What Might We Do With Our Extra Money?

Looking at our money and our budget, there are a few things that have changed over the recent months, and it will require some change in planning on how we approach our money.  One of the things we’ll have to look at it how we allocate extra money.

Where Is This Money Coming From?

Everybody will define this differently, but for us the extra money boils down to a few different areas.

  • Credit card rewards. Most of our spending is done on cash back rewards.  As such, we’ll have a few mb-201312billscoinshundred dollars in rewards after cashing in all of our rewards.
  • Tax refund. Last year we had to pay on our 2014 taxes.  This was largely because of a few things: I switched employers and our witholding didn’t cover us as well as I’d anticipated due to some changes in insurance coverages and such. We also realized some stock gains, and also cashed in some savings bonds that had fully matured.  In 2015, we should get a refund, as our withholding was adjusted, we didn’t do so great in the markets, and didn’t cash in any rewards. Our taxes are still out to our CPA, but a back-of-the-envelope estimate shows that we should get a couple of thousand dollars.
  • My wife’s side hustle. My wife runs a really cool shop on Etsy where she designs custom invites, thank yous, wall arts, and similar products.  Up until recently, pretty much everything went to funding our recent Disney World trip.
  • Pet expenses. Our cat recently passed.  We are going to give ourselves some time before even considering whether to get another pet.  Still, this will help our budget as his food, vet, and medicine bills were not cheap.

So, these are the four areas that we see working in our favor in terms of cash flow.  Some are one-time things and others will be more ongoing.

So, what to do? What to do?

A Couple of Needs, Some Wants, and Looking Toward The Future

Honestly, there are a few things that we will probably do with the money.  Not all of it is flashy, but it’s all (OK, mostly) helping us strive toward goals like saving for retirement, saving for big purchases, and being able to do enjoyable things without taking on debt.

Here are a few ideas about our extra money.  The splurge type stuff first:

  • New wireless router. Typically our credit card rewards money has funded our purchase of new electronics .  We’ve purchased all of our TVs with new flat screens by using credit card rewards.  Along these lines, we’re looking for a new wireless router.  The one we have now is at least 7 years old, doesn’t provide the latest security, and the coverage kind of stinks compared to what’s available today.
  • Vacations. Even though we aren’t piling as much into our travel fund as we did to fund our Disney trip, we’d still like to take a family trip every couple of years.  We liked Florida and have never taken our kids to the beach, and so we’re considering saving a smaller portion of my wife’s business toward a trip to the Tampa / St. John’s Pass area.
  • Other travel. We do most of our traveling with our RV.  Every couple of years, my wife and I like to consider a small anniversary trip in the fall.  These aren’t extravagant or largely expensive, but stashing a few hundred bucks goes a long way.
  • Entertainment. We both used to be pretty frequent concert-goers but kind of stopped once we had the family.  We have done a few concerts and really enjoyed it, so we’ve decided to try to do 1-2 concerts per year.  Putting some money toward a specialized entertainment fund is a good goal that will let us buy tickets and a night out without guilt.
  • Furnace Fund. Last year we found that our furnace is starting to fail. We’ve taken some measures to slow this and are very carefully monitoring the device.  Eventually it will have to be replaced.  Continuing to save for this or other big purchases that might come up is important to us.
  • Retirement.  Bumping retirement contributions is never a bad idea.
  • Kids Activitie. We set aside money for some of the big things that our kids like to do.  Summer camps, swim lessons, dance lessons, etc.
  • Replacement Car / RV. We are proud that our two cars and our RV are from model years 2006, 2007, and 2004 respectively. However, the bottom line is that eventually they may hit the end of their useful life.  We save for this and could likely replace one without having to take on a loan.  With all three at that age, it could be that more than one would need to be looked at in a shorter period of time.  We will definitely be upping the allocation here.  We don’t want something to leave us unprepared.

So, that’s really about it.

Readers, I’m curious what you think of our plans for extra money?  Have you had any favorable (or unfavorable) budget changes over the past months? How have you worked to incorporate them into your spending plans?

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Why And How We Create A Christmas Budget

It’s that time of year, and shopping is already underway in earnest.

I’m sure that many of you have gotten started with your shopping, and many will also be waiting until the last minute.  I generally fall somewhere in between that spectrum.

I thought I’d take a little time to explain how we set and track our Christmas budget, and I’d love to see how it compares to yours.

History As Our Guide

We have one big spreadsheet that I’ve used for years to track various aspects of our personal finance, from a spending ledger to budgets for big items to investment gains and losses, and yes, a Christmas budget.

This is great because I can track prior years spending and set that as a starting point for this years budget.

mb-2015-11-christmas01This allows me to start off with:

  • Who we bought gifts for in the past
  • What we budgeted for gifts for each of them
  • What we actually spent on each person

These are two big pieces of information that, in reality, gets us most of the way there.  All I need to do is list out any changes in the list of individuals that we need to buy for, then look at the amounts to see what needs to change.

