M is for Money

Back in January Los Angeles bid a tearful farewell to its only worthwhile radio station Indie 103.1. The station was yet another recession victim. Unable to survive on declining ad revenues, the station now only exists online. A Spanish language format took over its old home, how one alternative station couldn’t cut it but hundreds of Spanish ones survive is beyond my comprehension. Indie’s demise left only one rock and roller on the scene – KROQ.

KROQ likes to bill itself as “world famous” but let’s face it - the station sucks. Unfortunately I can only listen to NPR for so long and KROQ fills the void from time to time. My least favorite part of the station is their morning show jocks Kevin and Bean. Juvenile pranks are no longer funny once you reach puberty, what does it say when two old geezers are acting like perpetual teenagers. But at least their stupidity is limited to the morning drive.

Not any longer, recently K & B have escaped their timeslot. Any time I tune in they are on. An afternoon show was added some months ago and now the weekend airwaves are polluted by their reruns. I don’t even think it’s original, someone is splicing together old shows. Recycling is good for the planet, is this radio going green?

My guess is it’s another cost cutting move. K & B are probably getting the same old pay despite the extra work, in exchange for keeping their jobs. By recycling content the station saves money, no on-air personality to pay. Or maybe I’m the only one who doesn’t appreciate those fools. Have your local radio stations changed or disappeared during this recession?


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I swore off overtime a few months ago, around the time I paid off the majority of my debts. Work had been the singular focus of my life for several years and I was ready to reclaim some of my time. It wasn’t that my work had slowed down or that I wasn’t needed any more, rather I put my foot down and said I wasn’t going to work myself to death any longer. Unfortunately my resolve didn’t last long.

My dreams and schemes take money. I live modestly and mostly frugally, I don’t need the money to support a lifestyle. I need it to save, to invest and to buy a property with my mom. We have some debts to pay off and a wedding to plan for. The money I’ve saved so far isn’t enough - I squandered my 20’s and got a late start. Now I’m rushing to make up for lost time. But when I add it all up, it seems impossible. I have too many goals and not enough time to save for them.

What I Need

-$15000 for the investment property (timeline – 6 months)

My mom has $30,000 in CDs that she is looking to buy a property with. I need to match that if we are going to find a place. While prices in LA have fallen significantly, buying an income property takes a 25% down payment. Prices here even after the decline are still higher than much of the country and finding a 2 bedroom fixer for under $200,000 will be tough. I have $15,000 I can pull from savings now, so I’ll need another $15,000 to reach my goal.

-$15000 for the wedding (timeline – 15 months)

I don’t see us getting married this year, we haven’t planned a thing and don’t have any money saved yet. It’s one goal I can push off till next year in order to save up cash. I expect my parents will help somewhat with costs, but I’m not expecting much. My dad has this delusion that he’ll pay for it all, but I won’t let him. My plan is to give him one specific piece to pay for, like the location or food. That should keep him happy without too much damage. On our budget, this will have to be a modest affair.

-$8400 in credit card debt (timeline – 12 months)

As I mentioned earlier, combining our finances meant taking on responsibility for Mr. M’s credit card debt. I’ve already chipped away a little, the balance is now below $8000. I think 12 months is a reasonable timeline to get it paid off, I’ve paid off a whole lot more before.

-$5000 house repair fund (timeline – 9 months)

To buy the investment house I’ll have to take money out of my current house repair fund. We were planning to replace the electrical and plumbing this fall/winter, so I will need to replace the money I use. This tiny house has 4 electrical panels but yet only 1 circuit for the entire house, the basement and garage occupy the other circuit. The plumbing has been partially replaced, but they left behind the most deteriorated pipes! We’re living on borrowed time already.

-$5000 cash savings (timeline – 15 months)

I’ll have to drain most of my cash savings to buy the investment property, $30,000 is a lot of money to me. Don’t worry, I won’t spend all my cash! But I want to start building it back up as soon as possible.

OMG How do I Save all That?

That is over $48,000 in a little over a year, not including my retirement savings or taxable investing. I make good money, but not that good. We have to earn more to have any hope, so for now I’m back on the OT train. The rest depends on Mr. M and his oh so unpredictable income. We could pull this off easily or end up in ruin depending on how his career goes. I’m looking at what I can sell and what we can cut. I have no idea how to accomplish this goal, but that won’t stop me from trying.


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I love to budget, does that make me strange? I feel comforted when I visit my budget, when I update the totals and see the progress I’m making. It’s a soothing ritual I’ve carried on for years. If only I could budget a little bit better, all my problems will go away. I can always hope.

I use a simple excel spreadsheet, it’s the same file that I started in 2001. Buried in its depths is the history of my income and expenses, my vices and victories. I’ve tried the programs designed just for budgeting, Quicken and Money, but I hated them both. Neither could be as simple or as powerful as a few simple cells and formulas. I have built a budget that works for me, which is the only thing that matters. What about you, do you love to budget too?


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With billions being handed to banks many people are wondering, where is my bailout? As a nation we are paying the price for someone else irresponsibility. What about personally, have you ever had to bail out a friend or family member? I’m worried that in the future, I’ll be called upon to do just that.

My father is a financial idiot, which was almost the title of this post. He makes good money but he spends every dime - and then some. He routinely bounces checks and at 54, has practically no savings. My mom was the financial glue that kept them from falling apart, now that they’re divorced he is on his own. It doesn’t bode well.

When my mom moved out she took the majority of the furniture with her. That left my dad in a huge, empty house that they were trying to sell. In order to make it look better my dad bought a new houseful of furniture – on the home equity line that they still share. His explanation was, his credit cards are maxed!

For now my dad is able to balance it all, his job is secure as long as he can work. He is a tenured professor who lives for his research, he’ll do it as long as he is able. But he also suffers from a chronic disease, at some point his body will start giving out. Without savings and mired in debt, how will he get by? Will he turn to me to support him, to bail him out?

