Where It Goes
Kristine Hayes | Mar 7, 2017
WHEN I DIVORCED a few years ago, I found myself needing a crash course in financial management. My first task: Understanding where my money went—and figuring out where I could cut back. Today, I create a budget each month. I don’t use any type of program or app—I prefer paper and pen. At the top of a page, I write down my take-home pay. I use take-home pay, rather than my $5,500 monthly gross income, because all taxes have already been deducted, as well as my $1,500-a-month in pretax retirement contributions. From my take-home pay, I deduct those expenses I’ve identified as pretty much fixed. They include my rent, car insurance, utilities and groceries, plus cell phone and internet. Once those expenses have been deducted, I’m left with the money I can spend during the month on discretionary expenses—fun stuff like hobbies and eating out. So what are my fixed expenses? Here’s what my budget looks like: Emergency Fund: This was a priority when I first got divorced. But at this point, because I’ve already set aside emergency savings equal to one year’s salary, I no longer contribute to this account. But if I had to tap my emergency fund for some reason, my monthly fixed costs would include replenishing the account. Housing: After my divorce, I chose to rent an apartment rather than buy a house. I live in a small—800 square foot—unit in a suburb of Portland, Ore. By living just outside the city limits, my $1,050 monthly rent is less than if I lived downtown, and it’s also well below the standard recommendation, which advises limiting housing costs to 30% of gross income. For me, that would be $1,650. Health Insurance: I have a choice of two different employer-sponsored health plans. For the less expensive choice, my employer would cover 100% of the monthly premiums. But I’ve chosen to enroll in the costlier plan, where I have to pay $130 per month. I don’t like the extra expense, but it gives me greater flexibility in choosing my health care providers. Groceries: Food is a budget expense I include as both a necessity (groceries) and an indulgence (dining out). My monthly grocery budget is quite variable since I tend to buy staples in bulk, but fresh meat and produce on a weekly basis. Utilities: My garbage service, water and electricity expenses average about $130 per month. My apartment was recently retrofitted with energy-saving light bulbs and surge protectors, which will likely reduce my electricity bill slightly in future. Insurance: I have both car insurance ($78 a month) and renter’s insurance ($10 a month). I drive a 2007 Honda CRV, which I purchased used and paid cash for. I have an excellent driving record. When I got my first speeding ticket, I opted to take an online driver-safety course as part of my court settlement. By doing so, the infraction was not reported to my insurance company, thereby saving me from a potentially sharp increase in my premium. Cell Phone and Internet Service: Last year, when my cell phone service was due for renewal, I switched to Republic Wireless. By making the change, I’ll save almost $400 over the next year in cell phone service fees. What I’ve discovered since I began budgeting is that even with my basic “needs,” there are still financial choices to be made. By reducing the cost of certain necessities, I’m left with more money for my many “wants”—and for my eventual retirement. Kristine Hayes is a departmental manager at a small, liberal arts college. One day, she hopes to retire and become a fulltime writer. Kristine's previous articles were A Less Taxing Time and From Half to Whole. [xyz-ihs snippet="Donate"]
Read more » Heading Home (II)
Kristine Hayes | Oct 4, 2018
WHEN I FINALLY MADE the decision to apply for a mortgage, time was of the essence. Mortgage rates were rising daily and I wanted to lock in a reasonable rate as quickly as I could. Luckily, I’m one of those people who pride themselves on being well-organized. The loan officer at my credit union sent me a lengthy list of financial documents I would need to provide before she could begin processing my loan application. Having online access to my financial accounts, and digital copies of my tax returns, made the whole process easy. I was able to upload all my documentation to the credit union website within an hour of the request. A couple of days later, I got a text from my loan officer. I nearly choked when I read the message. She told me I’d qualified for a $403,000 loan, with as little as a 5% down payment. I’d been going on the assumption I’d qualify for no more than a $200,000 loan and was figuring my overall house-buying budget would be no more than $250,000. In hindsight, I probably shouldn’t have been surprised. I have no debt, a credit score that’s labeled “excellent” and more than $300,000 in my retirement accounts. With about $80,000 in liquid assets that I could use toward a down