In some cases, we might have gone over, so I’ll look at why we went over and determine if that needs to be the base amount, or maybe it was just a one-time thing.

Adjustments Based On Availability

After I’m done coming with adjustments, I compare it to our total budget amount.

See, we save for Christmas shopping all year.  We earmark a fixed amount per month that sits in our account, and is allocated just for gifts.  We essentially take 8.3333% (or one-twelfth) of what we estimate we’ll spend, and set it aside.  Then, when it’s all said and done, we’re fully funded for Christmas shopping.  No worries about how we’ll pay for the credit card bills come January!

Usually the total amount is pretty close to what we budget, so not much tweaking is necessary, though there’s usually some back and forth between my wife and I on how to make sure everything is covered.

Tracking, Tracking, and Tracking

The difficult part I have is tracking the spending.  I can easily track what I spend, but as my wife does a majority of the shopping, and she’ll do it in big chunks at a time (usually 2 or 3 shopping days in total), I have to then work with her to try to make sense of all the charges and get a breakdown.  So, she might go to Marshall’s and spend $250, but if $80 is for her parents, $45 for our son, $75 for our daughter, and $50 for her sister, it gets difficult, though not impossible to track.

It gets even more complicated when she buys gifts for me.  She usually identifies one rarely used credit card and will put my purchases on that.   I have to ‘go dark’ on being able to track the card activity until Christmas arrives.  Inevitably, she’ll also buy stuff for other people in the same transactions, which then complicates it for me.  At that point, I don’t really know the remaining budget.  We then have to do manual exchanges of information.  This sounds easy enough but taking the automation away is really confusing, especially around the holidays!

Argh!  And, yes, I know, that means I track things a bit too precisely for my own good 🙂  But I’m good with that.

In the end, we sometimes go over a bit and sometimes come under on our total amount.  There is a little cushion built into our total monthly budget, so the difference is absorbed easily.

How Do You Budget?

Readers, I’d love to if and how you budget.  Are there any big similarities or differences to the strategies that we use?  I’m always open to making things easier!

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Is Our Mortgage Payoff Too Aggressive?

Four years ago, we made the decision to refinance our mortgage.  We hit the time when rates were about the lowest they’ve ever been, and decided to get into a 15-year mortgage.  This would increase our payments but lower our total interest.  It would also move forward our mortgage payoff date.

From a financial perspective, the move has been a big win so far.

The Benefits Of Our 15 Year Mortgage

  • Low rate – We got a 3.375% rate, if memory serves, so we are paying very little in interest and more toward principle.
  • Modestly higher payments – Our payments went up a bit from our previous 30-year mortgage
  • Getting in line my payoff date objective – I’ve always said that in an ideal situation, the mortgage would be paid off before our kids started college.  This timing would actually have the payoff occur during senior year of high school for our oldest.  I’d be 52 which is a pretty good target age to be mortgage free, all things considered!

However, with everything positive, there is a downside.  It’s only one item, but it’s definitely a noticeable one.

The Drawbacks

The payment takes a big percentage of our take-home pay.  Between the mortgage payment, and our tax and insurance payments, the payments take away about 33% of our take home pay.  I learned by example (from my parents) the benefits that a 15-year payoff can have and have applied it via re-finances for my condo (back in my single days) and our current home.

I’ve read that the ideal number is around 25%, with the target range that most would suggest going no higher than 35%.

So, we’re on the upper end and we definitely can feel the pinch at times.  As I look back at the application of the lesson I learned from my parents, I realize that in principle, applying the practice is a no brainer, but from a situational standpoint, we have one big difference: Right now, we’re a single income family.  We made the choice for my wife to stay at home  when we had kids, and we have no regrets on that, but we always knew there would be tradeoffs involved from a financial perspective. We’re fine with that, but it does mean that we have to approach things from different angles.

Home Vs. Car

The reason I’m noticing this is that I’m starting to pay close attention toward our New Car Savings Fund.  We save what we can toward new cars, and as our cars are 8 and 9 years old, the time is coming faster and faster that we’ll need to address this.  Over the years, the amount we’ve added toward this fund hasn’t kept up with the combined cost of depreciation on our current cars plus the overall rise in cost as prices have gone up.

This means that if we were to buy a new car today, we wouldn’t be able to meet the objective of being able to do so without taking on a new loan.  And if we look at both cars, then we’re definitely nowhere close.

Will The Mortgage Payoff Be Worth It?