I have no idea how to prepare for this possibility, I didn’t realize how bad his finances were until he told me his credit cards are maxed. It is tough getting my own money issues under control. Saving for the future is hard enough without having to prepare for someone else’s too. Has anyone else dealt with this problem?

I need to know what preparations I can take to mitigate this possibility. I want to be able to help him, without sacrificing my own needs. I would prefer to help him fix his own problems, but I’ve had little luck so far. Conversations about his money issues never lead anywhere, he thinks it’s hilarious that he is broke. Any attempt to work on the problem just leads to him laughing and throwing up his hands. I can’t deal with someone who thinks financial ruin is funny.

Where did my sense of financial responsibility come from, neither of my parents are very good with money. Yet they will likely end up relying on the money smarts that I’ve acquired. My mom tries her best, but she is used to a higher standard of living than she enjoys post-divorce. Meanwhile my dad is busy spending the money he will need to live on some day. In this environment I have to prepare to help them as I can all while accomplishing my own goals.


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The foreclosed house next door has attracted a lot of attention, it’s one of the lowest priced properties in the city. When I came home from Costco yesterday there were cars blocking my driveway, err. Someone looking at the house thought it was kosher to park in front of my driveway, I hate inconsiderate people. Later the owner of the house across the street, who rents it out to his nephew, announced to me that he was about to become our neighbor. He has put in a full price, cash, no contingency offer on the house. He is a contractor and plans to do a quick fix before renting it out. Some of his proposals are illegal in LA, if he does buy the house someone will have to be calling Building and Safety… There doesn’t seem to be any point to putting a low ball offer on a place that has already attracted more favorable ones. Hopefully the future neighbors will be better than the previous ones.

Carnival Links:

-Carnival of Pecuniary Delights at Living Well on Less (Editor’s Pick!): Investing with Little Money
-Festival of Frugality at My Life ROI: Favorite Frugal Dinners
-Carnival of Personal Finance at Mighty Bargain Hunter: Tax Write Off for 401k Losses
-Carnival of Debt Reduction at Simply Forties: Till Debt do us Part
-Money Hacks Carnival at Personal Finance Playbook: The Complete Guide for the First Time Home Buyer

Have a great week everyone!

Well I took a look at the house next door yesterday. While I’d love to own the property, the house on it is a wreck. The front living room/dining room is ugly but serviceable. Paint, new flooring and new baseboards would do wonders. The kitchen would have to be ripped out and replaced. Unfortunately, that was the best part of the house. The back half with the bedrooms is in terrible shape and does not seem structurally sound. The bathroom leads to the garage?

It appears the house was modified at some point in time and several feet added to the back. That portion is in the worst shape, with soft floors and termite damage. The bathroom would have to be gutted and replaced. The ceiling height is substandard in there, making us question what the space used to be. One bedroom has two closets while the other has none. According to the old residents, those closets were the daughters sleeping quarters. These were not walk-in closets, they were quite small! The house shows the strain of too many people crowded into a tiny space.

I don’t think this house will qualify for a loan. There is a catch 22 with many REOs. The banks won’t do any repairs or a termite report on the properties they are selling. Meanwhile they won’t lend on properties that need repairs and they require the termite clearance. This house has obvious damage, some areas are unsafe and it needs major structural repairs. The price reflects the poor condition, but for us it is still too high. We may put in a low ball offer for one reason only – it is next door. The chance to own two adjoining lots with million dollar views would be awesome. But if this house were anywhere else I’d run far far away.

My mom and I have decided though that we’d like to look for an investment property together. An idea that started on a whim is starting to gain shape and traction. We are meeting this weekend to discuss our goals and capabilities. I told my agent that while this house might not be the one, perhaps there is another that will come along. For now the search is limited to the immediate neighborhood, both because it’s a strong rental market and the proximity will make it easier to manage. Who knows where this will lead, for now we are working on a plan and when the right place does come along – we’ll be ready to act.


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Two months ago I asked what happened to the neighbors? In the dead of night they disappeared without a word. There weren’t any warning signs of trouble, everything seemed as it always had been. They had lived there for a long time and could tell you about everyone on the block. So I was surprised to learn the house was foreclosed upon.

From time to time I peruse the local listings to see what is happening in the housing market. Yesterday morning I came across a REO (bank owned) listing for the house next door. Don’t ask about the list price, it’s enough to make me sick. But it’s also low enough to make me think – investment opportunity. Mr. M got a peek inside yesterday and as you can imagine, it’s in bad shape. But it wasn’t stripped or looted, just tired from housing way too many people for way too long. My mom and I could comfortably buy it so we’re taking a look this afternoon. Unfortunately buying a REO requires preparation and I’ve done nothing so far.

I wasn’t planning to buy a house any time soon, but at the asking price it’s a deal I have to look in to. I doubt it will pan out, either someone else will offer more or it will need more work than I’m willing to take on. The house across from it seems to have finally sold after being on the market forever. The listing said cash only, so it must have been in bad shape. I wonder how bad this house is. Anyone else looking to pick up an investment in the wreckage of the market?

See Update: She's a Fixer

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Let’s be honest, it is common for couples to fight about money. It is also common to have two financial opposites in the relationship. This pairing provides special challenges, but there are many couples who make it work. It all starts with awareness, first about yourself and second about your partner.

Common Financial Goals

It is always a challenge to marry someone else’s habits and expectations. Even two people with similar financial styles will have to work together to find common ground. In my own relationship taking this crucial step has helped bridge the gap between our different money styles. It is easier to sacrifice and save for a goal that you really care about. Saving for the sake of saving is unappealing to a spender, but saving for a concrete goal is more palatable. Everyone has some goal that requires saving to achieve, like buying a new car, a house or retirement. Developing goals together will help you start managing your money together.

