedding and a Honeymoon

I always liked the concept of buying experiences rather than stuff when you are young. Our wedding and honeymoon, while comparatively expensive, will provide us with some of the most important memories in our lives. Stuff can break. It can get old and become obsolete. Memories will last forever.

Frugal living is important to a point. It is not more important than creating those memories that will last you a lifetime.

Check out this article from CNN.

• Lingerie, iPods on government credit cards
  

Apparently, the government is not good with money. That in and of itself is not big news.  The really disturbing part is that in the end it is the individual employees who are taking advantage of the system and wasting all of our tax dollars. The people using these purchase cards include civilian employees along side military personnel. These are normal people. They may be your next door neighbor or someone you see at your kid’s soccer games.

Lets read this again.

Nearly half of transactions made in the 2006 fiscal year with government credit or debit cards — referred to as “purchase cards” — were improper, the study found, and the audit condemned the government-wide “rate of failure” as “unacceptably high.”

Almost half of all transactions? What a disgrace.

Of those willing to have knowingly defrauded their employer (the government and thus all tax paying US citizens) I wonder what is going on in their own finances. Do you think that they are as studious with their own bank accounts as the government is with theirs? If so, then perhaps there is a bit of poetic justice already in the works.

This brings about a good point. There is no auditing agency out there that will be scrutinizing your bank and credit card statements each year. If you took a peek at your activity last year would you be surprised with what you would see? Do you have some lurking improper expenses of your own?

We are all masters of our own spending habits. We make choices each day that affect our future financial selves. We should take a lesson from our wayward government.  Don’t end up wondering what where your money went at the end of every month.

It happens to me to a certain extent each month.  I know I can do better.

My fiancé and I are anxious to get this whole marriage thing completed. We are planning on a June wedding. When we started planning, we had a little more than three months to pull everything together. So far we have a ceremony/reception hall, officiant, and all invitations out. We still have a lot to do but we are tackling things on our list as quickly as we can without being rash.

In a pleasant turn of events, the DJ company my fiancé and I decided on offered a $200 discount for planning an event in under three months. The choice of DJs was limited but after meeting with our two favorites, we are very happy to book the one we did.

I wonder if there are other wedding services that have a similar policy. It seemed that everyone else at the DJ open house we went to were planning for weddings in 2009. In the eyes of the company, I’m sure that short planners such as ourselves are all gravy since most plan events up to a year in advance.

CNN has been posting more and more stories focusing on people caught in the economic downturn. Some are more ridiculous than others but this one takes the cake.

Patricia was a member of the working middle class as recently as February. She was laid off, which is unfortunate. But to turn around within weeks crying poverty is a clear indication that this individual lived her entire life well beyond her means. It has been less than two months since she lost her job and within that time she has been drawing unemployment, received her tax refund, and had her mother move in to help with the bills. Despite all that was working in her favor, she exhausted all of her savings within weeks.

Guerrero is estranged from her husband and raising her two young children. She’s already burned through her savings to help make ends meet, and is drawing unemployment checks. She has had to take extreme measures to pay for her interest-only mortgage of $2,500 a month. In fact, her mother moved in with her to help pay the bills.

$70K a year ends up being about $3,500 or so a month in take home pay. That would put the cost of her mortgage alone at over 70% of her take home pay. I played around with some mortgage calculators and without knowing her interest rate exactly, my best guess points to a house value around half-a-million.

People lose their jobs all of the time. It’s a fact of life. But it happens even when the media is not focused on it. These kinds of stories probably occur with great regularity over the course of every year. In bad economies they are more frequent true, but that is exactly when the media puts it in front of our faces because they are fashionable.

It does nothing more than sensationalize and feed the specter of recession.

It takes common sense to make yourself recession proof.

• Spend less than you make
• Make more than you spend
• Have an adequate emergency fund
• Don’t buy too much house
• Invest for the long term

If you lost your job tomorrow would you find yourself on the front page of CNN with your story? Perhaps you would simply shrug it off and move on with your life because you were fully prepared for it.