So, I guess the question to ask is has it been worth it over the last four years, and will it be worth it over the next eleven years to have this situation?  Some of the variables to consider:

  • Income – We counted on our income to go up.  This would lower our percentage of payment vs. income.  With the recent economic slowdown, this hasn’t happened to my projections.mb-2015-11-checkbook
  • Other costs – In truth, the squeeze has been felt not so much from the mortgage, but simply because of the rise in other costs.  Grocery bills have gone up as a lot of food costs have risen, plus our kids are getting older and eating more.
  • Side income– My wife has a nice side gig that she’s dedicated toward paying for a Disney World trip that we’ll soon be taking, that is definitely a luxury.  However, it’s a trip that is a once-in-a-few year type thing, and now that the costs will largely be done, her income could help supplement other things….like bolstering the car fund!
  • Money chunks – Tax refunds are always a good way to address big ticket items.  They’ve helped us fund a new roof, landscaping, and other things we’ve looked to do.  We need a new furnace.  Plus, we’ll have new cars to pay for eventually. The current ones won’t last forever!
  • Another refinance – One option would could certainly consider is refinancing again to another 15-year mortgage.  The rates are higher and we’d be adding years back onto the end, but it would free up cash flow, and we could always pay the same amount as we were anyway.

Staying The Course (For Now)

As of right now, we’re staying the course and I’m not looking into refinance options.  I like the rate at which we’re paying things down.  I’d certainly love the flexibility in our cash flow.  However, I want to make sure to look at all of our available options.   Our family does a good job of balancing present needs with saving for the future.

Even though we do things like plan trips to Disney and camp frequently, we’re not living on Easy Street.  We aren’t rolling in the dough, and with only one full-time income, we don’t make decisions without careful consideration.  Every decision we make includes a lot of potential trade-offs and variables that come into play.

Readers, how do you approach housing costs as a percentage of your take home pay?  How does this play into other decisions on big-cost items like travel and automobiles?  

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Cider Costs: What The Apple Is Going On Here?

Fall and apples go hand in hand here in Michigan, as I know is the case in many other parts of the country.

We have always enjoyed many of the activities that fall brings, and those centered around apples have always been favorite, specifically going to the cider mill and also apple picking.  Both of these things have been traditions of our families for the last few years.

But, we noticed this year that things are just out of hand!

Cider Prices

Who doesn’t love cider and donuts?  I know everyone in our family loves these things.  Still, the price of cider these days is through the roof.  A gallon is now around $8 at most local cider mills!  This pricing came about in kind of a sneaky way.

In 2012, Michigan had an incredibly warm March.  Temperatures averaged low 70’s for roughly a two week period. This was about 30 degrees warmer than normal.  The apple trees started blooming earlier than normal, as is normal with these temperatures.  Unfortunately, when the cold weather came back in, many trees were damaged for the year.

In short, the harvest in 2012 was a dud, and prices of apples and cider went up as the crop was down 75% in many areas.  Prices for a gallon of cider went up from around $5 to $7.

Now, 2013 and 2014 produced bumper crops of apples, but do you think the prices went back down?

Nope.

I really get bothered by these types of opportunistic price increases, but they’re not surprising, and even though I’m sure there wasn’t direct collusion between cider mill owners, I’m sure that they all just decided to put out their prices as they were the year past and see what happened, and unfortunately nobody complained.  And now we’re left with cider prices that are much higher than they probably should be.

And, to top it off, some of the cider mills have gotten greedy.  There’s one local mill (Long’s Family Farm) that actually charges you for plastic cups if you want to buy your cider and sit outside.  Talk about greed!

Picking Prices

Long’s was also our favorite spot to pick apples.  They had a pretty sweet setup where you came in, parked, and took a hayride out to the picking area.  Our family generally got a large bag.  The fun and experience, plus the apples, were worth the $25 or so.

mb-2015-10-appleSadly, it’s not that easy anymore.  They now have a policy where every person that goes to pick apples has to buy their own bag.  Even kids.  So, instead of our family buying one large bag for around $25, we could get four small bags for roughly the same price. The only problem is that you end up with roughly half the amount of apples in four smaller bags as you do with one larger bag.

And, to add insult to injury, it’s been reported that when you go back, if your bag is above the top line, they’ll charge you for yet another bag!  After all, if you’re going to effectively double the price of your product, why not effectively throw sand in their face while you’re at it?

Sadly, our annual visit to this mill and orchard was crossed off the list.

Our Alternative

We found a new cider mill that we tried this year (Rochester Cider Mill).  The prices were around the same, but there’s no getting around that, but it was very laid back.  They had areas for the kids to play, and while you were in there, you didn’t get the sense that they were looking at you with dollar signs in their eyes, as has turned into the case with other nearby mills and orchards.  We loved it!

We ended up skipping apple picking this year.  Hopefully we can resume this at some point, but it will either have to be at a new orchard or if the old place we went to changes their minds.  This year, we have gotten our apples at the grocery store.  It’s not as much fun, but in the end, we’re satisfied with the product and we can justify the prices.  Our goal is to still have fun, just maybe in other ways.  The kids are now old enough that they can help bake pies or make crisp.  Yum!

A Deep History

Many of the mills and orchards in our area is that they are very old, with decades of tradition and history.  That’s all great and it makes for great stories.  However, I can’t help but think that charging for cups and napkins goes against the established traditions.  Was this kind of business what the founders had in mind?  It seems awfully hard to believe.

Readers, do you love apples and fall like we do?  Have you seen your local businesses stay true to their history or has commercialization and profit taken over?  Tell me your thoughts and experiences in the comments below.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.