No Shame, No Blame

For the sake of your relationship you have to drop all judgment of whether it’s better to be a spender or a saver. There are positives and negatives to each type of person. Savers are good at preparing for the future, but can do so at the expense of living today. Spenders are spontaneous and focus on the present, but can get themselves into debt and be unprepared for emergencies. Embrace the positive aspects in each of you and use it as a starting point for planning.

Set Up a Budget

A budget is not a bad word, it’s an important tool to help you reach your financial goals. When you develop a budget together – and actually stick to it – you can avert many money disagreements. The budget is the place where you address each partner’s needs, your need for the newest electronic gadget and your partner’s need to save for a rainy day. By balancing your differences in the budget you won’t have to fight about these things later.

Allow a Spender to be a Spender

You can’t change a person, you have to work with who they are. Your budget should allow room for a spender to spend, a dedicated fund that they are free to use as they wish. This is not a blank check and obviously won’t work for a compulsive spender who refuses to stick to a budget. But if your spender is willing to play by the rules this idea can prevent a lot of arguments. A separate personal spending account is a great way to separate the funds needed for bills and saving from the “fun” money. Mr. M and I are using this method, he kept his old checking account as his personal fund. As long as it’s not illegal, I don’t care how he uses this money. We are still meeting our savings goals and he is able to satisfy his desire for the latest video games.

Save for Your Common Goals

As part of building your partnership you set common goals, now make sure your budget is addressing those goals. Save for that new car or house, plan that vacation or your children’s college education. A spender may transform into a saver when they see the tangible benefits of saving, like achieving one of these major goals.

Review and Reevaluate

Many financial goals are measured in decades, not just years. It often feels like you are making no progress, but by periodically reviewing where you are and where you are headed it is easier to see how far you have come. Goals will change as you go through life, either as you’ve accomplished them or other more pressing matters appear. Together review the earlier goals that you set and ask, are they still relevant? I recently had to change some of my 2009 goals because they were no longer the smartest financial decision.

With a little planning financial opposites can build a strong partnership. Recognize your differences, play to your individual strengths and come up with goals that you can both work towards.


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On Sunday we got the chance to mix with our fellow citizens, in the economic sense, during this longest recession of our young lives. But there was no single story that emerged from the day. Is this the beginning of the end or just business as usual? I saw both sides.

In the morning we headed down to The OC for the annual Pet Expo. It is like a pet convention, with all different types of dogs and cats that you can meet and greet and vendors selling pet related products. Mr. M and I have gone for several years and had gotten used to the things the way they were. Well those days have passed. I remember stumbling home our first year, loaded down with free samples and giveaway goodies. The food samples lasted for a month and we picked up many other treats and biscuits for pennies. The fairgrounds were as crowded as previous years, but fewer people were buying. Gone were the piles of giveaways and the samples were no longer free. The case of canned food I bought for $10 last year was priced at $20 this year. I didn’t buy any. I paid for items that I’ve gotten for free in years past. It was still an enjoyable experience, but not as lucrative as before. Was it the economy? Were vendors worried that desperate people would take advantage of any giveaway? Or were their bottom lines hurting and the money for promotions gone? I’m not certain, but the difference was discernable.

Later we went out for a birthday dinner in old town Pasadena. Mr. M doubted that it would be crowded - it was a Sunday night in the middle of the recession. But the place was packed and tables remained empty only long enough to get cleared and reset. This place was not cheap either! A dinner for two would be $80 or more. Obviously there is still some money to be spent in this economy, judging by how many people were enjoying a Sunday dinner out. There isn’t one story in this recession, some businesses remain strong or benefit from the economic conditions, while others stand on the brink of closing. Have you seen a similar schism - some businesses thriving while others are dying?


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Last December I set several financial goals for the coming year. They were based on my needs at the time and where I wanted to be at the end of the year. But as happens in life, things changed. When Mr. M and I combined finances last month I took on the responsibility for his debt too. My budget and goals were mostly geared towards saving, so I’ve had to go back to the targets I set and decide what is really important for us.

Our budget has to balance several different needs - paying off debt, building up savings and preparing for future expenses. I don’t want to give up saving entirely, but some savings goals are less important than paying off the debt. The rate we are paying on debt is much higher than the rate we are earning on savings right now. ING only offers 1.5% currently - almost all debt carries a much higher rate.

What I am Adding

I am adding several goals to the ones I already set. Our needs as a couple are different than what my needs were independently. Together we need to get out of debt and start saving for our future. We’re at the point in our relationship where getting married is important to us, it’s time we started saving to make that a reality.

Mr M’s Debt – there is approximately $8400 to pay off at 10% interest. This isn’t a huge amount or exorbitant interest, but it’s a lot more than we’re earning elsewhere. I haven’t set a deadline for paying this off, which I think is a crucial part to getting out of debt.

Wedding Fund – we’ve been together for 6 years, it might be time to make this official. We’re good at talking about getting married, not so good at the actual execution. Money has been an excuse for years so we’re going to set money aside to make it happen.

Mr. M Tax Fund – Mr. M hasn’t been setting aside money for taxes from his contract work. He then scrambled to pay his quarterly taxes. I’m putting a stop to this poor planning and saving tax money out of each check he receives. With any luck there will be extra money left in this account come tax time.

What I’m Taking Away

I have a finite amount on money to work with. In order to add new goals I need to take something away elsewhere. I’ve looked at several places in my budget to cut, though I haven’t committed to all of them yet. Motivation is a key component to getting out of debt, and mine is lacking right now.

Snowflaking – recently I’ve been snowflaking extra money into I-bonds. I have one last check to deposit and then I will have saved $450. I’m going to instead divvy up the snowflake money between the debt and the wedding fund.

