Frugal Missus Gets Honest

There has been so much talk about the federal gov'ts Car Allowance Rebate System (CARS), aka"Cash For Clunkers" program that I felt compelled to write something about it.

When you get down to the brass tax, C4C is just a way to draw Americans further into debt by offering what seems like a great deal (either a $3500 or a $4500 cash rebate) on a new, more fuel efficient car when you trade in your "gas guzzler". That's $3500 - $4500 off a new car, but, really? You are still paying THOUSANDS of dollars you would otherwise not be spending by signing a new lease or loan. I've got an even greater deal in my driveway! A fully paid for reliable vehicle that passes smog. Check it out! I just saved $20k+!!

Now, I know there are a few folks out there that have cars that really should be off the road for a number of reasons (environmentally unsound, safety hazards, etc.), but a vast majority of the people that I've heard cashing in on the C4Cs program are just trading in their minivan for a newer minivan that happens to get better gas mileage. Of COURSE it's fun to get new toys! I mean, who isn't intoxicated by the smell of new car? I am!

There are a couple of things I see wrong with the C4Cs program rules:

1) For passenger automobiles, the new vehicle must have a combined fuel economy value of at least 22 miles per gallon.

I used to drive a 1997 Saturn SL2 that got 26 miles per gallon. I don't see the 22 mpgs as a huge improvement.

2) ...The Act directs NHTSA to set up a program in which owners of vehicles meeting statutorily specified criteria may receive a monetary credit for trading in their vehicle and purchasing or leasing certain new vehicles.

NEW vehicles. You know, the ones that depreciate at the exact moment you sign your John Hancock on the dotted line?? I found this pretty cool website that allows you to calculate your cars depreciation. Here are the examples I did:

Car Price: $25k

Years old when purchased: 0 (ie NEW)

Age of Car at Time of Estimated Value (in years): 1

Car Deprecation: $6250

Estimated Value: $18750

Car Price: $25k

Years old when purchased: 1

Age of Car at Time of Estimated Value (in years): 2

Car Depreciation: $3000

Estimated Value: $22k

You read that right. That $3500 you got in rebate from C4C on a NEW car doesn't even cover depreciation of the first year! You could get a great used car and save almost the entire "rebate" amount, and not have had your "investment" slashed so dramatically in the first year! Not to mention, $25k for a new car and $25k for a used car can be quite a difference when looking at the bells and whistles. It could be the difference between leather and cloth seats, or the XM radio package and a stock CD system.

3) The CARS Act provides two limitations on the duration of the program. First, the program ends November 1, 2009. Second, NHTSA has been appropriated a fixed sum of money ($1 billion) to fund the program.

1 billion dollars. To keep the American Public in debt. Well, I guess I shouldn't be surprised when I look at this. Don't we have teachers to pay, potable water to find, and a housing market to fix? Hey, Federal Government Folks, hows about you send me a $4500 check for having paid my mortgage on time every month?

Oh, and this original $1b (that ran out in a matter of days!) doesn't include the possible additional $2b the Assembly approved last Friday for the program (still waiting on the Senate to approve). Go big or go home, right? I mean...we're already in insane debt as a nation. What's a couple billion more? Hell... let's send some to Dr. Evil while we're at it, hrmmmmm???

Ok. I'm almost off my soapbox. One more thing...

A car payment is NOT a way of life!

We have 1 car payment (just paid off a Ford Explorer last month) and once the second car payment is done, that's it for us. Done. Finito. Our Explorer is most certainly still in drivable condition. It's still rather comfy. It fits our family and our needs. No, it doesn't smell like new car anymore. Yes, it has a couple scratches on it. Yes, there are some stains on the carpet. But it's PAID FOR. For 6 years, we paid $542.10 every month. We now have $542.10 in our income to pay off debts every month that we didn't have for the past 6 years. Once our second car is paid off, we'll have almost $1100 A MONTH in our pockets. With that, we'll be saving for a while to purchase a great used car WITH CASH.

So, Cash For Clunkers? I don't think so... at the risk of offending some readers, I think it would be more aptly called Debt for Suckers.

Hey man, I told you was getting honest in the post title.

Frugal Missus Thanks You

I just needed to brain purge for a minute. This isn't technically a journal entry because DR didn't instruct me to write about this, but it's been on my mind and I feel I need to get it out there!

I fully recognize that we are in the "Honeymoon Phase" of our journey with Dave. We've been at this for just about 2 weeks, but Frugal Mister and I have both marveled at the sense of clarity and purpose we feel in our lives now that we are living by the plan. I can only hope that some of you guys out there will feel the same sort of peace if you decide to take a journey similar to ours.

