What We Teach Our Kids About Money

We are in debt and we hate it. I’m not talking about our mortgage. I’m talking about consumer debt, credit card debt that we fell into because we were living beyond our means. Due to this, we are trying very hard to teach our children about money and good money habits.

When The Kids were very little, they had a weekly chore chart.  We paid them $1 a day if they did all the tasks we asked them to do.  Essentially, each task ended up being worth 12 and ½ cents. We paid them out weekly and then divided their money up into three categories: save, spend, and tithe. When they were very little, they put 50% into savings, 40% into spending, and 10% into tithing.  Savings was, and is, considered long term. Spending can be for whatever they want; they might be saving their spending money to buy an expensive something or they can spend it on books and candy if they want. Their tithing money is also spent how they want. They have donated the whole amount to church. They have gone shopping for groceries to donate for a canned food drive at school. It’s really up to them. We want their tithing to be meaningful so they get to decided how to spend it.

As The Kids have gotten older we have moved away from the chore chart and started paying them to work.  They earn $5 per hour that they work.  That’s not to say they don’t have chores they are expected to do as part of our family, because they do; but we pay them $5 an hour for extras, things like cleaning the bathroom, washing the cars, dusting, or generally anything we need at any given time. They also have gone to both sets of grand-parents’ houses and helped them. There they have weeded, wrapped Christmas presents, and un-packed boxes.

Once they get paid out the money they are owed, it is still divided into three categories: save, spend, and tithe, though our percentages have changed a little. Now they put 50% into savings, 40% into savings, and still 10% into tithing.  As they get older, we might revisit our breakdown again, but this works for us for now.

The Husband and I fell into poor financial habits, so we are doing our best to teach The Kids good habits.  First among them is savings.  In addition to long term savings, The Kids have to save for certain items they want to buy.  They are not allowed to buy on credit. They need to save for any large purchases they want to make, or have enough money for any smaller purchase.  This past summer, The Kids saved their spending money to buy themselves iPods. To encourage good saving and spending habits, we offered to buy them a case for their iPod once they reached their goal.

In our home, we often talk about money. We talk about how expensive something is or how we can’t afford something or why something is a good deal. We don’t want talk about money to be taboo.  We do, however, tell the kids to be discreet. We also explain that they shouldn’t flash money around or constantly tell people how much money they have. We talk about how much money The Husband and I make per year, how much money we bring home, as well as how much we have to pay for bills.  Our goal is to raise financially literate adults.

As The Kids have grown, we also talk about the use of credit, especially as we make most of our purchases using a credit card. They used to think that “things just cost a card”. We have worked very hard to dispel that theory and explain to them that we use the card, but that we have to pay money for everything we buy. Each purchase costs money and we have to pay for it even if we use “a card”. This is another way we are trying to teach them to be responsible users of credit.

We are also trying to teach them to save. We want them to save for both long term goals (car or college), and short term goals (iPod, video games, books).  We want them to save so they pay themselves first. We want them to save for their wants so they don’t go into debt for them. We want them to see saving for your wants as a way of life so they don’t always expect instant gratification. We want them to tithe, or give, so they see there is a world beyond themselves that they can help.  Our hope is that by learning good money habits early and young, they will become lifelong good money handlers.

If you stuck around this long, thanks.  I think kids and money is an important topic and it’s one I’m sure I will write more about in the future.

Playing the Odds

I'm playing a major numbers game right now!

I have a monster credit card bill due in the middle of November and I'm trying to pay it without having to dip into my savings or borrow money from The Kids. We paid a lot for the kitchen on this bill: plywood for the sub floor, hardy backer for the floor, floor tile, and the sheetrock for the kitchen. We also bought some tickets to some upcoming shows in our area. We purchased all the tickets, for two shows, for 5 couples.  We have a lot of money coming our way, but we haven't received it yet, because of this, I don't know if I'll be able to pay the bill with borrowing from Peter to pay Paul.

I'm stressing out!

I was able to scrape together enough extra money to pay $360 to our credit card that carries a balance, so our next statement should show that we are under the half way mark.  I don't know if this was wise or not, because that took extra money away from paying the monster bill on our other card.

Sometimes I wonder if anybody else plays the games I have to to pay all our bills on time and in full? I'm so sick of living this way and I can't wait to be out of debt so I don't have to anymore.

I'll keep you posted on whether or not I have to rob money from any other accounts to pay for this credit card.