House Fund – I had set a savings goal of $3000 this year for the house fund. Since I already have significant savings in that fund, I feel OK diverting that money towards other goals. I’m still going to set aside $50 each month, but the other money I had budgeted will also go towards the debt and wedding.

Cash Savings – I haven’t decided to reduce my $7,000 savings goal yet, but it’s up for consideration. My job is fairly secure and I do have some savings already. Also the interest I’m earning is pitiful and it makes financial sense to pay off debt with that money.

Be Prepared to Change Course

Setting goals is a big part of a sound financial strategy. Goals give you direction, keep you motivated and hold you accountable. But life will throw curves your way and it’s important to reevaluate and adjust your goals as your needs change. Don’t stick blindly to a plan that is no longer relevant to your life. Goals are a reflection of where you are and where you want to be.


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My birthday is on Monday, which has made for a busy weekend. In addition to the usual chores and errands I have a cake to bake and a busy Sunday planned. I like baking my own birthday cake, though some people think it’s odd. I’m not a fan of store bought cakes and I enjoy baking in general. I’m making my favorite carrot cake, a tropical version with coconut and pineapple. Sunday we’re going to Pet Expo down at the OC Fairgrounds. It’s great fun for an animal lover like me, there are at least a hundred different breeds of dogs you can meet and greet. Then there are the vendors and giveaways, I always leave with several pounds worth of free sample kibble and goodies. I’ve gotten dog beds for $5 and bags of biscuits for $1. So Cal pet lovers should definitely check it out, there are also cats and exotic animals.


This week's carnival links:


-Carnival of Pecuniary Delights at Ms. Thrifty (Editors Pick!): KISS – Keep It Simple, Small

-Carnival of Personal Finance at Money Ning: The First Time Home Buyer – Closing Time

-Festival of Frugality at Stretchy Dollar: Be Beautiful Without Breaking the Budget

-Carnival of Money Hacks at Consumer Boomer: The First Time Home Buyer – Welcome Home

I like to eat, I like to cook and I like saving money. Even better is combining all three loves into one delicious and inexpensive dinner. There are many options when it comes to fast, frugal dinners and here are a few of my favorites.

Grilled Cheese and Tomato Soup

This childhood staple is still one of my favorite comfort foods. It’s easy to make a more grown up version, I buy Trader Joe’s creamy tomato soup and use a blend of cheeses on multigrain bread. You could add a slice of meat to make it a melt or pair the soup and sandwich with a salad. Approximate cost for 2 people (this is based on what I pay in Los Angeles), $3 or $5 with a salad.

Breakfast for Dinner

What’s even better than breakfast for breakfast? Breakfast for dinner! Plus as an added bonus breakfast is the cheapest meal. The old frugal standby is the pancake dinner, but it isn’t exactly a balanced meal. Pair that pancake with some fruit and a scrambled egg and you’ve covered the important bases. Just eating pancakes will only cost a dollar or two but for under $4 you can have a rounded meal for two.

The Frugal Frittata

Frittatas go well with almost any meal. They are easy to whip up with ingredients you already have on hand, like vegetables, meat, pasta or potatoes and eggs. They are also a great way to use up bits of leftovers, so don’t throw away that half breast of chicken or last spoonful of pasta. You can whip up a frittata for two for $2-$3 depending on the ingredients you use.

Mexican Rice Bowls

A complete meal all in one bowl, what’s not to love! I layer Spanish rice, beans and sautéed vegetables in a bowl and then top it with salsa, grilled chicken (for Mr. M) and a little cheese. Rice and beans provide a complete protein source for very little money - this recipe is a variation on that frugal staple. The vegetarian version clocks in at around $4, adding chicken will cost a few dollars more.

Pasta and Peas

Pasta is another favorite frugal food, but plain old spaghetti and sauce is boring. There are infinite variations to create instead, try adding vegetables, meat and creating your own sauces. Dry pasta is inexpensive and keeps well in the pantry, and have some parmesan cheese on hand. I buy frozen vegetables to use for cooking, fresh is nice but tends to cost more. In the summer I have a garden and grow my own. This last weekend I mixed pasta with sautéed mushrooms, red bell pepper and peas along with veggie sausage. Even carnivores like Mr. M think it tastes great, even better it only costs $4.

Add Your Own

What do you do to save money in the kitchen? Care to share any favorite frugal recipes?


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Last month Mr. M and I finally took the plunge and combined our finances. Up until that point our financial relationship would be best described as - roommates. We would split the bills and expenses with Mr. M cutting me a check out of his pay to cover his share. Obviously this was not the most romantic arrangement. But you might be surprised to know why I decided we had to join our money, it wasn’t for any beautiful ideals. Mr. M was in too much debt.

It wasn’t a surprise, while our financials weren’t combined they weren’t a secret either. His balance has waxed and waned over the years with the whims of a Hollywood career. For years we discussed how we would manage our money together but it never moved beyond talk. In the back of my mind was the caveat, only once he pays off that debt. Eventually the one thing that kept us apart drove us together. I knew he couldn’t pay it off without help, the balance was too big.

I know all about debt and have dug out from under it before. Mr. M’s $8400 is a fraction of the load I carried. But I don’t relish the fight. I don’t feel the same motivation to pay it off, the same shame and guilt that drove me on. We’ll get it paid off, but it’s not the only focus right now. There are the personal savings goals I set for the year, a house to fix up and hopefully a wedding to plan. I am having a hard time figuring out how to balance so many competing goals.

I also don’t know how to handle this new debt in my/our net worth. I really don’t want to include it - it’s been so hard to claw forward. I’m feeling rather discouraged and subtracting that much from the net worth overnight is too much to bear. I don’t include the $10,000 savings I have in the house fund in the total, is it OK to ignore the debt as well?