Like a marriage, things mellow after a while. You find yourself savoring the sweetness that is love, not the burn that is lust. This is a change to your way of life. It's not always easy. There are fights, compromise, and a learning curve when it comes to melding your life with another person.

This is true, also for the journey to financial peace. There are things I will miss about my "single life", but knowing I am making my family a better unit for it is all the motivation I need! Well, that's not entirely true...

I need YOU. I need to THANK YOU. Through the years, it's been suggested to me that I have a blog with my menu, organizing ideas, frugal tips, etc., but I knew there were so many other great blogs out there that served that purpose! I've gotten many communications from Frugal Fam readers telling me how amazing/cute/inspiring this blog is for them. It's given people ideas to help set their lives on a path they want, rather than life leading them. That, in turn, inspires me to keep going!

So, no pressure... but keep loving this blog. Share it with someone you think might need a push in the right direction. Keep looking back at old posts. And please, always feel you can ask us questions, leave comments, share a tip or two (I might do a "From the Readers" tip post some day! You could be famous!), and give us general feedback and encouragement because it really does help us in our ultimate goal.

Frugal Missus Joins a Committee

We had our first "Budget Committee Meeting" this weekend, for which both Frugal Mister and I were very excited! I know... it's a sickness.

Frugal Mister journaled below about the different forms DR provides us and how he took to them, which I am THRILLED that he liked them so much. As I've said before, most of what DR teaches us, I've had the idea of before even knowing who DR was! The Allocated Spending is one of those things that I knew I liked the idea of, but the Type A in me needed a written form to tell me what to do, and the Type A in Frugal Mister needed a form that I didn't throw together! DR is an angel in that respect! He filled a need for both of us!

Like Frugal Mister, I am very excited about our monthly Budget Committee Meetings. Dave warned us that our first few would be hard. That we'd have conflict over where we thought money should go. I am incredibly pleased to report that that didn't happen. We just focused, compromised, and listened to each other. It felt as if we really had formed a committee, with equal amounts of input, and I have to say, that feelts great.

Frugal Mister's foray into Cash Flow Planning

We finished up the Cash Flow Planning/Budget lesson this weekend. A wealth of information to be had, without a doubt. The final lesson included some questions for the journal (blog) that I wanted to address here:

What’s the difference between a “monthly cash flow plan” and an “allocated spending plan”? Which one is best suited for you?

List the bills in your budget that are due irregularly (bi-monthly, bi-annually, etc.) How have you traditionally prepared for them? Is there a better way?

How difficult was it for you to prepare your initial budget? Do you think it will get easier as you move forward?

I was a little put off initially by the allocated spending plan. It seemed cumbersome and not really necessary after completing the monthly cash flow plan (budget). I couldn't have been more incorrect. The CFP is, in my estimation, more of an overview of how much you are budgeting (e.g. $400 for food, $556 for car payment, $2500 for mortgage, etc.). The ASP is where the rubber really meets the road.

The way the ASP works is you start with your income (we get paid bi-monthly) and you allocate what bills get paid when and how much. For example, our mortgage is due early in the month, but our car payment is due at the end. We pay the mortgage with our first paycheck and our car payment with our second. The amazing thing is that DR utilizes a zero-sum budget. That is to say, at the end of your ASP, your total should be zero. With each item, the money budgeted is subtracted from the money earned. Say I earn $1000 in the first pay period and our mortgage was $150. The entry after $150 would now be $850. That $850 is all I have left to allocate my funds to. Every dollar in the budget has a name, an identity, a destination....including BLOW money.

What is BLOW money, you ask? That's $$ you know darn well you're going to waste. DR says if you budget for it, you can still do it. It gives us a sense of freedom. A sense that our money is working for us, not independent of us.

We will continue to use both the CFP and the ASP on a monthly basis!

The bills we see irregularly are things like garbage, water, and property tax. Used to be we'd get the bills and just adjust our weak excuse for a budget. "Honey, let's watch our spending this week!" That was my financial advice to the Missus. It worked...at least well enough to get everything paid on time. Where it failed us is we never saw any kind of light at the end of the tunnel.

Now? We divide those bills into equal parts over the course of a quarter or the year. Water is usually about $90 every three months. Instead of trying to scrape together $90 in a month, we now allocate $30 into a "sinking fund" (savings). So, when the bill comes due, BAM, we've already got it saved for.

