The tax man cometh

April 14 looms as the deadline for filing taxes in the US, and about half of my income statements from both my employer and investments are in. I haven't reviewed them in detail, though I will before packing them up for my accountant in early March.

I've mentioned before that I don't use financial software to track any of the money investment I do, and the same holds true for taxes. I used to do my taxes by hand using paper-based forms while I was in graduate school, but one year I made a mistake and didn't realize it until after I sent my taxes in. I called the IRS to let them know I had made an error that I needed to correct, and the representative I spoke to laughed and said Don't worry, we'll find it and get back to you.

The IRS found the error and got back to me, but it took two years. By that time, I owed what was (for a broke-ass grad student) a horrendous amount in penalties. The year I paid that nasty surprise off was the last year I ever did my taxes on my own. Since then, I've used an accountant.

My accountant for nearly ten years was a very nice guy who always looked after my interests. "S" died suddenly early last year (and I was really sorry about that on a personal level), but in anticipation of his death had made arrangements to leave his practice to another firm and have his paper and electronic records professionally destroyed after transferring them to the receiving firm.

I met with one of the partners of the receiving firm to get to know him before deciding how to have my 2008 taxes done. "G" greeted me with the unfortunate news that my former accountant's records suggested that he took some very aggressive chances with his filings, a strategy that will most likely come back to haunt some of his former clients. "G" felt that my records indicated significantly less aggressive behavior than most, which didn't surprise me too much for a couple of reasons: First, my portfolio is fairly simple given that my W2 job, with only minor complexities stemming from investment income and home ownership; and second, because I had always been very insistent that "S" not take deductions that I couldn't substantiate.

The interview with "G" was very positive, and although "G" charges twice as much as "S" did, I left feeling comfortable that my taxes would be handled properly. This year, getting my taxes done through "G's" firm will be an out of pocket cost of about $450, but this is one of those instances where the peace of mind is well worth the dollar figure charged - especially since there's no way I'll ever tackle taxes on my own again if I can help it.

Do you file your own taxes, or do you have them professionally done? Is there anything about your situation that makes filing either easier or more difficult than the average?

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This ought to make my future health insurance situation interesting

Long-time readers might remember that my dad died nearly two years ago. He had multiple terminal conditions, but the one that got to the finish line first was congestive heart failure. His brothers also died of related causes, one a few years older than my dad was when he died, and one a few years younger. My dad's major heart attack and bypass surgery were in his mid-seventies. Every time I've gone in for a physical since then, my doctor has slapped an EKG on me. So far, so good: My pulse is strong, steady, and unusually slow, usually riding around 40 beats per minute.

My mom had cancer, but she's been in remission for nearly ten years. Her siblings both died of massive strokes when they were in their seventies, and my mom has significantly outlasted them. Unfortunately, my mom was diagnosed yesterday with the same heart ailment that started my dad down his long road of heart disease.

Both sides of the immediate family now. Great!

My mom's situation is not serious, and it's possible that it might never become serious. The fact that both of my parents ended up with heart trouble is disconcerting, though. It's certainly too melodramatic to think of it as carrying around a ticking time bomb in my ribcage, but the fact remains that heredity might eventually nail me no matter what.

My philosophy towards my personal genetic lottery is that some things are out of my control, but staying fit and healthy now will optimize my ability to defeat whatever crap genes might emerge. Being the proud bearer of two mild auto-immune disorders already, I think it's reasonable to expect that something that may or may not be related to the existing issues will eventually hit. In the meantime, however, until there is full legal protection against genetic discrimination and no risk of ever losing medical coverage, there is no way in this lifetime that I'm going to take any gene tests that might predict a bad future outcome.

It pretty much goes without saying that I'll keep running marathons, too. I feel that it's incumbent on me to do whatever I can to give me not only a good quality of life now, but also the best fighting chance possible in the future, just on the off chance that I need it.