Money and relationships are always tricky. We have the added challenge of being opposites - spender versus saver, carefree versus careful planner. The time we spent discussing how we would manage our money together has paid off, there haven’t been any disagreements. But this arrangement is still a work in progress.

It feels like my finances have come full circle. The debt monster that I defeated has come back into my life without me spending a dime. Some cycles shouldn’t be repeated.


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I see a lot of traffic from searchers wondering if they can write-off the recent losses in their 401k. I hate to disappoint these folks but the quick answer is no, you cannot take a tax write-off for your 401k losses. The money invested in your 401k is taken out before taxes are calculated. Then when you begin taking distributions in retirement you will pay taxes on the money removed, at your current income tax rate. But you can’t take a tax write-off for the loss on your quarterly statement.

In a way your taxes are reduced courtesy of the current bear market - you only pay taxes on the amount withdrawn. Since you have less money in your account to withdraw you pay less taxes! Probably not the answer you were hoping for.

To write-off losses from stocks or mutual funds you have to “realize” the loss, meaning you have to sell the investment. Paper losses do not count. Changing the assets in your retirement account has no effect either. You’ll only pay taxes on your 401k when you retire and take distributions or if you cash out the account. Meanwhile your 401k losses are only paper losses, they cannot be deducted.

The deferred taxes are a central pillar of retirement plans like the 401k. If you could write-off losses, then you would also have to pay taxes each time your account balance grew. Most people enjoy the current system, though perhaps not the loss and risk. Of course it’s important to understand the tax implications of all your investments.


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Every first time home buyer needs guidance. The world of real estate is a minefield for the unprepared. This series is an overview to the home buying process, an introduction to the basic steps involved. It covers everything from deciding if you are ready to be a homeowner to walking you through closing. I wrote this guide to help first time buyers be smarter shoppers. It is exactly the type of advice that I wish I had when I bought my home. If you are a first time buyer or hope to be one someday, you can never be over prepared. Please read on

1 - Introduction
2 – Are You Ready to be a Homeowner?
3 – Get Your Finances in Order
4 – Mortgage Basics
5 – Starting the Search
6 – Be a Smarter Shopper
7 – Making an Offer on a House
8 – During Escrow
9 – Closing Time
10 – Welcome Home


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Any other last minute tax filers out there? I’m a terrible procrastinator and always wait until the very end to send them in. I did a preliminary run back in January but never finalized or filed my return. Now we’re down to the final few days, the deadline is April 15. There is still time! Here are some last minute tax tips for my fellow procrastinators.

Gather Your Documents – you don’t have time to waste, gather all the information you need before sitting down to do your taxes. This includes receipts, income statements (W-2 and 1099’s) and deductions like mortgage interest, taxes paid and deductible expenses. If you are missing any forms try checking online, many are available for download.

File for an Extension – If you absolutely can’t get your return finished on time you can file for an extension. It’s quite simple, but it won’t get you out of paying your taxes by April 15th. You simply have to send in Form 4868 along with any payment due. The extension must be postmarked by April 15th. Don’t forget to check your state’s rules on filing for an extension.

Free E-File and Tax Software – Take advantage of free software to help you prepare and file your taxes. This year anyone can file for free through the IRS. You can get free tax preparation software if your income was less than $56,000 adjusted gross income (AGI) for 2008. There are also paid versions of tax preparation software like TaxAct and TurboTax if you don’t qualify for their free versions.

Paid Preparers – if you need help preparing your taxes call a tax preparer right away. They will have extended hours for tax season but might already be booked full. Call as soon as you realize that you need professional help.

Don’t Overlook Credits and Deductions – in your rush to finish don’t overlook valuable credits and deductions. Some of the more commonly missed write offs are education expenses, child care credits and student loan interest. If you itemize your deductions don’t forget to include property taxes you paid on your home and vehicles and all charitable donations.

Open an IRA – IRAs are unique in that you can open and fund one for 2008 up until April 15, 2009. Not all IRAs are tax deductible, Roths for example are not, and not all people qualify for the deduction. Generally if you don’t have a 401k at work your IRA contribution is tax deductible. If you have a 401k and your Modified AGI is over $63,000 single/$105,000 joint you cannot deduct any IRA contributions. If you are under these limits and now want to reduce your tax 2008 burden, an IRA is the only way. The 2008 IRA contribution limit is $5000 for those people under 50 and $6000 for those over.

Double Check Your Work – it is easy to make mistakes when you are hurrying to finish your taxes. Take a moment to double check your numbers and to ensure you haven’t forgotten anything.


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I hope everyone is having a wonderful Easter weekend. It’s been a lovely Sunday around LA, you couldn’t ask for a nicer day. C and I headed to the park for a walk, but I didn’t realize it would be so crowded with Easter picnics. There was no place to park but fortunately I knew of another entrance where I could park in the neighborhood. Anyone in northeast LA/South Pasadena should check out Debs park, it’s a little slice on nature in the heart of the city. Alas tomorrow we all must head back to work. Here are this week’s carnivals.

• Carnival of Pecuniary Delights at Wise Bread: Zero Based Budgeting
• Carnival of Personal Finance at ABCs of Investing: The First Time Home Buyer - Making an Offer on a House
• Carnival of Everything Money at I Pick Up Pennies: The First Time Home Buyer – During Escrow
• Money Hacks Carnival at Greener Pastures: Auto Insurance – Are You Covered?

It’s not easy or cheap trying to look good every day. Women are bombarded with images of a perfection that is impossible to achieve. But it doesn’t stop us from trying - we spend billions on lotions and potions promising beauty in a bottle. We spend hours getting ready, preening and primping our way to a better looking version of ourselves. It’s time to step away and look at what this quest is costing us. It is possible to look good without breaking the bank.

