Looking Forward

So if you’ve read my previous posts, you know that I’ve been mulling over a new opportunity for several weeks now.  This has been one of the most difficult decisions I’ve had to make because I really like my job, but there’s been several layoffs since I started, and the future isn’t quite as certain.

As I mentioned in a previous post, I was approached by another company, fairly soon after our last round of layoffs.  I interviewed with them, and then heard nothing back – for several weeks.  I had thought I was off the hook, and almost put them out of my mind assuming they had decided not to hire me.  And then yesterday the recruiter called to tell me that they wanted to move forward with an offer.  So I figured I had one more night to think/sleep on it.

I received the offer tonight and faxed my signature to them accepting it.  I believe it will be good for me, both personally and professionally.

So…  I’m still on Baby Step 2 – but still making really great progress.  If you listen to Dave Ramsey’s radio show you hear him say that when you start the debt reduction process it’s like you get a raise – because you address both the income and spending areas of your life – you learn to live on less than you make, and therefore spend less, and you find ways to make more money.  The new job helps – it’s not a BIG raise, but definitely significant.  But more importantly, I’m living on quite a bit less than I used to.  So ultimately I’ll be able to pay off that student loan just a little bit faster. 

Baby Step 2 is a long process for me – but I’m finding ways to speed it up. 

A Taxing History

The year is 1865. Andrew Carnegie steps out of his carriage sporting a gold watch. At home in Carnegie’s Pennsylvania estate, his grandchildren bang on a custom-made piano. Things are quite comfortable for the Carnegie family. And why not? The steel baron and later philanthropist would earn $84,000 that year—the equivalent of about $2 million today

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Foreclosures jump 57 % in last 12 months

Home foreclosure filings surged 57 percent in the 12 month-period ended in March and bank repossessions soared 129 percent from a year ago, as homeowners struggled to make mortgage payments, real estate data firm…

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Serial or Parallel?

As I was writing the last post, I started thinking about the Baby Steps, and whether they are supposed to be done sequentially, or whether some can, and probably should be done simultaneously.

For instance, Baby Steps 1, 2, and 3 are almost certainly sequential because they represent, to some extent, a priority.  You need a baby emergency fund before you start your debt snowball.  And, to some extent, you probably want each and every available dollar to go towards the debt snowball before you start saving for your fully funded emergency fund.  If this was not the case, then Baby Steps 1 & 3 could almost be combined.

At the same time, Baby Steps 4, 5, and 6 can probably be done simultaneously.  Obviously Baby Step 4 is a flip of a switch – you begin the process of setting aside (hopefully automatically) 15% of your income into pre-tax retirement accounts.  Once that’s started, it’s not going to end until retirement.  I haven’t given much thought to Baby Step 5 as I don’t have children, but I’m sure it can and probably does happen at the same time you’re paying your home off early in Baby Step 6.

Dave – if you’re out there, please help me to clear this up! 

Baby Step 3B?

Yesterday I attended an FPU class with a friend.  I have always wanted to ask somebody when the right time is, to save for a down payment on a home.  At first glance, Dave’s baby steps seem to assume that you already have a mortgage, given that it says to pay off all debt except the mortgage during Baby Step 2.  It doesn’t mention the mortgage again until Baby Step 6, which is to pay off your home early.

So somewhere between Baby Step 2 and Baby Step 5, someone without a home should purchase one.  Baby Step 2 seems too soon, as your focus is getting out of debt, so to take on what will probably be your biggest debt in your lifetime seems wrong.  It seems intuitively correct that you would want a fully funded emergency fund before you took on such a big responsibility, so it must be after Baby Step 3?

The answer, it turns out, is Baby Step 3B, according to what I learned in FPU last night.  It turns out that once you have your emergency fund built up, you can start saving for a down payment on a home.  Dave recommends putting at least 10%, if not 20% down, with a mortgage payment not to exceed 25% of your take-home pay.  Oh, he really thinks that paying cash is the best way to go.  I believe he’s stated on the radio that he does not use debt:  ever.  That includes buying a home.  For his listeners, he seems to make an exception when it comes to a home loan.  He’s still pretty clear that cash is best, but if you buy a home with a loan, do it with a fixed rate, 15 year mortgage and pay it off early.