Do yourself a favor and be a part of the second group.

Trent over at The Simple Dollar wrote an interesting article recently that encouraged saving/investing a full 50% of take home pay. As I read this, I felt somehow targeted by the advice. I am young. I am (relatively) new to the workforce.

So I asked myself, could I pull off the 50% solution?

After a recent promotion at work, my total take home pay ends up at $3,544.06. So I’ll need to save or invest $1,772.03 each and every month. I don’t add in the two additional checks I receive each year. Those I’m already used to saving anyways so it only helps me.

Each month my required expenses add up to $1,698.00

• Housing (includes rent, utilities, cable), $900.00
• Car Payment, $253.00
• Car Insurance, $100.00
• Student Loans, $225.00
• Gas, $200.00
• Petty Cash (laundry quarters), $20.00

Wow, now that is close. Far closer than I had originally thought possible. Of course this assumes that I spend absolutely no money on anything else.

• No tolls, and thus no long trips
• No eating out
• No entertainment
• No fitness
• No gifts
• No vacation

Honestly, the most difficult thing on the list to give up would be gifts. In fact, looking at my yearly totals, of all my non-essential spending categories, gift giving is hands down the most expensive.

The best part in all of this is that the goal gets easier if I can eliminate bills. I have under $3,500 left to pay on my car. Within this year, that will be paid off leaving me with an additional $253 each and every month for savings. My student loans are another issue. It’s $225 each month but the balance is staggering. It will take a few years to eliminate it.

Saving and investing 50% of ones salary is a great goal. I’m not there yet but I believe it is possible within a year or so.

According the the latest issue of The Nest magazine, New Jersey is the second most expensive state to get married in, with the average wedding costing $37,150.

My fiancé and I certainly don’t have that kind of money burning a hole in our pockets. We also do not have huge families to invite either. After talking together we have settled on a budget of $10,000. The funds would come from money we have been saving for a house down payment. It will delay the eventual day when we will be able to buy a house, but we believe that it will be worth it.

I am a firm believer in the mantra that if you are going to spend money when you are young, you should spend it on experiences rather than stuff. Stuff can be lost, stolen, it can break, and it can also become obsolete. Memories last forever.

So, the bottom line is this, how are we going to pull this off for $10,000 or less? Lets look at what we have done so far.

We chose a date and time that was not the most popular. Our wedding will take place on a Sunday in the afternoon. All of the wedding venues we looked at offered discounts for any Sunday wedding. A seated lunch menu is also much cheaper than a dinner menu for a reception.

We booked our reception and ceremony together. No travel is needed between the ceremony and reception which makes it easier for everyone to get from I Do to Let’s Celebrate! It’s also much easier to plan.

We asked all of our friends, recently married or not, for advice and recommendations. It was a tip from a friend that led us to the venue mentioned above. Not only is it very affordable compared to other venues we saw, but it also fits our expected number of guests much better. One of the problems we faced when hunting for a venue was minimum seating requirements. We noticed a tangible bias towards large extravagant weddings here in New Jersey. We didn’t want our relatively small party of 50-60 people to feel lost in a reception hall that was far too large for us to fill.

We also found an officiant, from a recent friend’s wedding who, to our delight, charges a nominal fee for a wedding ceremony. Nowhere online or elsewhere have we seen a price as reasonable as his.

We printed and stuffed our own wedding invitations. We bought a simple kit from a local craft store and spent a night (and morning) together printing, cutting, and stuffing envelopes. For invitations we have spent around $100 which includes postage and an extra ink cartridge for our printer.

As we get closer and closer to the big day I’m sure we will have more advice to give. And when it is all over, I’ll be sure to report on how we did as well. Can we really pull it off for $10,000? Stay tuned for more.

Links>>

• My finacé and I enjoy reading the Kvetch forums from Indie Bride for ideas and general entertainment.
• Calculate your Economic Stimulus Payment right at the IRS website.