For the record - I wear makeup every day. I enjoy feeling pretty and wearing flattering clothes. Frugality will never get the better of my ingrained vanity. Still I’ve come a long way from my free spending days. I used to waste money on products that were redundant or makeup I would never wear. Now it’s all about strategic spending and a streamlined routine that doesn’t take all day.

Saving Money and Saving Time

There are a few conscious choices you can make that will also save you money. Choose a hairstyle or color that can be grown out between trips to the salon. In LA a cut and color can run several hundred dollars, no way do you want to shell that out every 6 weeks. When it’s time for a trim look for a nearby beauty school. They often have days where students work under the supervision of hairdressers and you get a huge discount. Mr. M gets his hair cut by a professional hairdresser in the evenings at her home. He pays her a fraction of what the cut would cost at the salon. Another way to save money is to use less, use a smaller dab of shampoo or moisturizer. The packaging and instructions encourage you to use more than you need. As an experiment try cutting back until you notice a real difference.

Another tip is to simplify your beauty routine. This means fewer things to buy and less that goes to waste. It turns out that makeup and beauty products have a shelf life. I would buy many products that did similar things, as a result much of it would spoil before I used it. There is no sense in having 20 shades of nail polish when it goes bad within a year. Hold off on buying more makeup till you’ve used what you already have.

Over time you’ll discover what styles fit you and what colors you can – and cannot - wear. I’m sure you’ve bought makeup that will never look good on you, I know I have. Eventually I stopped fooling myself. The result - no more money wasted on blue eyeshadow!

When to Splurge, When to Save

I use high end concealer and foundation, but drugstore mascara. It’s personal preference based on trying various products and finding what I like. Don’t automatically assume that more expensive means better. My mom the chemist insists all shampoos are basically the same and there is no reason to spend more, but conditioners do have differences and are the place to splurge. You should experiment for yourself, you may be just as happy with a cheaper brand.

Make Your Own

There are many beauty products that you can assemble at home. Your kitchen is a treasure trove of all natural beauty aids, use oatmeal for masks and sugar for scrubs. You can make cleansers, toners and moisturizers all from ingredients you already have on hand. The money savings is a bonus.

Frugal Beauty

I’m sure the term frugal beauty is an oxymoron to some people, but I think it’s possible to marry the two. Being frugal doesn’t have to mean looking like a bag lady, there are many creative ways for you to both look your best and keep to your budget.


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This is the final chapter in the series - Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8 and Part 9

Welcome to the world of homeownership. Unfortunately the costs don’t end with closing. There are many expenses that first time homeowners underestimate or don’t anticipate. This is especially painful when you’ve wiped out your savings to buy the house.

Property Taxes and Insurance

Hopefully you figured out the cost of your annual property taxes before buying the house. Often your lender will collect these funds along with your monthly payment, or if you’re lucky you can set up a self-escrow. But sometimes your lender doesn’t collect enough to pay the entire bill, this happened a lot during the bubble years when values were skyrocketing. You’ll have to come up with the difference at tax time. There is also the cost of homeowner’s and other insurances to protect your investment.

Lawn and Garden Care

Most first time home buyers haven’t had a yard to care for. Suddenly you have to acquire all manner of tools and supplies before that neatly trimmed landscaping turns into an overgrown jungle. Depending on your yard you’ll need everything from garden hoses and a shovel to a lawnmower. When starting from nothing, the costs add up quickly. You can shop craigslist but be wary of anything mechanical, I bought a used wood chipper from there that broke a day later.

Maintenance and Repairs

There is always something to fix around the house. Little things break and over time the major systems become worn and obsolete. Homeowners spend thousands of dollars on upgrades and upkeep, it’s unavoidable. There is no super or manager to call when something breaks either. The bill and the headache are all yours.

I keep a savings account specifically earmarked for home maintenance and repairs. An emergency fund is good, but you should consider a separate house fund as well. The cost of many home repairs is more than the average e-fund can handle.

A Handy Homeowner

The best way to save money on maintenance is to tackle the small stuff yourself. With a toolkit and a few plumbing supplies you won’t have to run to the phonebook when the sink backs up or a handle comes loose. The largest cost for small repairs is the labor, often the parts are inexpensive. We’re rebuilt faucets, repaired the water heater and replaced a light fixture, among other things. Assemble a toolkit with a few screwdrivers, wrenches, pliers and a hammer. For a plumbing kit you need a pipe wrench, Teflon tape, plumbers putty and a small hand operated drain snake. With these tools and the information on the internet, tackling repairs will be a breeze.

Welcome Home

Buying your first house is a huge financial commitment that doesn’t end with closing. First time home buyers get themselves in trouble by underestimating the cost and responsibility involved. Month after month you have not just the cost of the payments but the burden of maintaining your investment. Your satisfaction with your house is ties to your expectations. Knowing in advance the expected costs and concerns will make you a more educated buyer and happier homeowner. Welcome Home!


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But being cute won’t keep you from getting fired.

It’s a common topic of office gossip, did Cindy or Bob get the job because of their beauty or their brains. The beauty bias is well documented in both men and women. Success and attractiveness tend to go hand in hand according to several studies. We all know that first impressions count, so being attractive would give you a definite advantage when it comes to being hired. But what about long term, when performance really counts?

The Beauty Bias

Often beauty based discrimination happens on a subconscious level. I remember seeing the results of a beauty bias study conducted on babies. Babies were shown a pair of pictures, the face in one picture was considered more attractive than the other face. The researchers then recorded how long the babies focused on each picture. The study showed that the babies spent considerably more time staring at the pretty face. We’re instinctively wired to be drawn to beauty.