Do you have any worries about your genes and how they might impact your health coverage going forward? Why or why not? If you worry about your genetic makeup, do you do anything special in hopes of mitigating your concerns?

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Things I learned when converting my traditional IRA accounts to Roth

Two of the items on my list of goals for 2010 (to be published this coming weekend, if not before) were to fully fund my traditional, non-deductible IRA accounts for 2010, and then take advantage of the elimination of income limits on conversions to switch them over to Roth IRA's. I'm happy to say that both of these goals are completed, and I learned a couple of things about Roth IRA conversions in the process.

As I mentioned once before, while income limits on Roth IRA conversions are gone, income limits on direct Roth IRA contributions still exist. I anticipated that this would play out in my having to create a new traditional account each year, fund it, and then convert it over to Roth (locking myself out of future contributions in the process) until either income limits on conversions come back, or income limits on direct Roth contributions go away. I was wrong. There is a way around this.

It turns out that I can keep my existing traditional IRA accounts open by leaving a token amount of money in place, and convert the remainder of the money into Roth IRA accounts based on the same investment funds as my traditional accounts. Then, I can fund the traditional accounts next year and do a conversion into their corresponding Roth IRA accounts the next day. It sounds convoluted (it is somewhat convoluted), but it's a much better solution than opening up a brand new account every year, fully converting it, and locking myself out of future contributions.

I also confirmed that since the original IRA accounts are non-deductible, the only tax I pay is on the growth, and I'll pay that when I file my 2010 taxes next year. However, a 1099R form issued by my account holder will note how much was converted, but not what part is taxable. My accountant needs to figure that out based on the 8606 forms filed in prior years.

I was able to do the conversion over the phone during lunch. The conversion trade executes today, but the account holder will issue an authorization form that I need to retroactively fill out, sign, and return. The customer representative didn't tell me a deadline for doing this, but asked that I take care of this promptly.

During the conversion, I had the options of:

1.) Having taxes on IRA growth withheld at the rate of 10% (by default)
2.) Identifying a percentage of growth taxes to be withheld
3.) Paying the growth taxes when filing my 2010 taxes next year. (For 2010 conversions only, these taxes can be spread out over 2011 and 2012.)

Aside from the fact that paying taxes from the investment itself probably isn't the brightest idea since it reduces the overall value of the investmemt, for people under age 59 1/2, having taxes withheld at the time of the conversion will be treated as an early withdrawl, triggering an additional 10% penalty charge . Not surprisingly, I'm opting to pay the taxes on the account growth in full next year when I file my 2010 taxes. The way the stock market got spanked over the time the traditional IRA accounts have been open, this won't be much anyway.

Going forward, since keeping my traditional accounts open to expedite conversion will naturally result in co-mingled funds, every time I do a conversion I need to pay taxes on a portion of whatever growth took place in the traditional funds. Again, this is something that my accountant and I will need to figure out based on prior year 8606 form filings.

While we're on the subject of Roth IRA's, I'd encourage you to also think about the Roth 401(k), which is becoming much more widely available. My blogger friend Shadox and his wife were planning to invest her company retirement savings in a Roth 401(k), but a commenter provided some compelling reasons for them to stick with a traditional 401(k). I'd encourage you to take a look at the article that convinced them to change their minds. In my case, this article reaffirmed my confidence that a Roth 401(k) is the right company retirement investment vehicle for me, but obviously your mileage may vary considerably based on your life circumstances.

Are you doing any traditional to Roth IRA conversions this year? Why or why not?

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f.z. takes you grocery shopping

After I posted how I spend $24,000 per year, a few commenters expressed a little bit of surprise that my average grocery bill hovers around $200 per month for one person. Commenter amr was interested in a breakdown, so I figured that the most efficient way to do that would be to take you shopping with me.