We have another couple large expenses to pay for for the kitchen and then things should slow down moneywise. We need to buy the granite and pay for all our plumbing supplies.  We have the cash for the plumbing supplies, but will be putting the granite on our credit card, (yes we are paying for our granite with future income). After those purchases, we will have our Christmas party and Christmas to pay for and then, hopefully, we can start to rebuild our savings.

Wish us luck!

Laundry Woes

We had a tough weekend this past weekend, both financially and because of that, emotionally. In truth, I wasn’t sure it was something I wanted to post here on the blog, but I want to share the good, the bad, and the ugly of our journey to being debt free.

Financially it wasn’t a huge setback, (though it wasn’t good), but emotionally it really threw us for a loop.

For several months now (I’m so OVER. IT.) we have been remodeling our kitchen. Because we are doing it ourselves, after work and in between kids’ activities, it has been a slow process. The weekends are when we get the most time to work on it.

This particular weekend, on Sunday, we thought we would have a the whole, solid day. Unfortunately, it didn’t work out that way.

Let me give you a little backstory first. Our laundry room is right off of our kitchen and is also getting remodeled. Due to this we were without laundry for about 10 days because we were having plumbing lines moved. Needless to say, I was unable to do laundry and it piled up. Once it was hooked back up, I only had it for one day because it had to be taken out again to prepare our floors for tile. All told, I was about 12 days without laundry services in our home.

On Sunday, it was finally hooked up again and I started laundry. First I washed a load of delicates because we needed them and they have a shorter cycle than towels, for example. Within about 3 minutes of starting the washer, water was pouring out of the door of our front loading washer.  We were able to stop the cycle, but to keep any more water from pouring out, we had to push the door to make the seal tighter. We then had to hand-bail 15 gallons of water 2 cups at a time. It took 2 hours. (We looked on-line to figure out how to force drain the washer and the way it said didn’t work. We found out later, after hand-bailing, that the drain was clogged.) Once we were able to drain the washer, The Husband was able to clean out the filter and the drain.

I ran the load again with no mishaps. Then I switched the laundry; delicates into the dryer, a load of towels into the washer. Once the delicates were done in the dryer, I set them for 20 more minutes and realized after I pushed start, our dryer wasn’t tumbling. I opened the door and tried to spin the drum: nothing. It wouldn’t move. I found a shirt had gotten caught in the dryer and wasn’t allowing the drum to move.

The Husband went to work. He was able to get the shirt out (relatively unscathed) but what he discovered was so depressing. He found a crack in the dryer drum and that’s why the shirt got stuck.

In the morning it was problems with our washer and in the afternoon a broken dryer. I cried.

For months we had felt our dryer was on its last legs, so rather than just replacing the drum, we opted to purchase a new dryer. I cried again.

We first checked out Home Depot for a dryer, but this was Sunday and the soonest they would be able to deliver was the following Saturday. After almost 2 weeks without laundry, I couldn’t wait another week. We then checked Best Buy. Best Buy had the same dryer I had picked out at Home Depot, for the same price, but we were able to get it on Monday, the next day.

We bought the dryer on Sunday; it was $719.99 plus tax. We paid about $777.

I cried.

And mostly not about the money.

Mostly.

It was an emotionally exhausting day. On top of that, I really didn’t want to have spend $700+ on a dryer when I am trying to pay cash for an entire kitchen remodel. The kitchen remodel is bleeding us dry. It’s just so expensive and we have some of the most expensive expenses left to pay for: granite and our fixtures (sink, hot water dispenser, faucet, utility sink, utility faucet, water filter). Needing a new dryer could not have come at a worse time.

I’m trying to be positive about it and remember that it could be worse and at least we were able to go buy one, but right now that feels like little consolation.

I’m also afraid we are going to have to draw money from some other accounts to finish paying for the kitchen. Currently we have money in our annual expenses account and in the kids’ bank accounts. If we have to use either of those, the first priority will be to pay them back, but I’m sad it might come down to that.

Stupid $777 dryer.

I know this is a long post, thanks for sticking around and reading it.

Have you ever had any budget busters that just made you cry?

New Debt Update

I still haven’t decided exactly how I want to share my debt totals every month, so for now, I’m going to stick with a middle of the month recap.

As of last month, we owed $20180.17. Holy cow that’s a lot of money to owe to other nameless, faceless people!

Over the course of the last 4 and ½ weeks, we have made a payment to our credit card and towards our car loan.  For now, any extra money we have (which isn’t much because of the kitchen remodel) goes towards our credit card that carries a balance. Last month, I was able to make a payment that was about 2 and ½ times the minimum payment. 