My younger brother works in retail. Even though he is a technically a manager it does not pay astonishingly well. That alone shouldn’t be a budget killer. To his benefit, he does live in a low cost of living area within Virginia. His troubles come, ironically enough, the same way it comes for me, having to say “No” to family members in need.

In trouble with debt

My sister called me one day and demanded $1500. After much anguish and heart ache I said No. So she went to my younger brother. Against his better judgment, he said yes.

The worst part of it is, he didn’t have $1500. Not by a long shot. But since she had promised him that he would get his money back when their tax return came in, he rationalized using a cash advance on his credit card. The tax return money never materialized for one reason or another. Excuses piled up and my Brother was left holding the bag at an atrocious interest rate.

Unfortunately, this was not the only debt my Brother had gotten into. He already had a good chunk of money on that card. He was a sucker for a good deal. He used his employee discount to purchase all kinds of stuff and his credit card balance showed it.

Cleaning House

I looked through a few months of bank and credit card records to see just how deep the rabbit hole went. Besides the overall balance, I found some astonishing things.

First, he was spending at an alarming rate. Well more than he was bringing in. Some of it can be excused. He just graduated college and got an apartment. He needed a bed to sleep in and the standard accessories that every home needs. But then there was more. Lots more. He was regularly spending several hundred dollars past what was reasonable.

And then there were the services. He had been signed up for at least three credit monitoring/credit protection plans that were pinging his bank account for $5 to $20 each and every month. I have no doubt that predatory or malicious means were used to get my Brother on these programs. But shame on him for not even checking his accounts for suspicious activity. He had a head in the sand attitude when it came to his finances. This just had to stop. He was in trouble as it was and these just added to the bleeding.

Making a budget

We needed a plan. On paper on purpose as Dave Ramsey likes to say. I took my own budget and blanked out the data. I worked with my Brother, parsing through payroll stubs and bills to come up with a realistic view of what was ahead of him.

My Brother is very lucky to have parents like ours. They are still taking care of his car insurance and car payment. But even with these advantages, I estimate that it will take until October to rid himself of his debt. And that assumes he is an absolute saint when it comes to his money. No eating out, no movies, no games, nothing. No frills, no entertainment, nothing.

It could have been worse. I hear about people climbing their way out of debt for years. A few months of sacrifice seems to me to be a pittance.

Following Through

I call my Brother every few weeks to chat about life. I always try to casually sneak in a question or two about his progress. I’m not about to hover over him like a hawk to make sure he fixes his finances. He is a grown man and should be accountable for his own actions. If anything, I hope that I have guided him along a better path. His biggest problem was in actually acknowledging his own money. He preferred not to know how bad it really was.

Some recent developments should help him along. He expects a tax return around $500 or so. Add to that the $600 he expects from the economic stimulus rebate in May and he should be able to get clear from his debt sometime in the late summer.

I’ll continue to check in and see how things are going.  My hopes are high.

The final tally? A measly $107.

I couldn’t be happier.

By estimating my tax bill at the start of last year, I made sure to take an extra allowance. Doing so helped me minimize the amount of taxes paid during the year. That’s more money in my pocket instead of Uncle Sams. Its been said many times by many a PF blogger but it is worth repeating, a huge refund means you gave the government a hefty interest free loan. You are better off putting that money to good use during the year. If you follow a budget carefully enough, and as a reader of personal finance blogs I assume you do, you will come out ahead.

Worried about under paying? Its true that if you do underpay the IRS can fine you for your carelessness. It is important to note that there are exceptions that will waive any possible penalty if you have at least paid as much in taxes as your last tax return. This makes sense for the majority of us who receive pay raises on a semi regular annual basis.

The IRS has a special document, known as Publication 919, that helps you figure out the optimum withholding. Take a moment and see if your 2008 taxes could be adjusted. After all, you know better than the government how to spend you own money so keep more of it for yourself during the year.