I go to Trader Joe's once every six to eight weeks, and to two neighborhood stores once a week. When I go to Trader Joe's, my bill is usually $70 to $80, and at the neighborhood stores I usually spend $30 to $40 each visit, sometimes more if I'm stocking up on something. A Trader Joe's visit usually results in a couple of weeks of grocery bills that hover around $20 to $25, so the monthly total generally balances out at more or less $200 per month. I didn't go to Trader Joe's this week, so that's just background.

As far as the neighborhood stores go, I think of them as Meat Store and Vegetable Store based on what I buy. Meat Store is where I buy ground turkey, turkey sausage, and the occasional ham. I also buy canned goods and other non-perishable staples there. Vegetable Store is where I buy produce in winter and early spring. (Late spring to early fall, I usually go to farmer's markets for about half of my produce and Vegetable Store for the rest.)

Vegetable Store caters to the upper middle class and Meat Store is aimed at low-income customers. I've noticed at Meat Store that the vast majority of customers pay for their purchases with food stamp debit cards. The only reason I point this out is because while meat at Meat Store is significantly cheaper than it is for the same products at Vegetable Store, produce at Meat Store is of significantly lower quality than the produce at Vegetable Store, but it's much more expensive. I find that the extra time it takes to go to two stores that are nearly a mile apart for different types of purchases is well worth it.

This week, here's what I bought:

Meat Store
Purchase	Price	Comments
2 28 oz cans of peeled tomatoes at $1.19 per can	$2.38	I don't often see store brand canned tomatoes at Meat Store. At regular price, they are about the same price as the sale price for the branded version.
2 boxes of Pop Secret popcorn, light butter flavor, $1.50 each	$3.00	Reduced from $3.49 per box with a coupon for a total savings of $3.98. This is one of the rare occasions where I actually did use a coupon: Normally, I don't because most of what I buy isn't coupon-friendly.
4 48 oz containers of store brand rolled oats for $2.29 per container	$9.16	Reduced from $2.99 per container for a total savings of $2.80. This supply should last for about three and a half to four months.
One 24 oz container of store brand seedless raisins.	$3.29	Store brand is significantly cheaper than branded, even at regular price.
One 12 oz container of store brand honey, reduced to $2.50 from $3.29	$2.50	Total savings of $0.79. Store brand is significantly cheaper than branded.
Two 1.3 pound packages of ground turkey, reduced from $5.99 each to $3.99 each	$7.98	Ground turkey is my go-to meal when I need to get something ready for dinner quickly. It will drop to $2.99 next week and I'll buy a lot more, but in the meantime I bought some on this trip so I can make turkey meatballs and freeze them to eat during the week.
Meat Store Total: $28.31

Vegetable Store
Purchase	Price	Comments
Five pounds of clementines	$6.99	This is the cheapest I've seen them in a few weeks. Last week, they were $8.99 a box.
Mesh bag of four Hass avocadoes	$2.99	Also the cheapest I've seen recently. Hass avocadoes are usually $1.99 each, although these are admittedly on the small side.
Three large pomegranates	$6.00	Boo, pomegranate season is ending soon.
2.65 pounds of Idaho potatoes at $0.69 per pound	$1.83	Potatoes are not the best choice for someone like me who is sensitive to high glycemic foods, so these are a very occasional purchase
Three pound bag of yellow onions	$1.67	Really, there's not much to say about onions.
Ten ounces of fresh spinach	$2.49	I think cooked spinach is nasty, but raw spinach makes excellent salads.
1.12 pounds of yellow Holland peppers at $1.69 per pound	$1.89	Red peppers were $1.49 per pound, but they were soft and obviously had been sitting around for quite a while.
Vegetable Store Total: $19.86

Grand total for this week's grocery shopping: $48.17

This is more than I usually spend in a week, but stocking up on rolled oats threw me off. Most likely, my next grocery bill will be closer to $25 or $30.