Initially preparing the budget wasn't as difficult for us because I've religiously used Quicken for years. I update and balance my accounts numerous times within the month. I always knew how much we had. The difference now is I know exactly where it's all going.

Like I've said in previous posts, the Missus and I have always been great communicators with each other. Having the CFP and the ASP in action and physically writing them down was a pleasure because it only served to show us we can do it. I whole-heartedly believe it will only get easier from here on out!

Frugal Mister gets down to brass tax

Yes, I know, technically it's brass tacks, but this is a financial blog. Make the leap...

The brass item we're facing now is better known as the Budget. I've religiously balanced my checkbook for years. Particularly since marrying the Missus, I've been relied on to make sure we had enough to get from the first of the month to the end. Up until this week's budget lesson, I thought that what I was doing was, in fact, budgeting. I was wrong.

Sure, I was paying the bills and providing, but only insofar as saying, "Missus, stop buying stuff 'till we get paid again." In retrospect, I never really understood a budget...at least a true budget. I was operating under the impression, mistakenly as it turns out, that once written, a budget is in stone. I don't know why I always thought that, but I did. Perhaps I just never gave it enough serious thought. As luck would have it, those days are over.

The questions posed in this week's lesson were "Have you ever lived on a budget before? What is your "gut reaction" to the word "budget"? Does it bring positive or negative images to mind? What has created those associations for you?

I think I more or less answered the first one, but, for the sake of clarity, I'll answer with "sorta". My gut reaction to "budget" is kind of a nervous anxiousness. Not anxious in a negative connotation, but like you look forward to something. Geez, what a Nerd. With regard to images, I think it's mostly positive. I think hammering out a budget and sticking to it will help our money go further and make it work for us instead of simply disappearing and leaving us wondering where in the world it went. I think my associations with the budget have more recently been adapted to a more positive spin, even pre-DR, because of the Communication and Love in our marriage. This is just another obstacle for the Missus and I to master. There is literally nothing we can't do together. Except create matter. That's just physics.

Frugal Missus Journals: Kids and Money

What do you think of Dave’s “commission” structure for kids? Is this something you could easily implement in your home?

There is a HUGE difference between "Commission" and "Allowance"! In Dave's lesson "Kids and Money", he states that, to him, "allowance" sounds like "welfare"; that you give allowances to your kids because they are unable to do anything of value, so you are going to make allowances for them. Commission, on the other hand, means if you work, you get paid, if you don't work, you don't get paid. BRILLIANT!!!

Enter the good ol' fashioned Chore Chart! Each "chore" is worth X amount (Dave paid $1 per chore. I'm inclined to think we'll be paying a little less to start), and as the chores are completed, a check mark is placed in the box next to it. At the end of the week, you sit down with your child and pay them their commission for each chore done.

I've been working since I was 11 when I started babysitting. When I was 14, I got my first "real" job, dusting shelves at a collectibles store (you know, engraved pewter stuff and embroidered blankets). At 15, I worked at Baskin-Robbins. At 18, I was a receptionist in a hair salon. At 19, I waited tables. At 22, I nannied. I KNOW the more you work, the more money you get, and when you don't show up, you don't get paid!

I wish, after so many years of working and earning, I had known the fiscally responsible route to take with my money rather than piddling it away on candy, makeup, and when I got older, adult beverages and pedicures! I had nothing to show for my aching feet (hence the pedicures) but a pretty good social life and a bucket-o-debt.

That stops now. The Princess is almost 3 and will be learning about working for your money, saving for special purchases, and giving a portion of her earnings. I think we'll be getting Dave's Financial Peace Jr. Kit for The Princess' birthday. She already enjoys putting away her laundry, helping clear the table at dinnertime, and cleaning up her room (it's a sickness, really. She is her mother's child!), so why not show her that her hard work and helpfulness can benefit her and help her reach goals?

I do like that Dave reserves some tasks for "just 'cuz you're a part of the family". Meaning, not EVERYTHING they do around the house earns them commission. I don't know about you, but I don't want to have to pay The Princess every time I want her to pick up her shoes from the middle of the kitchen, but her help in picking up her toys before she goes to bed is something that is commission worthy.

Frugal Mister and I haven't worked out the Commission List for The Princess yet, but I am leaning towards not giving commission for things that are health/hygiene related (brushing teeth, taking showers, etc.). I am sure this, along with everything in this program, will be a learning experience for us all and take some fine tuning.

Frugal Mister finance free?

Like Frugal Missus has explained, journaling is an important part of FPU, so I won't belabor the point here. Suffice it to say, we're going to try and answer some of the questions posed to us at the end of each lesson we complete.