Anyway I learned last night that there is this Baby Step 3B – to save for a down payment on a home.  I’m a little bit concerned that I should flip the Baby Step 4 switch first – begin putting 15% of my income into pre-tax retirement plans – which basically means Roth IRAs and 401(K)s.  I say “flip the switch” because unlike Baby Steps 1, 2, and 3, it pretty much amounts to doing the paperwork to get it started.  Once started, it seems like it’ll be ongoing, and continue right up until you retire.  At least that’s how I plan to do it. 

So I wonder if it shouldn’t be Baby Step 4B?  Or maybe I’m assuming that these steps are serial, and not parallel.  Maybe I’m thinking too much about it.

As I do not have children, I could easily make Baby Step 5 the one where I save for a down payment on a house.

Okay enough.  I’m not even finished with Baby Step 2 yet.

Microsoft reaches for Google’s turf

The proposed Yahoo deal, and other companies’ efforts to thwart it, show how powerful the search leader has become.

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I didn’t want to see Microsoft buy Yahoo!, and to be honest, this looks like desperation on Microsoft’s part, to participate in the future of the Net.  What’s frustrating to me is that I used to believe in Microsoft because of their innovation and creativity and drive.  But I don’t see Microsoft as an innovative company any more.  They were once a leader; Microsoft was a company made up of people who were hungry for success, who understood that being at the top was precarious, and there are always others wanting to be number 1 (ahem, Google).

I haven’t seen anything truly innovative come from Microsoft in a very long time.  They don’t seem to take risks anymore, and it almost appears that their leadership has lost their hunger.  So when I first heard that they wanted to buy Yahoo! – well, it smelled like desperation to me.

Senate passes foreclosure bill

Plan includes tax breaks for builders, credit for the purchase of foreclosed property and grants to buy and repair abandoned homes.

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Glenn Beck: America needs a 12-step program

I read this article several times. I don’t agree with everything Glenn Beck says, but on this he is right on target. I am guilty of complaining about our government, especially during tax season, and as I’ve watched things like the Patriot Act get passed. The thing is, we’re all in this together and we all need to take personal responsibility to uphold the values our country was founded on.

I remember once listening to a radio program where they interviewed people on the street, and asked people if they knew what the “Bill of Rights” is. As you might expect, most Americans did not know. When I started listening to the program I felt proud that I knew that the Bill of Rights is the first 10 amendments to the Constitution – but was convicted when some of the listeners were asked what each of the amendments actually are. I could only name a couple at best.

Read Glenn’s article (http://www.cnn.com/2008/US/04/09/beck.twelvesteps/index.html) – he is right. America needs to own up – it’s too easy to complain and do nothing.

I read an article a couple of days ago saying that a high percentage of Americans think we’re on the wrong track as a country. I agreed wholeheartedly. Glenn’s read the same article, and his take is this:

“A recent polls says 81 percent of Americans now say that our country is on the wrong track. If you’re one of those people, who do you blame? The Bush administration? Congress? The media?

Here’s a crazy idea: How about blaming ourselves?”

To pull this around to finances – he makes a great point, which is why I wanted to post a blog entry about his article:

“But we have to start somewhere, and the best place is with the defects that almost all of us agree on. For example, does anyone really believe that being addicted to Saudi Arabia’s oil is a good idea? What about China owning billions of our debt? Speaking of debt, what about the fact that we’ve saddled our children with $53 trillion in future Social Security and Medicare obligations?”

America, we need to act.

I’m going to start by really investigating the choices in the coming election.  I am going to try and become more involved, and try to never allow another election to pass without participating.  I’m not sure that’s enough – but it’s a start.

KISS, or How I learned to give up complexity and love simplicity

It’s really interesting to me, how only ten, maybe fifteen years ago I longed for the complex, perceived “fun” things in life. Taking on additional responsibilities (credit cards, car payments student loans) just seemed like life. And to a certain extent it is – although the older I get, the more I realize just how optional those things really are.