In order to see the full picture of what grocery shopping looks like in my world, there's a little more you should know. I mentioned at the start of this post that I normally go to Trader Joe's once every six to eight weeks, and the bill for that trip usually runs around $70 to $80. Here are the kinds of things I usually buy there:

2.6 pound bags of chicken breasts and thighs, $6.99 to $7.49 per bag
Frozen uncooked shrimp, $8.99
12 oz ravioli and/or tortellini, $1.99 to $3.49 per package
Crunchy peanut butter, $1.69 per jar
Salsa, $1.29 per jar
Basil pesto, $2.49 per jar
Thai curry simmer sauce, $2.69 per bottle
1 liter olive oil, $5.99 per jar

In addition, if you look in my refrigerator or cupboards, here are things you'll just about always find:

Oatmeal
Popcorn
Some kind of meat (ham, turkey sausages, chicken breasts and thighs, ground turkey)
Canned tomatoes
Almonds
Pecans
Sunflower seeds
Pumpkin seeds
Whole wheat flour
White flour
Yeast
Frozen blueberries
Coffee
Peanut butter
Spices
Olive oil
Margarine
Minced garlic
Dates
Canned olives
Brown and wild rice mix
Onions
Salad dressing
Chicken broth
Fresh fruit and vegetables in season (some organic, some not)

Depending on when you look, you might also find some of these:

Garlic
Eggs
Cheese
Pasta
Dried beans
Crackers or bread crumbs
Dried fruit
Shrimp
Honey

Astute nutritionists will immediately spot that I'm completely missing the dairy group. My stomach doesn't tolerate milk, and in the last six months even plain yogurt has started doing a job on it. I do take calcium and vitamin D supplements in an attempt to mitigate the shortfall.

I cook in large quantities and freeze a lot, especially things like bread, vegetarian chili, chicken pot pie, chicken cassoulet, Indian curries, lasagna, and turkey meatballs. I don't buy a whole lot of processed food, but I do rely on a few shortcut items like pesto, salad dressing, salsa, and simmer sauces because sometimes I just don't have the time to whip together everything from scratch.

Oh, and I don't eat red meat. Never liked it. I also don't cook fish at home because it stinks like hell in here for a few days afterwards.

That's how I do my grocery shopping. What are some of the similarities and differences with how you do it?

I have a couple of post ideas for next week including the long-awaited 2010 goals, but before I jump in and start writing, is there anything else you want to know? Feel free to make suggestions in the comments or via email at frugal (dot) zeitgeist (at) gmail (dot) com.

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Spending virtues and vices

Okay, in my last post I answered a question about how I spend $24,000 per year. Here's what I don't spend money on, and why:

What I'm NOT spending on	Why
Manicures	My nails have always been weak and brittle, even with extra calcium. I also do a lot with my hands, and that's hard on the nails. I keep them neat but since they'll never be long, I've never figured that a manicure is worthwhile.
Pedicures	With the amount of running I do, there is no nail technician in the world who gets paid enough to get up close and personal with my feet.
Waxing, facials, eyebrow grooming	Never felt the need for any of it.
Massages	I had one once. It was nice, but it's not a priority.
Hair salons	My hair is pretty easy: It's long and straight, so I just get a wet and whack every ten weeks or so at Supercuts for $16. I put in some mousse and twist it up for ten minutes or so every day to get a little curl going, but that's the extent of it.
Books	There's a library less than half a mile away.
Lunch out at work	I pack my lunch every day. Breakfast, too. I think the only day in 2009 that I went out to lunch at work and paid for it out of pocket was during one of the major layoffs.
TV	I've never wanted television badly enough to pay for cable. It's just not a priority, and I can catch most shows online if I really want to see them anyway.
iPod	Another one of those things I just never felt I needed.
DVD's/movie rentals	I've never bought a DVD, and I haven't rented one in years. I borrow them every now and again but it's just not a priority, especially with so much available on Hulu for free.
Camera (digital or otherwise)	Taking pictures doesn't interest me. Inevitably someone else has a camera, does like taking pictures, and is willing to share, and that makes this one even less of a priority.
Car	The great thing about living in Manhattan is that it's very easy to get by without a car.
Cleaning person	I like doing my own cleaning. Doing something nice for my home is rewarding in some weird way.
Sending laundry out to be washed or pressed	I send my suits out for drycleaning when they need it, but I wash my own clothes and iron my own work shirts. Having a washer and dryer in my apartment helps!
Most processed food	I've learned through bitter, bitter experience that I can't keep junk food of any kind in the house. In case that sounds sanctimonious, I'll add that I have a strong and powerful relationship with the vending machine at work, which is where I get a Cheetos fix two or three times a week. That's really about the only true junk I eat, and making space for them helps keep me away from worse food vices. (I know it would be cheaper to buy Cheetos at the store and pack them in my lunch, but I've tried it. The Cheetos don't make it to work.)
Bottled water	I have a very large Brita filter at home and drink a lot of free coffee and herbal tea at work.
Expensive hobbies	There once was a time where I thought very seriously about taking up triathlons, but the cost of remedial swimming lessons and a racing bike scared me off. Running, blogging, reading, and volunteering are all cheap, and I try to use my pricey gym membership enough to make it worthwhile.
Collecting things	Collections are not my thing. I care far more about having ample open space than I ever have about having groups of things I could shove in it.
Expensive cocktails	Cocktails easily cost $12 a pop or more in Manhattan. When I'm going out with friends, I usually have one glass of wine and then switch to water. If there are enough of us out for dinner, we do generally get wine for the table, and I always pay my share of that. I should also add that one unexpected benefit of cutting sweets out has been that I've kind of lost my taste for sweetened alcohol as well. I have three bottles of duty-free Bailey's, Cointreau, and Irish Mist in the refrigerator right now, and I haven't felt like touching them in months.
Starbucks	I accrue free coffee on a credit card, so whenever I'm in the mood for a latte, I'll have one - but only if there's enough coffee credit on the card to pay for it.

There really aren't any things that are universally right or wrong on this list. I'm not spending money on these things because I've either found an acceptable substitute, or I just don't have any interest in these things in the first place. Couple that with taking care of financial responsibilities before moving on to the fun stuff, and I think that's the key to spending sensibly: Take care of business before you think about discretionary spending. After you take care of business, cut back on the things that aren't important to you so you have money to spend on the things that are.

Now that you've seen the things that don't crank my spending motor, I'll also tell you my biggest hot button items, where I really have to work to manage my spending appropriately:

Hot button #1: Workout clothes
I exercise a LOT and my clothes are pretty skankola after a workout, so they get one wear before a wash. This means that I have a lot of workout clothes. No matter how much I have, though, I always want more. I try to keep that beast locked up by mentally counting up how many sports bras, shorts, or whatnot I already have every time I see something nice at the right price. No matter how great a bargain is, it's not a bargain if I don't NEED it. I also limit the space I allocate to good quality workout clothes: I have two drawers to cover every season, and they're full. I really don't need any more.

Hot button #2: Cooking and home decor
Remember why I said I like cleaning? Doing things to make my home environment clean, tranquil, and welcoming feels really good. Unfortunately, that good feeling also applies to buying nice things for my apartment, even when I don't need them. Having a really strong stance against clutter and not going to stores that cater to this particular jones help a lot, but once in a while I fall down on the job. This past weekend, I went to Crate and Barrel to buy a really good spatula to replace one that disintegrated. I bought the spatula, along with a 30% off spoonula (similar to a spatula but with a scoop), and a new duvet cover and pillow shams. I saw the duvet cover and pillow shams in a catalog in late December and set the catalog aside for three weeks. When I still wanted them badly three weeks later, I decided that if they were as nice in the store as they looked in the catalog, I'd buy them. (It was also easy to rationalize the cost because this month's gym membership fee was waived thanks to a referral reward.)