The one I'm going to tackle today is:

In this session, Dave introduced the notion of actually paying cash for major purchases. This is something we’ll talk about A LOT as we work through FPU. As we get started, what are your initial reactions to the idea of never borrowing money again? Do you think this is too extreme?

This lesson covered saving for emergencies and purchases. We've made it through Baby Step 1: Our $1000 Emergency Fund and now we're moving toward Baby Step 2: Paying off Debt. The concept of never borrowing money again is just that...a concept.

I find it difficult to wrap my brain around it. Since college, I've become pre-conditioned to borrow money. Hell, I borrowed money to go to college (all five of them, thank you very much). So, the idea of no longer enslaving myself to the Bank of Gimme is completely alien to me. I've been able to get some very nice things in the past 20 years. The majority of them have been paid off, but at what cost? I'll guarantee you I ended up paying far more than they were worth at the end of my payments. It's an irritating thought, but true nonetheless.

The idea of never borrowing again is at once exciting and fear-instilling. Lord knows, I am an adrenaline junkie...perhaps this can be a high of one kind or another. I don't think the idea is too extreme at all. I think this country is getting it's backside handed to itself because we've spent the last fifty years or so borrowing ourselves into the poor house.

Perhaps I'm wrong, though. Perhaps the idea is just extreme enough. Extreme enough to motivate Frugal Missus and I to right our own ship. Extreme enough to encourage us to go against where a lifetime of instruction and habit have gotten us.

So, yeah, on second thought, I absolutely think it's an extreme idea. Just extreme enough to work.

Frugal Missus Journals: Marriage and Money

After each video lesson in Financial Peace University (FPU), we are given a to-do list that we must complete before we have access to the next lesson. Part of our to-do list is to start a journal. In the program, there is an application for a journal, but both being bloggers, Frugal Mister and I decided to use this blog as our outlet. Lucky you!

We're given 3 questions to answer in our journals. I figure it'll keep us honest and focused as to what this blog is about if we answer at least one of them here.

So, let us begin!

If you are married, describe how you and your spouse traditionally communicate about money. Do you fight about it? Do you ever talk about money at all? Do you have written goals for your income?

When Frugal Mister and I were going to get married, we had pre-marital conversation with the priest who would be marrying us. As a jumping off point for these sessions, we individually took tests that assessed various facets of life that are come with marriage (communication, money, sex, family, etc). Using the results, we were able to have serious conversations about what our future could possibly hold in regards to those matters. To be general, we scored 100% on the Communication portion of the test. That is, we answered the questions exactly the same.Needlesstosay, we very rarely "fight", and when we do, it's typically about household chores, not money.

However, on the Money portion of the test, we scored LOW. I mean... LOW. (I don't remember the actual percentage because it was 5+ years ago, but I want to say it was 10%). We were on such different pages back then, it was pathetic. At that time, Frugal Mister had been stable in his career for a number of years with a good grasp on budgeting using Quicken Software. Sure, we both had some bad habits (like using credit cards far too often), but at least he paid his bills on time! I had a LOT of learning to do!

So, I defaulted to Frugal Mister keeping track of our finances. He says it relaxes him, but I still don't see how because every "cha-ching!" I hear ring out of the computer when he's using Quicken makes my heart speed. I suppose that is a residual effect of us having vastly different views of money. He has Faith, I have Fear.

For the 4.5 years of our marriage, money isn't talked about too much. Yes, I brought up principles Dave Ramsey talks about before I knew there was a Dave, but we never did anything about it. We were "happy" living paycheck to paycheck. Well, we were glad to make the bills, to have our nice toys, and for me to be able to stay home with our children. I shouldn't say not making progress on our debt made us happy, by any stretch, but it was easier to deal with when we knew we could keep the lights on, so to speak.

By using Dave's principles, I have found us being much more open with our money; where it has gone and where we want it to go. Frugal Mister has always budgeted out a month or two so we could keep an eye on our spending (him on video games, me on groceries). If we knew we'd have the bills paid and had $1000 in the account, we were doing pretty darn good! If we only had $500, he'd tell me, "watch the spending", but it wasn't specific as to what we were overspending on. I hope having our written budget each month will help us know where we're overspending from one month to the next. For example, so far, I am $13 over in my grocery budget with an entire week to have to buy for! My menu for next week will have to reflect that overage. We'll eat less expensive meals and I'll raid my freezer meals to make up the difference. I actually don't think it's too bad of an overage, considering we didn't start this journey until July 15! I look forward to seeing how our numbers reflect our hard work at the end of August!