Okay, here goes. The numbers for this month:

Credit Card 1: $5314.52 at 9.24% interest ~ the current minimum payment is $160

Car Loan 1: $14125.25 at 0% interest ~ payment is $345

                _______________

If you’re keeping track, that’s a grand total of $19439.77

On the plus side, we are down below the $20000 mark and that’s a nice barrier to break. I much prefer seeing a 1 as the first number as opposed to a 2! Last month we paid off 3.6% of our total debt. We paid a total of $780, but stupid tax, (more commonly referred to as interest) ate up some of that.  Only $740.40 went towards paying off the principle. As always, I wish it was more, but the takeaway here is that our total debt decreased.  We did not add any more debt and we were able to pay more than the minimum payment.

My goal for next month is to bring our credit card down under the $5000 mark, after interest.  In order to do that, I will have to pay about $356.  In my budget, I included $300 towards our credit card, so we only need to come up with an extra $56.

The kitchen has really complicated our debt payoff. Any extra money at the end of the month is being diverted to pay for the kitchen. (The current balance on the card that we pay off monthly is $4800!!!) I’m hoping that we will be able to increase the payment amount on our credit card 1 balance to bring it under $5000. If we can, that would be another psychological boost.  Once we are under $5000, we will have paid off half of a maxed out card. I know it’s not much, but we need to start somewhere and baby steps are all we have right now.

(This is copied and pasted directly from my last debt totals update from September 16, 2016.) I’m trying to keep my head up and remember that our total debt load decreases every month, if only by a little. I try to remember that we haven’t added to our debt total in 10 months and that we are better off now than when we started 2016. I try to remember that we choose to not let debt dictate our life or to punish our kids for our poor financial habits/choices.  That’s it in a nutshell, I’m trying.

We aren’t debt free, but we have a plan and are working it.  If we keep at it, we will be debt free.

You can see my last update here.

How We Save For Annual Expenses

I read it all the time in PF blogs, annual expenses aren’t surprises, you know they are coming.  Every year we have to pay homeowner’s insurance, car insurance, property taxes, etc. So why don’t we plan for them?

The Husband and I have developed a system that works pretty well for us.  It began the first time we bought a new car.  We set up a direct deposit of $300 for every paycheck to go into a credit union to make the car payment.  We bought that car in 2001 and we have still kept up the practice of depositing money every pay period. 

For many years, the money had no purpose so it was squandered in many different ways.  But several years ago, we started using that money to pay for our annual expenses. For us, these include our home owner’s insurance, property taxes, car registration for four vehicles, and our car insurance, which we pay twice a year.  We also try to pay baseball and soccer registration fees out of this account and, if there is enough money, some competition fees for our daughter’s dance studio.

Over the course of the year, these bills can really add up. It has really helped us to have at least most of the money readily available

. 

Our homeowner’s insurance is due in October, so we just paid it.  We had plenty of money in the account so it was paid in full and the account continues to grow.  Coming up in the near future, we will have to pay the first installment on our property taxes as well as our car insurance for the next six months.  These are both hefty bills, well over $1000 for each of them and I’m so happy we will have the money to pay for both of them.

In our household, we have to pay for a car registration once a month from January to April.  Again, these aren’t surprises, but as the old adage says, failing to plan is planning to fail. For many years, every time a car registration was due, it became a pitfall for our budget. In the past, many times, we actually paid our car registrations late because we just didn’t have the money.  Now, we always have the money to pay our car registration, on time and in full.

The reason we are able to do this, is because we automate the deposits.  On our own, we would never set aside $300 per paycheck into a separate account, even though we know we have these expenses due every year. We would still be acting as if these annual (which means yearly y’all) expenses came out of nowhere. We would still be falling farther and farther into debt each month instead of slowing clawing our way out.

This account also acts as a mini-safety net for us.  In a sense, it acts like another emergency fund. The amount of money in this account is always fluctuating, but there is usually at least a few hundred dollars. In a real and true emergency, we have another small cushion to fall back on because of this account.  We haven’t had to use it in such a way, but it gives me some peace of mind just knowing that it is there.

This is actually the only account we automate. We make it work, but we can’t seem to save any more than that a month. Almost all financial advice you get starts with “pay yourself first”. With this account, that’s exactly what we’re doing.

How We Use our the Cash System to Pay our Credit Cards

I talk often about “the card we pay off monthly” so I decided maybe I should talk about how we do that.

We have two credit cards: one that we have carried a balance on for over 4 years and one that had a balance for about 10 years, but we have paid off monthly for the last (about) 5 years.

My last post about how we budget was all about how we use Dave Ramsey’s envelope system and cash; so I get that using credit and paying cash doesn’t really reconcile. I’m going to explain to you how we do that. (PS the say we do it is part of why we can’t get out of debt faster.)