This process – debt reduction in particular, has caused me to consider, and even value simplicity in my life. On the “No Credit Needed” podcast, the host described the idea that he worries now, so he doesn’t have to worry. He talked about having his bills paid up, or in advance for a month in preparation for the birth of his daughter (CONGRATULATIONS, NCN!!!) – so that when she does arrive, he can focus on her – and not worry about bills. WOW.

I don’t have children, but I can relate. I remember a couple of years ago we had a pretty big event happen in my family; it was painful and traumatic. I became fairly depressed for about a month, and lost interest in – well, paying my bills or keeping up with them among other things. Now depression isn’t something I struggle with on an on-going basis – but when it did hit, I felt pretty disoriented.

Here’s the interesting thing – I eventually came back around, and when I looked at my bills and decided to catch up, I was caught up already. You see, I had set up my bill payments through my bank. My bank can receive bills from almost all my accounts, and I had set up automatic payments to be sent on the due date for those. For the bills that don’t have eBill capability, I have scheduled the right amount to be sent (which is pretty much only rent). And since my employer automatically deposits my paycheck, well, I hadn’t realized just how much my finances were on auto pilot. As long as money was in my account, my bills were paid.

I had expected to have to catch up with late payments – but everything had happened exactly on time, and for the right amount. Had I realized this, I probably could have focused on my family needs a little more – and worry less about my finances. Actually in retrospect the right thing probably would have been to pay attention and not let life’s events keep me from managing my finances. But that it worked out as well as it did is a testament to the simplicity of paying bills this way.

Now I make it a personal and unbreakable policy NOT to allow any company to deduct a payment from my checking account automatically. I want control – I’m more than happy to set up payments through my bank, where I have control – but I will NOT allow another company the right to dip into my checking account. By doing it this way I can change the amount, date, or even cancel a payment if I need to. In other words, I am in complete control.

As an aside, several years ago I had an interesting conversation with a salesperson at a gym:

Salesperson: Now, just give me your checking account information and we’ll deduct payments automatically through your checking account.

Me: Whoa! I was not aware I had to give you access to my checking account in order to sign up.

Salesperson: No, it’s okay – this way the bill is paid each month so you don’t have to worry about forgetting.

Me: I schedule payments to happen automatically on my bank’s web site. Besides, it’s a personal rule of mine, not to allow companies to take payments from my checking account automatically.

Salesperson (you won’t believe this): Well, you know rules were meant to be broken.

Me: What hours are you open?

Salesperson (a little surprised at my question): We open at 5:00am and close at 11:00pm.

Me: Would you mind if I came in at, say 2:00 in the morning to work out alone?

Salesperson: No, we couldn’t allow that.

Me: Why not?

Salesperson: You can only come in during business hours.

Me: So you’re saying it’s one of the company’s rules?

Salesperson (beginning to understand): Yes, I suppose so.

Me: And you won’t bend that rule for me?

Salesperson: I could ask, but I assure you the answer would be no.

Me: So I’m sure you understand when I tell you that my personal rule is never to allow a company access to my checking account. This, like your store hours, is a rule that is not meant to be broken.

The salesperson grumbled, but he did find the right forms, and he signed me up with traditional payments.

I’ve been told before that I’m a salesperson’s worst nightmare. Later on I saw that salesperson again, and he told me that he had called another salesperson at another location and told them what I had said.

At any rate, I like to keep control of my bills. So setting up automatic payments through your bank isn’t for everybody – but for me it works like a charm. In fact, in a way it allows me the freedom from worry. As long as I have an income.

So over the past few months, I’ve been able to remove bills from the list of bills on my bank’s website – and the smaller that list becomes the better it feels. Simplicity feels great – and allows me to relax a little bit.

3 Reasons to Welcome a Recession

Recession. It’s a word that strikes fear into the heart of chief executives, economists, and everyday Americans alike. And for good reason — recessions bring job losses, falling stock prices, and general economic gloom and doom. But while almost no one is enthusiastic about the thought of a recession knocking on the front door, there are a few goo

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