Were the duvet and shams as nice in person as they looked in the catalog? Of course they were. It was hard to leave without taking half of the rest of the store with me, too.

These two categories of stuff are by far my worst spending vices. Prioritizing my discretionary spending means that I can indulge them within reason, though, and I'm satisfied with that.

What are your own spending virtues and vices, and why?

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Commenter wants to know how I spend $2000 per month

An interesting question popped up after my last post. In that post, I noted that my emergency fund/F.U. fund is currently $60,000, which works out to 2.5 years worth of living expenses at $24,000 per year. Commenter Tom averaged that figure out to $2000 per month and was curious to know where it all goes, since I don't have a mortgage.

Happy to tell you. Here are my major budget categories:

Monthly fixed (or near-fixed) expenses
Co-op maintenance and taxes	$640
Gym membership	$139
Land line and internet	$87
Weekend New York Times	$25
TOTAL	$892

Monthly variable expenses
Groceries	$200
Utilities	$80
All other	$300
TOTAL	$590

Annualized periodic expenses
Homeowner's insurance	$250
Airline travel to see my mom ($250-$450 per flight plus $100 ground travel,quarterly)	$1,800
Other travel	$1,200
Medical care, including dental and prescriptions	$1,500
Subscriptions	$60
Costco run (mostly health and hygiene items)	$400
TOTAL	$5210

When you add fixed plus variable expenses together, you get $1482 per month. Let's round that up and call it $1500. For months where I don't get socked with one of my periodic expenses (and there aren't many!), that's about what I spend. If you annualize that, it works out to $18,000 per year. Add in the $5210 in periodic expenses, and it comes out to a little over $23,000. Add in some wiggle room for the unexpected and you get $24,000 per year.

Now, a little explanation on the budget categories: The catchall called All other under variable expenses really does mean all other. It includes clothes, entertainment, haircuts, light bulbs, cleaning products, gifts, bottles of wine, bags of Cheetos, succumbing to the occasional Crate and Barrel jones, and just about anything else you can think of. Some months it goes way over the amount I have allocated, especially if I have periodic expenses hitting at the same time. Some months, the All other category comes in way under estimate. As long as my overall savings plan is on track, I'm not terribly concerned about the month to month variation.

Also, it should go without saying (but I'll say it anyway) that this is the spending plan I'm working with today. If I'm unemployed, some of these categories will be cut back or eliminated so I can pay for health insurance.

That brings up one other key point to address: Where are health insurance, taxes, transportation, and cell phone on this list?

I left them out deliberately. All of those things except the cell phone are taken out of my paycheck before I see them, so I don't count them when I'm working with after-tax budgeting. I claim zero withholdings for taxes, and I usually end up with a couple of thousand dollars refund rather than having to pay out of pocket. Finally, the cell phone is 95% paid by my employer, who is pretty good about reimbursing my out of pocket costs promptly.

I hope that answers your question about how I spend my money, and I'm interested to hear your feedback on what does or doesn't make sense from other people's perspectives.

In my next post, I'll talk about things I don't spend money on and why. In the meantime, if there are any other questions or topic suggestions, I'd love to hear them. You can either drop a suggestion or a shocking personal question (whatever gets your groove on) in the comments or shoot me an email at frugal (dot) zeitgeist (at) gmail (dot) com.

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The fundamentals of fundamentals

Sorry about the unplanned hiatus this week. Lots of exciting things (and I don't mean that in a good way) are going down at work as we gear up for our next round of layoffs. The big one for my grade is already done and dusted so I don't think I'm particularly at risk, especially since my extended group already provided more than 25% of the casualties to date. My emergency fund, now also known as my F.U. fund, is officially up to 2.5 years of living expenses in cash ($60,000) without factoring in unemployment or severance, so even without the other semi-reassuring factors, I'm not worried about getting axed anymore.

Oh, and I have a stomach bug, too. Marvelous.