payment—and a $403,000 loan—I realized I could purchase a house costing nearly half-a-million dollars. But since I make just $71,000 a year, taking out a loan that large seemed ill-advised. Between the mortgage payment, property taxes and insurance, well over 50% of my take-home income would be going toward housing. In looking at my loan options, and what my monthly payment would be, I ultimately decided to look at homes in the $380,000 range. At that price, I could afford a 20% down payment—thereby eliminating the need for private mortgage insurance—and still be able to find a house in a neighborhood that would allow me a reasonable commute. My monthly payment would be higher than what I was paying in rent, meaning I could put far less money into my retirement accounts than I had been. But it was a tradeoff I was willing to make to have a place of my own to call home. Kristine Hayes is a departmental manager at a small, liberal arts college. This is the second in a series of articles about her recent home purchase. Her previous articles include Heading Home (I), Happy Ending and Material Girl. [xyz-ihs snippet="Donate"]
Read more » Nervous Bride
Kristine Hayes | Aug 5, 2019
WHEN I MARRIED FOR the first time, I didn’t think much about it. I was in my 20s. My new husband (and future ex-husband) and I had already been living together for nearly a decade. Neither of us had any items of real value, so the financial implications of joining our lives meant very little. Marriage, it seemed, was just the obvious next step in our relationship. When I married for the second time, I couldn’t stop thinking about the implications. Emotionally, I didn’t want to make the same mistakes I made in my first marriage. Financially, my husband and I each entered into our relationship with considerable assets. Having lost half of a lucrative state-funded pension plan in my divorce, the financial risks of remarriage weighed heavily on my mind. Adding to my anxiety were the different spending styles my husband and I have. He’s more impulsive with his purchases, while I tend to contemplate—and track—every penny I spend. I worried about our financial compatibility to the point where I couldn’t sleep at night. I wondered if my goal of retiring from my fulltime job at a relatively young age would be helped, or hindered, by getting married again. A scientist by training, I approach most changes in my life in the same way I approach a research project. I begin by writing down all the information I have available to me, and then carefully evaluate the data. In this case, I compiled a list of all the assets my husband and I would bring to our relationship. My husband has a solid, stable, monthly retirement income. His pension and Social Security benefit provide a larger net cash flow into our checking account than my monthly paycheck does. He also owns a mortgage-free home that generates rental income. He still works a couple of days a month to stay active in his field and earn some additional spending money. My contributions include the regular income from my job, as well as my employer-sponsored health care benefits. Since my husband is 13 years older than I am, he’s eligible to enroll in Medicare. But instead, he’ll be able to stay on my health insurance until I turn 65. After that, my employer will pay for Medicare supplemental plans for both of us, a benefit that will continue for the rest of our lives. The house I recently purchased still has a sizable mortgage. But I’ll likely recoup all of my down payment, and perhaps make a little money, when we sell in a few years. I’ve built up a decent-sized emergency fund. I also have my own pension, as well as an employer-sponsored retirement plan, with a current balance of $330,000. Once I had a balance sheet in place, I realized our financial profiles were complementary to one another, rather than being in conflict. My husband provides long-term income stability, while I contribute short-term liquidity. We’re now almost a year into our new marriage. I no longer stay up at night worrying about our future. Even though our spending styles are different, they also seem to mesh well with one another. Left to my own devices, I’d likely squirrel away every penny for a rainy day. My husband’s impulsiveness, while initially making me nervous, has instead made me realize saving and spending can be done in balance. The occasional splurge on a desirable item won’t necessarily lead to financial doom. Kristine Hayes is a departmental manager at a small, liberal arts college. Her previous articles include Prime of Life, School's Out, Six Years Later and State of Change. Kristine enjoys competitive pistol shooting and hanging out with her husband and their three dogs. [xyz-ihs snippet="Donate"]
Read more » School’s Out
Kristine Hayes | May 31, 2019
