Thursday, February 16, 2006

Games People Play

I think we all have silly ways in which to trick ourselves into saving money, or at least not spending more than we already do. Here are ours:

1. Automatic deductions: This is the easy game. Spouse and I divert money from our paychecks so quickly and frequently that it’s amazing that we have anything left in the joint account. Excepting things like 401k contributions that are deducted when our paychecks are just gleams in the eyes of the Employers, here’s what is deducted and when:
• $250/month into emergency fund, broken into $100 and $150 increments, each the day after Spouse gets paid. We like to pay bills as soon as we’re paid, so if we timed it any differently, this plan probably would not work!
• $30 every Monday into an ING account. It’s not a lot of money, but that’s why it’s called the “Rainy Day” account. It will likely be used for a mini-getaway sometime this year.
• $100 of each of our paychecks (Spouses, twice monthly and mine, weekly) goes into our personal checking accounts (our respective “slush” funds). This money used to be used for not-so-secret personal discretionary spending (fancy haircuts, gifts for each other, what have you), but the slush funds have of late turned into holding cells to fund big upcoming bills or projects (thus, why we may not look like such a hot, well-groomed couple these days). Friday, my slush fund will be blown to pay off the balance on some furniture that is about to be delivered. We’re thinking that Spouse’s might need to be earmarked for the homeowner’s insurance policy, which is coming due in a couple of months. Point is, it’s sort of tempting to spend the few extra hundred dollars that we have hanging around, but it’s so nice to say to ourselves, “Oh, we already have $600 of that $1,000 payment that’s coming due.” That said,
i. Two $60 increments of my slush fund are refunneled into two T. Rowe Price index funds. I don’t know why I don’t have it just done directly from the joint account. I think I was the one who had originally decided that we needed to invest, so that my discretionary spending would have to take the hit for it…

2. The Checking Plus Game

The Checking Plus Game isn’t much of a game at all, because there’s nothing funny about taking advantage of overdraft protection that charges an 18% APR. But here’s why we have it: First, for the obvious reasons of not bouncing any checks (or online payments, as we almost never write checks). We never incur crazy bank fees as a result. But perhaps more psychologically important to us is that it gives us no excuse to use a credit card rather than the debit card. If the debit purchase bounces into Checking Plus $20 or $30, fine, we get paid in 2 days anyway, and the $0.14 finance charge I incur for borrowing money for two days is better than watching the AmEx balance climb (you know, promising yourself to pay it back but never getting around to it). I dunno, others may feel differently, but that’s how it goes in the Spouses household.

So yeah, this is through Citibank, and though taking out overdraft protection is sort of the same as applying for a credit card (in that it’s an inquiry on your credit report), it’s worth it. My advice is to not get more than $500 worth of Checking Plus, though they’ll certainly offer you more. I once had a $2,500 line of overdraft protection and spent my way through it, having to redeposit entire paychecks to pay the credit line back (hence the need, back in 2000, for a personal loan to dig myself out of Checking Plus hell).

3. Charging Ourselves a Fee for Using Plastic

We can say all we want that we’ll never, ever again use our credit cards as part of our ongoing quest to be debt free, but it has to happen sometimes. For me, deposits on large items (good-faith deposits on cars, for example) and purchases that I might end up returning (why wait 4 days for the bank to credit my debit card, and be out that money in the meanwhile?) are just the sorts of things that credit cards are good for (ie, anything that may need to be disputed in the future). I’m almost completely over buying things on plastic that I just can’t afford or don’t need, but let’s face it, that sometimes happens, too.

So if the goals are not to use plastic and to pay credit card debt down faster, what works for me is to charge myself a fee — say, $25 or $50— for allowing myself to use the plastic to begin with. So buying $45 worth of dining room chair cushions at Target (ooh, I’ll get back to that subject sometime soon) will really cost me about $80, because they weren’t a crucial purchase and if I really want them, I’ll just have to budget in the luxury tax out of my slush fund (it’s not Spouse’s fault that I spend money on things that maybe we don’t need). Same goes with the furniture deposit that I had to pay yesterday: $695. I’ll be putting $800 back on the credit card (the bigger the purchase, the more I try to ramp up the penalty).

4. The Bucket

I mentioned in an earlier post (okay, the earlier post) that Spouse and I have a small jar into which we put found money and other small amounts of cash. Yes, we’ve tried the “save all of your $5 bills in there” and the “put all small change in there” approaches. They sort of work for a few days. Before our wedding, though, we put in $5s and the money we’d get from rebates, lottery winnings, or whatever else. But then — and this is for everyone to figure out for themselves — we’d sort of charge ourselves a tax for doing things that we did frequently, enjoyed very much, and were not likely to just stop doing. For us those two things were drinking wine and eating cheese. We do these things pretty much every day, whether we should or not.

For a few months before the wedding, we imposed a strict “$5 into The Bucket for every bottle of wine we opened” rule; same with cheese. On those nights where maybe we went a little overboard and wanted a second bottle of wine, the penalty doubled to $10 for the second bottle. Believe me when I tell you that after a few months of birthday money, lottery winnings, extra $5s, and the wine tax, we had about $700 in there. We took it with us on our honeymoon.

About me

A little about me (us?): We’re a barely 30s couple in the Northeast. We just purchased our first home six or seven months ago. It’s in far from perfect shape, but we love it anyway and are thrilled about every small improvement that we can manage. I mean, in this area, fixer-uppers (fixers-upper?) still aren’t cheap.

Before buying the house, we had gotten our credit card debt down to a manageable amount (still considerable, but manageable). After we moved in, of course, that total kept creeping up. We’ve now consolidated most all of it onto one 0% Amex card. But still, we’re talking just over $15k on the credit card. The minimum payment is about $320 a month, which we always manage to exceed, but we’ve gone from paying an active $1,000 or more a month (when we were renting), to less than that, now that we have a mortgage and considerable property taxes. And it’s frustrating.

The thing is, most all of the extra (meaning, “we’ve paid the bills…should we pay more on the credit card or use it for something else?”) cash that we have is going to making our house habitable. And I can’t say it’s so much a struggle to decide what should be done with the cash—we just go to Home Depot, spend the money, and then wonder later how it is that we didn’t put an extra $200 on the credit card this week. And promptly decide that, say, replacing the countertops and painting over high-gloss purple walls were totally worth it. The inch-by-inch improvements make us happy and are, in many cases, pretty necessary.

Why is this called “quartersaver”? Three years ago, we never thought we’d be homeowners. I have a ton of student loan debt (about$80k), and we both had plenty on our credit cards. We had personal loans so that we could consolidate our credit card payments, even. We’re so proud of how far we’ve come, but it really did take lots of small adjustments (including, incidentally, a small jar into which we’d put spare change, found money, lottery winnings, etc, hence the name “quartersaver”) in order to get this far. And though we still do have the jar full of petty cash on top of our TV, it’s a lot less full than it used to be. We’re looking for ways to economize, to do it ourselves on the home-improvement front, to save for our futures…and we’re just doing the best we can. We hope to find virtual friends who have great ideas and similar experiences, who might be able to benefit from the small ways we’ve made our lives a little more comfortable. Here, you’ll find home improvement advice and progress, debt-reduction advice and progress, and other notes relating to doing the best you can with what you have. Nice to meet you all.