Monday, November 02, 2009

Money Monday: November 2, 2009

Why do we work?

Most of the time, I suspect this question is asked as a rhetorical protest against the evils of the early morning alarm. Gaaaaaah, why?! Why do I DO this to myself? Unnnnnngh…don’t WANNA work…

And then we drag ourselves out of bed, pull on our battle raiment and head for the battlefields for yet another day of slugging it out with the world.

I’m one of those people who feels that life is work – that work is, in fact, kind of the point of things. What we do with our time is kind of, you know, what this life’s experience is all about for us.

Things haven’t really changed as much as we think they have. Oh sure, they’re faster and sleeker and smarter and come in a much wider variety of colors and all, but what does it all boil down to in the end?

Most of us work to keep ourselves in food, shelter and clothing; it is only a happy few who get to work because they merely want to work, because it makes them feel fulfilled or gives them some other emotional high.

Most of us work because we’ve got to, in order to keep body and soul together.

I’m stating the obvious here because I’m having a big problem with myself right now.

I need to work right now because we are up to about our knees in debt; arguably, it’s actually up to the waist at this point.

Over the last two years, we’ve had more crises than we had cash to cover them, and then with the last year of “eh” income we really got way out into the weeds on that.

And of course, the further into debt you go, the harder it is to cover everything on one income – and if you’re getting into debt because the one income can’t cover everything that comes up in an average year, well, what’s going to happen when you start adding debt payments to the pile?

Uh-huh. Suddenly a “good” month is one where you cover everything without using a credit card, and a “bad” one isn’t just that you slipped slightly further into debt, but that you took a major header down the Cliff o’Debt.

An average one sees you sliding by “just a little bit.”

And it is only on the GREAT! months that you take things the other way. Yippee, I actually made headway!…and then two months later…@^*&@ it, what do you MEAN it’ll cost $500 to fix that! Wellllllll…I don’t know…honey, how long do YOU think we can go without running water?…

So for me specifically, the answer right now to the question why do you work is very simple: So that I can take a backhoe to the debt pile, clear as much of it away as humanly possible and get us back to a situation where either one of us can, with one (1) paycheck, keep this household in food, clothing, shelter, and entertainment without a whole lot of drama.

Back to where we have enough, plus a little bit extra.

I’ve been going over what stays and what goes on my homesteading experiment. My first instinct was to say “Everything goes!” because I’m tired even thinking about commuting my time is about to become a lot more precious – and let’s face it, that’s what made things like boxed crackers and prefab meals so appealing to the human race in the first place.

When your time becomes a scarce resource, it automatically becomes more valuable…but throw a dollar value on it and suddenly all sorts of things become “more cost effective” to just buy rather than do yourself.

BUT. I am not working so that I can pay someone else to do things for me. I’m not working to support an entire ecosystem of gardeners and maid services and giant factories that belch out an endless supply of crackers, snack cakes and frozen sandwiches with their crusts already cut off. (I still hate that those things even exist. I’m not saying it’s a rational or even a fair loathing, but those Uncrustable things just give me the heebie-jeebies.) (Worse even than the Lunchable thing. “Hey moms! We’ll give you $0.65 worth of crackers and meat-like-product, and charge you $2.00 because we’ve put them into a bright yellow box and neatly organized them in plastic trays! Or, for another buck, we’ll throw in a fifty-cent pouch of juice-like liquid! What a deal!”) (But I digress.) (Sort of.)

A lot of times, those of us with two incomes get into what’s called the ‘two income trap.’ We acquire obligations, either debts or lifestyle, that eat up the entirety of both paychecks…and then we say, “I sure wish I didn’t have to work {this hard, this long, at this soul-sucking place}, that I could take more time for something else, but of course I can’t – we need every penny I earn to pay all the bills.”

If I start using my paycheck to pay for things like convenience foods, new clothes, vacations and all the other So Forth and So On our wonderful, entertainment-oriented society puts out there for my idle amusement, we’re quickly going to find ourselves backed into a corner where we need that paycheck, desperately, to keep the bills paid and our lifestyle what we’ve expanded it to be.

I don’t want to do that. We’ve already proven (time and again), that we don’t need that stuff to be happy – what we need is stability, and the freedom to make choices.

So, I’m going to be doing my best to make sure my paycheck doesn’t go into “stuff,” but stays firmly targeted against those debts – every debt I get rid of brings our monthly needs down, which returns that much more choice to us.

Whiiiiiich means that my homesteading experiment is still on…even if I do suspect that I’m more than a bit crazy for even thinking about attempting it. The only slack I’m cutting myself is that I’m not going to try to add anything new for a while, until I’ve adjusted to the new schedule and gotten some kind of groove on.