A First-Hand Look

I was oblivious to the bias at my own company until a co-worker pointed out a certain pattern. Our hard-working but not beauty blessed assistant B was badly injured in a fall at work, her surgery and recovery took 6 months. The boss then hired a series of assistants to replace her, each cute but incompetent. The longest any lasted was two months, which was a miracle considering how inept she was. She was promptly replaced with you guessed it, another cute girl.

There are many women at my work who have been there for years and who are not blessed with beauty. They are competent and capable, which keeps them employed. I’ve seen no link between looks and longevity in my workplace. But perhaps this is not true of every office.

A Changing Demographic

Recently the topic of women in the workplace has been coming up more often as the recession remakes the gender balance in the office. Some of my angry men seem to think that women hold an unfair advantage based on looks. Is this sour grapes or a real gripe?

Personally, it’s a half truth. Looks will only take you so far. Being cute will help you get a foot in the door, but it won’t keep you from being shown the door if you fail to perform.


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This is Part 9 of The First Time Home Buyer: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7 and Part 8

Closing is the final act in buying a home. This is where you put pen to paper and sign the documents making this house, your house. But there are a few final preparations you need to make to ensure your closing is simple and surprise free.

Final Walk Through

You absolutely must do a final walkthrough before closing on the house. The walk through allows you to verify that any agreed upon repairs have been completed. You can ensure that the house is still in the condition you expected and that nothing has been removed from the house improperly. If there is a problem with the house or a disagreement with the seller, don’t go through with closing until it has been resolved. It’s much harder to deal with problems after you’ve signed the paperwork and the money has changed hands. Be thorough in your inspection, I’m embarrassed to admit some of the things I overlooked. In my case the sellers never completed painting the exterior, I bought a house with 3 brown walls and one pink wall!

Show Me the Money

It takes money to close on a house. Already you have shelled out a deposit and possibly the cost of an inspection and appraisal. The remainder of the balance comes due now. There is a long list of costs and fees associated with closing:

-Down payment
-Escrow or lawyer fees
-Title insurance
-Recording fees
-Appraisal and inspection if not already paid
-Broker’s or agent’s fees
-Tax and insurance impounds
-Miscellaneous Junk Fees

The impounds are often a surprise to first time buyers. Many lenders collect your yearly property tax and homeowners insurance along with your payment, then they pay the bill when it comes due. At the start of the loan they will demand some amount of that money up front, often 6 months to a year’s worth. This could add several thousand dollars to your closing costs. Many of the fees are unavoidable, like the cost for the government to record the title in their records.

Closing Cost Statement

When you apply for a loan you receive a Good Faith Estimate for your closing costs. This would include the down payment, any points and the many fees associated with the transaction. In my case, the estimate was off 100%. It’s important to compare the estimate you receive against the actual closing costs. Often lenders will insert needless fees that you can negotiate. Errors are common in these statements as well, I can’t remember how many I found in mine. Go through it carefully and be prepared to question any fee you don’t understand. I got both my agent and the mortgage broker to eat some of their fees. They’ll try to charge you for printer ink and copy paper too, if you let them.

Loan Paperwork

Signing the paperwork will allow you ample opportunity to practice your signature over and over. But it’s important to actually read some of what you are signing, including the terms of the loan. In a previous post I wrote about being screwed by an unscrupulous mortgage broker who managed to slip a different rate past me at closing time. Sometimes there are honest mistakes as well, now is the time to catch them. Closely check that the rate and terms are the same as promised and that no prepayment penalty has sneaked in. A colleague of mine walked away from his closing when the loan paperwork came with a much higher rate.

A Comfortable Closing

All the preparation you have put into this moment will make closing a breeze. In fact, you might not even be there when it happens. At some point the keys will be handed over and the house officially becomes your home. I hope with a little planning, preparation and guidance this house will be everything you dreamed of.

Part 10 - Welcome Home

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Hanging out with people of more means than myself can be awkward. We don’t shop in the same stores, eat in the same restaurants or live in the same neighborhoods. Our homes and our problems look nothing alike. Does that explain my tendency to avoid wealthy friends?

Recently I realized I’ve been avoiding a particular co-worker. I’ll walk the long way around so I don’t pass by her office or pause in my cubicle when I hear her in the hallway. There is nothing wrong with her, she is pretty and pleasant. It’s nothing personal, but rather monetary. After lunching together one day I discovered we move in very different circles – and ever since that meal I’ve avoided her. We seem to have so little in common.

It has also happened with close companions. A college friend and I drifted apart after her income grew exponentially. I kept up with the expensive shopping trips and meals at tony restaurants for awhile, until I was drowning in debt. Once I found fiscal responsibility I couldn’t continue, so I started declining her invitations. Eventually she stopped asking…

I don’t know if it’s because I’m uncomfortable with the fact I make less or to save myself from being sucked into expenses I can’t afford. Is it that we can no longer relate to one another because the things we bond over, a meal, a vacation, a shopping trip – aren’t a shared experience? I’ve never noticed this with friends who are less well off, perhaps because I’ve become more frugal and any financial differences are hidden. While my friends all look different, most share one common trait – economic class.

Am I just imagining that this economic segregation exists? I don’t think it’s done consciously, perhaps we simply relate best to those in similar circumstances. Or am I the only one without wealthy friends?


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Yesterday Mr. M and I visited the Getty Villa in Malibu. The villa is a recreation roman era villa built with Mr. Getty’s oil fortune and now housing his collection of Greek and Roman antiquities. Oh to have a fortune to waste on such vanity. The layout is based on a partially excavated villa that was buried in the eruption of Mt. Vesuvius while the decorative elements were cobbled together from various houses of the era. My 8th grade Latin teacher would be very proud, the villa was like mecca to her. Here are some great articles and carnivals for the week, enjoy!