Each pay period, I go to the bank and take out however much cash we have budgeted for the next two weeks.  And then I proceed to charge everything. WHAT? It doesn’t make sense, I know, but let me explain.  We still aren’t disciplined enough to use credit exclusively, so right now, I physically take the cash out of the bank and then when I buy something out of that category, like gas or food, I take that amount of money out of the designated envelope and put it in a jar with a post-it note on it with the date the credit card bill is due.

Pretty complicated sounding, I know. But it keeps us from overspending too much.

Any time there is a shortfall in any category, we make that up with our credit card, hence the reason we can’t get out of debt. Instead of taking any leftover money at the end of the month and putting it towards debt, we are taking any leftover money and paying off the credit card that we pay off monthly.

We don’t budget enough money each month to actually cover many of our costs so we have to make up the difference using credit*; and because we aren’t gazelles we aren’t willing to sacrifice our lifestyle in order to get out of debt faster.  It is a vicious, never ending cycle, but one that is wholly created by us. (*This isn't intentional. We budget in good faith every month and then spend more money than we budgeted."

Clearly the way we budget and use credit is not the most efficient way, but it keeps us from getting too far out of control and has allowed us to slowly decrease our total debt load since we started budgeting this way in December of 2015, nine months ago.

By taking cash out, then putting it in a jar to use to pay a credit card bill, I’m drastically increasing my trips to the bank. I know it doesn’t make the most sense; but we are not responsible enough, yet, to solely use credit cards.  On the flip side we don’t want to throw away all the points we could be gaining if we used credit.  Although not the most practical way to budget, right now, it works for us.

Today, for example, I am heading to the bank to deposit $960 that we “collected” over the course of our last credit card billing dates.  The bill is due soon and I need the money to pay for it.  That is not the whole amount of the bill, but will definitely help towards paying it off.

In an ideal world, we would budget enough money to fund every budget category, every month and we would never exceed our budget. We are in debt so clearly this is not how we have operated in the past.  This one change has helped us to get more of a handle on our finances; and allows us to earn some credit card points without totally blowing our budget out of the water.

How We Budget (Part 2)

In How We Budget Part 1, I laid out how we budget our money each month and break it up into different categories. In this post, I'll explain about the different things each of our envelopes pay for.

Our car repair envelope pays for any necessary (and sometimes unexpected) car repairs, tires, and oil changes. Lately it has been one thing after another with our cars so the envelope only has $50 in it, but we are trying to bulk it back up so there will be enough money to pay for needed repairs in the future. Many times, although there hasn't been enough money in the envelope to cover the entire bill, it's been helpful to have the extra couple or few hundred dollars cash ready to pay for at least part of the repair.

The essentials/miscellaneous category could just as easily be labeled Target/Walmart. We buy toilet paper, dish detergent, laundry detergent, shampoo, face soap, body wash, dog food, cleaning supplies and the like with that envelope. Although I try, I never budget enough money towards this category to fully fund what we need.

Clothes is pretty self explanatory; we buy clothes and shoes with that envelope; this includes undergarments, socks, swimsuits, and pajamas. This envelope mostly funds clothes for the kids but occasionally clothes for The Husband and me come out of this envelope too.  With this envelope especially there's never quite enough money as there is need, so we charge the rest on the card we pay off monthly.

Hair care is specifically for hair cuts. This pays for haircuts for me (I go bi-monthly) and The Kids (The Boy goes about once a month and The Girl only goes about twice a year), The Husband uses clippers and cuts his own hair.

The school envelope pays for all the miscellaneous items we have to pay for throughout the school year. These are things like school pictures, field trips, dance entrance fees, and fundraisers.  This also paid for all The Kids new school supplies (to the tune of $200) this year.  It was depleted and is slowly being built back up.

Our final budget category is kid's activities.  This pays for things for like dance competition fees, things needed for baseball or soccer as well as dance.  I realized that just because I paid registration fees for an activity, it didn't keep hidden fees from popping up.  I felt like I was being nickeled-and-dimed out of all my "extra cash" laying around so we started funding this activity. It's been very helpful, though again, it never covers everything and gets depleted often.

To many people, this is too many categories or too much cash to carry around, but we've found it really works for us.  I mainly handle the finances for our family and by having this many envelopes and funding them, we have slowly begun to dig ourselves out of debt.  We have decreased our debt load every month since December 2015, (when we recommitted to Dave Ramsey and the envelope system) and our envelope system is a big part of why.