To reduce the temptation to decide things are “emergencies” based on the balance in the checking account rather than their actual urgency, I’ve set up my paycheck (when I’ve finally actually got one) (by the way, it is sooooooo hard not to spend the paycheck I don’t have yet right now) to go into a separate account rather than dumping it into the same pot with my husband’s paycheck. That secondary account will pay for three things, and three things only: Our childcare provider, my train tickets, and to make payments on whichever debt is currently at the top of the snowball list. (If you don’t know what a snowball is, scroll to the bottom of the post – I’ll explain it down there.)

For everything else, all the other bills and groceries and so forth and so on, we’re still operating on just my husband’s paycheck. I’ll still have the same tight budget, which will mean I’ll have to operate with the same (ahem) creative solutions for a while…but here’s the sweet bit: Each time my paycheck takes over paying a bill?

That bill’s payment stops coming from my husband’s paycheck, and can go back into the household instead.

It won’t be long before I’ve got the same budget I used to have for groceries and such…and not long after that, we should start seeing that we are once again consistently living below our means.

At that point, we should start automatically building up some savings – which both cushions us against the inevitable Stuff Happens that life likes to throw at us (oh, that funny swooshing noise was my brakes going out, you say?), and starts to give us back our choices.

I can’t wait for those choices.

I also can’t wait for my garden to start really producing. We’ve got a lot of slow-growing winter vegetables out there right now, and the peas got pissy because first we had a heat wave (they don’t like heat) and then a violent wind storm (they don’t like violence, either) – but now they’re suddenly getting their legs and growing vigorously and putting out pod after pod of sweet promise.

The green beans are starting to grow, too. They’re sooooooo cute! Wee little tiny green beans, awwwwwwww!

Also, green bean blossoms are just as sweet at pea blossoms.
Bean Blossom
Aren’t I the cutest thing ever? Yes, you know you want to kiss me and tell me how cute I am! I rival the tiniest babies in Cute Factor, it’s true! How about if I wave a bit in the breeze, give you a REAL treat…

The carrots are not impressed by the cuteness of the green beans. Actually, they’re kind of like teenagers that way.

Unimpressed carrot

Ya, whatever, cute little green bean blossoms…if you need me, I’ll be here in my room sulking and not growing by so much as a centimeter no matter how much you feed me because I’m a grouchy old carrot and I take something like 1,200 days to get big enough to harvest…whatEVER…

What the heck is a ‘snowball’?

The ‘snowball’ method is one of the most popular methods of getting rid of debt. It gets you out of debt fastest, and at the least possible out of pocket cost to you.

First, you take all the debts you want to be rid of – for most of us this would be “all” your debts, but sometimes people set out home and auto loans, loans to family, student loans and the like. (This time around, I’m not doing that – the minivan and home equity and mortgage loans are going into the pot like any other obligation. So there.) (Easier for me to say, since my mortgage interest rate puts it very near the bottom of the list.)

Next, you put the debts in order – highest rate of interest on top, lowest at the bottom.

The debt at the top of the list is the one you focus on first. Everybody else gets minimum payments while you blast away at that most expensive debt, sending it every spare cent you can – remember, focus on the interest, not the payment. What you pay in interest is the true cost of the debt, not the payment. This method works best because it eliminates the most expensive debt first, saving you the most money overall.

When that first debt is paid off, you move on to the next debt – but you roll the payment from the first debt into the payment on the second, and that’s what you send now to Debt #2.

That’s where it gets the name “snowball” – because like a snowball, the further you roll with this, the more mass you pick up. It takes some mental discipline, but hey, look, you’re making those payments now, right? Right. So, instead of spending the payment on fritter-and-fratter, you add it to the next payment in line and keep blasting away.

Soon, that little snowball is an avalanche and your creditors will never know what hit them! Woo hoo, debt free!


Anonymous said...

Dave Ramsay says you pay off the smallest first, regardless of interest rate so you can get out from under more minimum payments faster - as well as the psychological boost of getting a fast fix of "paid off".

As for child car/garden nurturing etc., have you ever considered trying to find a good-natured college student as a mother's helper?

Tola said...

i think i'd do the smallest first, just for that psychological boost. i just finished paying off my glasses and it's so nice to know i won't be seeing that piece of mail again! but my next goal is my high-rate cc. okay well that's a lie because my real next goal is to get a dang job!

Lisa said...

Don't forget to sock away $1000 for an emergency fund to cover those, well, emergencies. Like brakes and plumbing.

I can't imagine doing all you're doing. Take good care of yourself, even if it means you have to buy Ritz crackers once in a while!

Anonymous said...

I think this is a federal benefit -- have you checked with your new employer to see if you can purchase your train tickets out of pre-tax dollars? It's another way to save some $$ on commuting plus lower your tax bill a bit.

Tamara Holmes said...
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