THIS TIME OF YEAR, nightly news shows often feature a montage of clips from various commencement and graduation speeches. The speakers, mostly well-known business people, politicians and celebrities, dish out anecdotes and inspirational words to hordes of newly minted college graduates. If I were ever invited to speak at a commencement, I’d offer a more commonsense approach, sharing some of the insights I’ve gained from working in higher education for more than two decades. In particular, here are five tips I’d give to young graduates venturing into “adulting”: 1. Realize you probably don’t know what you’re good at. Also realize you don’t really know what you want to do with the rest of your life. I started my college career as a journalism major who hated science. When I was forced to take a biology course to fulfill a graduation requirement, I discovered I was fascinated by the field of genetics. I switched my major to biology, but swore I’d never work in a laboratory. One unpaid internship later, I discovered I was not only good at lab work, but also enjoyed it. Now, I’ve been working in labs for most of my adult life—but when I was 20-years-old, it was a career that wasn’t even on my radar. According to some studies, nearly half of college graduates don’t work in the field their degree is in. To make matters worse, nearly 45% of college graduates may be underemployed, working at a job that doesn’t require a college degree at all. My advice: Take advantage of various career and learning opportunities as they arise. They might just lead you on a career path you never dreamed of. 2. Get an education—just not too much. Studies continue to show that a college degree leads to significantly higher lifetime earnings. But the statistics may be starting to change. With the increasing cost of a college education, a four-year-degree no longer comes with the guaranteed payoff it had just a few decades ago. Too many students seem to think that, even though they hated sitting in a classroom for the first 12 years of their education, they’ll suddenly love it when they go to college. Nothing could be further from the truth, and many end up dropping out. Millions of Americans are saddled with student debt, but no degree to show for it. My advice: Consider alternatives like trade schools, apprenticeships, community college certificate programs and the military. All offer pathways to rewarding and financially stable jobs. The best part: Most of them cost a fraction of the tab for a four-year degree. 3. Follow your passion, but do it as a hobby. I admit I’ve contemplated trying to turn my hobbies into a career. Who wouldn’t love to earn a living doing what they consider their passion? But once your hobby becomes your job, it will likely cease to be your passion. Instead, it’ll probably turn into a stress-filled, 18-hour-a-day job as you struggle to stay afloat, build a business and make money. The cold, hard truth is only about 35% of small businesses survive more than a decade. My advice: Find a job you enjoy and a hobby you love. Maintain a healthy work-life balance. Dare to dream about retiring early and then save the money to make it happen. Once you leave the workforce, you’ll have nothing but time to pursue all the activities you love. 4. Learn to cook. I’m no gourmet chef, but I can read a recipe and create something reasonably tasty from a few simple ingredients. The few times a year when I go out to eat, I’m usually disappointed with the food I get and astonished by the cost. My advice: Invest in some good cookware and a couple of good cookbooks. Learn how to shop for groceries on a budget. Once you’ve become familiar with the price of common food items, you’ll realize the restaurant meal you just paid $25 for contained just $3 of ingredients. 5. Examine all benefits of a job. It took working nearly 20 years at my current job for my salary to double. I’ll probably never come close to making a six-figure salary. But I’ve had jobs with fabulous retirement benefits and I’ve had jobs where working less than 40-hours-a-week was still considered fulltime. At my current job, my dogs can accompany me to work every day—a huge benefit when it comes to raising and training a puppy. My advice: Don’t just consider the salary when examining a potential job. Factor in retirement benefits, paid time-off and any other perks that come with the position. While it’s the salary that pays the monthly bills, often it’s the benefits that make a job desirable and worthwhile in the long run. Kristine Hayes's previous articles for HumbleDollar include Six Years Later, State of Change and A Better Trade. Kristine enjoys competitive pistol shooting and hanging out with her husband and her two corgis. [xyz-ihs snippet="Donate"]
Read more » Keeping My Cool
Kristine Hayes | Jul 23, 2021