This is Part 8 of The First Time Home Buyer: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7

You’re both nervous and excited - the sellers accepted your offer. Now there are many things you need to do before you can complete the purchase of your new home. This is the time to gather as much information as you can regarding the house and its condition. You also need to secure financing and find insurance. This is when you decide whether to continue with the purchase, or to back out.

What is Escrow?

First, real estate transactions are handled differently depending on where you live. Some areas use an escrow process where a third party acts as a liaison between the seller and buyer. Both parties pay for the services of an escrow company, who prepares the necessary documents and handles the financial side of the transaction. In other parts of the country, lawyers are used to handle these details. For convenience I’m using the term escrow to refer to the period of time between your offer being accepted and closing on the deal.

Property Inspection

Every buyer needs to have the house professionally inspected before closing. This inspection should take place as quickly as possible – and hopefully you included an inspection contingency in your offer. Inspectors are trained to look over the house and note any problems or defects. Some will be minor details that won’t affect your decision to buy, but others may make you reconsider. The inspector should go under the house, up on the roof and check the systems (plumbing, electrical etc). It’s best to be present as the inspector does their work so you can ask any questions and get personal feedback. They will also produce a report for you to keep.

Inspectors should have a good general knowledge of houses, but they aren’t experts in all areas. Often they will recommend you hire additional specialists to do a more thorough evaluation of certain systems or areas of concern. Whether to perform these additional inspections is up to you, the cost for the inspector and any additional experts will be coming out of your own pocket. This has to be weighed against the cost of discovering an expensive problem after you’ve bought the house. Also, inspectors have very little liability if they overlook a problem. Generally their liability is limited to the cost of the inspection, which is certain to be less than the cost of repairs.

Financing

Unless you are paying cash you are going to need a loan to buy that house. An earlier post covered Mortgage Basics – as soon as your offer is accepted you need to apply for a loan. The application and approval process takes time so it’s important to start early. The lender is going to require a lot of paperwork, so gather as much as possible before applying. Tax records, pay stubs, financial records and the purchase offer to start. They will also require an appraisal, insurance and often a termite inspection before the loan can be finalized. Typically the seller will be responsible for the termite inspection and repairs.

Appraisal

An appraisal is a necessary part of the loan approval process, but don’t get one before you’ve applied for the loan. Some lenders require that you use a specific appraiser and will not accept one from anyone else. You will have to cover the cost of the appraisal as well, either out of pocket or it will be added to the closing costs. Hopefully you’ve included an appraisal contingency in your offer to protect yourself in the event the house appraises too low.

Insurance

You will need to secure homeowner’s insurance before the lender will fund the loan. Just as with car insurance you should shop around and compare rates. At a minimum you will need a basic homeowner’s policy, which typically covers damage by fire and a few other causes. Homeowner’s policies are rather limited - if it’s not listed, it’s not covered. Flood and earthquake policies are purchased separately.

Title Insurance and Disclosures

Title insurance is a one-time policy that only pays if someone else later appears with a claim to the title (ownership) of the house. You have to get a policy to protect your lender, it’s optional to get a policy that pays you as well. There are two categories of disclosures, one from the seller that lists any known defects and one prepared by a professional based on public data. The disclosures I received informed me I live in an earthquake zone (wow in California, can you imagine). Often the escrow company, the lender, or your lawyer will have a title company they use.

Negotiations

Now is the time for any final negotiations with the seller. The contingencies that you placed in your purchase offer give you the ability to bargain if the inspection turns up issues or the house appraisal is low. Often buyers will demand that a seller fix the problem areas identified by the inspector. You could also negotiate for a credit or price reduction if the seller doesn’t want to deal with repairs. As a last resort you can walk-away, and only be out the price of an inspection.

Gut Check Time

Now that you’ve gotten to know the house, warts and all, do you still want to own it? Backing out at this point means losing a few hundred dollars for any inspections and appraisals - hopefully you’ve protected your deposit and left yourself an escape route. Compare this to thousands in repairs once the house becomes your problem. Better to make that decision now rather than after you’ve acquired one very expensive headache.

Part 9 - Closing Time

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I’ve been waiting all year to add another one of my accounts to my net worth. Eagle eyed readers may have noticed the footnote in my net worth that says it does not include my company’s ESOP plan. There wasn’t a value I could include before today, but this one plan is a huge piece of the puzzle. Up until now I’ve been a retirement loser. With this money, I can step back into the winner’s circle.

First, no one at work seems to truly understand the ESOP program. I’ll do my best to explain it here. My company is employee owned and every year each employee receives an allotment of stock equal to their share of the company. Outside auditors determine a share price since it is not a publicly traded stock. You do not automatically vest in the shares you receive, after two years I have finally started to vest in the plan. Right now I only own 20% of my shares, in another 4 years I should be fully vested. It’s a strong incentive to stick around.

So how much is two years of service worth? My vested amount is $9800, which puts the total value at $49,000! That is more than my whole net worth. Watching the balance grow is very tempting, but there are a lot of limitations on that money.

Since the stock isn’t publicly traded I can’t sell my shares. In fact you can’t cash out until age 62 and you can’t work there once you’ve cashed out. But if you rollover the money into an IRA, it is tax free! Last year there was a wave of retirements at my company as many 62 and older employees opted to cash out. The company stock price was still strong while the broader stock market had declined significantly. Rolling over the money was a pretty smart strategy, likely the company stock will start falling in line with the economy while eventually the stock market will recover.

This plan is definitely one of the biggest perks at my company. Most people wouldn’t dream of leaving before hitting the magical point where you are fully vested. I’m sure it keeps many employees from straying, but I am considering it. I’m getting strong encouragement to form my own company, to work for myself. I’d make more money but I’d be responsible for my own benefits. These are good dilemmas to have. In the meantime I’m thankful for this benefit, rare as it is. Does anyone else have a similar plan or special retirement perk through their employer?


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