MY 2007 HONDA CR-V’s air conditioning system started having issues about three years ago. I took it to a shop where they added refrigerant and declared the problem fixed. A year later, the AC stopped working again so I took it to a different mechanic, who declared the problem solved after adding refrigerant and replacing a relay. Several months later, I was once again driving around in a car at ambient temperatures. Because I spent much of the summer of 2020 working from home, I decided not to bother with another repair. Fast forward to a few weeks ago, when temperatures in the Northwest were forecast to reach record highs. I knew I needed to come up with a fix. My first thought? Trade in my low-mile, mint-condition Honda for a fancy new Kia. I justified my thinking by first telling myself I deserved a new car. Then I justified it using the fact that used cars are in demand right now. I went so far as to contact a new car dealer to request pricing information for both my trade-in and a new vehicle. The dopamine hit I got from thinking about having a new car completely overwhelmed the more practical parts of my brain. In a moment of sanity, I told my husband I felt like I was trying to solve a $1,500 problem with a $25,000 solution. I found a local mechanic who specialized in AC issues and scheduled my car for a diagnostic panel. They quickly discovered the problem, gave me an estimate for the repair and, when I approved the fix, they ordered the parts and had everything repaired just 24 hours later. Ironically enough, the cost of the repair was almost exactly what I had predicted, coming in at $1,460. My lovingly cared for Honda now happily blows cold air again and I’m happily driving around without a $400-a-month car payment.
Read more » Getting Sued
Kristine Hayes | Sep 4, 2017
LIKE MOST PEOPLE, I don’t spend a lot of time thinking about my car insurance. And like most people, the only time I do think about insurance is when I need to use it. Four years ago, I was involved in a collision. My car was totaled and my insurance company processed my claim quickly. Because I was deemed to be not at fault by my insurance company, I didn’t have to pay my deductible or any other expense related to the collision. I purchased a used car with the funds from my claim and thought nothing more about it. Until a year ago. Sitting at home one day last summer, I heard a knock on my front door. I opened it and saw a young man standing there with a large envelope in his hand. After verifying who I was, he proceeded to hand me a summons. I was being sued by the other person involved in the collision. I had no idea how to deal with being sued. Fortunately, through a series of friendships developed in the competitive shooting community I’m part of, I was able to talk to someone knowledgeable about auto insurance litigation. I found out my insurer would provide a lawyer to represent me. I also learned several other valuable lessons related to my insurance coverage: Keep comprehensive notes about any accident you’re involved in. Get copies of any police reports that were filed. Take photos of any damage that occurred. Spend time writing down the details—weather, road conditions, specific location of the accident—as soon as you can.
Don’t be in a hurry to throw away any documents you collect. I almost discarded all the records related to my collision just a couple of months before I received the summons. I assumed that since the accident had happened more than two years earlier—and my claims had all been resolved—there was no reason to keep my records. As it turned out, the lawsuit was filed just one month before the three-year statute of limitations expired, so I was glad I had hung on to the documentation.
If you receive a summons related to a car accident, contact your insurance company immediately. You have a limited number of days to respond to a complaint filed against you, so it’s imperative to get the insurance company involved immediately.
Be aware of your insurance coverage limits and consider increasing them if you have substantial assets. I was happy to discover I had more bodily injury (BI) liability coverage than the minimum my state requires. Subsequently, it was recommended that I increase my BI coverage to at least $100,000 per person, to adequately protect my financial assets. With a net worth now exceeding $400,000, I’m also considering purchasing a separate umbrella policy to further protect me from any future litigation. I recently gave my deposition about the accident and the case should go in front of an arbitrator soon. Being sued was both a surprise and a wakeup call. Spending time reviewing insurance policies and contemplating litigation isn’t the way I like to spend my time. But knowing I’ve done what I can to protect my financial future helps me sleep better at night. Kristine Hayes is a departmental manager at a small, liberal arts college in Portland, Ore. Her previous articles include Then and Now, Growing Up (I) and To Buy or Not. [xyz-ihs snippet="Donate"]
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