What I've been meaning to post this week is a look over at Grace's blog, specifically about her current family situation. You can read Grace's blog yourself for the full background, but it made me think about life skills and where those come from.

I'm sure there's a proper psychological definition of life skills out there somewhere, but I think of life skills as comprising the basic, fundamental things people need to know to be able to fully function as an independent adult. To me, these things include (but aren't necessarily limited to):

--Reading and writing
--Budgeting
--Cooking and basic nutrition
--Cleaning
--Basic repairs
--Meeting deadlines
--Time management
--Decision making
--Planning
--Establishing a daily routine

(For parents, there's obviously a whole other world of life skills to learn. I don't know anything about parenting, so I'm just focusing on adult independence.)

In an ideal world, we'd learn all this stuff from our parents. In the real world, forget it. I learned a lot of it from my folks and some from school, but I also figured some of it out myself. One example: When I first went out into the working world, I had to teach myself how to make up a budget. There was no opportunity to learn this at home, since my parents didn't talk about their incomes or their household budget around the kids. I really wish they had: I picked up my views on spending by observing them and I know they were good at planning for their future. I really would have liked to sit down with them once a month to learn hands-on how they figured out what money went where.

Similarly, I can only imagine how aghast my college roommate was the day I moved into a share house and called her up shortly before dinnertime to find out what one does with chicken. I love cooking today: I'm a pretty darn good cook (and modest, too!), but getting there was something of an awkward journey. I'm just glad I never burned anything down.

I wouldn't say that all of my life skills are as good as they could be. I've learned a bit about fixing things over time, but only the absolutely most basic. My ways of compensating for that are to either bribe talented friends to teach me, or make sure I have enough money to pay someone else to do the work. I've got the other basics covered well, though, so I can get by even though I'm weak in this area.

So. . . what happens when someone gets to adulthood and for whatever reason isn't equipped with enough of the basic skillset to function independently? I posted my thoughts recently that teaching life skills should be a mandatory requirement in safety net programs, because I think that's potentially a great way to foster independence. What other ideas do you have for helping people get life skills that they may have missed out on while growing up?

While you're at it, what core life skills are missing from the list? Of the core life skills, what are your greatest weaknesses and how do you compensate for them?

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Well, I did something stupid

Let me set the context first:

I don't carry a credit card balance.

I've never carried a credit card balance.

I've never made a late payment on a credit card.

I have two credit cards, one which provides 1% cash back and one which accrues free coffee. When I spend money, normally I put everything on a credit card and set aside enough from one of my paychecks to pay off the balance in full. My closing and payment dates on the cash back card (which I use most often) change depending on the billing cycle, so I always keep a cash buffer in reserve in case something unexpected happens. I know that a number of people probably disagree with this way of doing things, but it works for me.

Now, with all that said, December was an expensive month. I had to pay out of pocket for a gold crown ($950), as well as buy a couple of Christmas presents, pay my homeowner's insurance for next year, and cover travel costs to visit my mom. I was also closing in on my financial goals and I wanted to have a nice, round figure in my emergency fund. Very much against my better judgment, I kicked my normal buffer money into my emergency fund, which I hold outside of my regular bank. I wasn't worried about it because I had enough cash on hand in my checking account to cover the credit card bill in full, plus a few dollars extra if I absolutely needed cash.

You can probably see what's coming, right?

My cash back credit card closed billing four days later than it did the month before.

During that four day window, my phone bill hit the card.

While I had set aside enough cash to cover what I expected my credit card bill to be plus a few dollars extra, my buffer had already gone into emergency savings, resulting in very tight cash flow. End result: Not enough money to cover the credit card bill!

I had a brief moment of panic and kicked myself for being stupid: A spotless record of never carrying a balance is a Really. Big. Deal. to me. In all honesty, though, it wasn't a particularly serious situation: I had the money; it just wasn't where I needed it to be. The only real issue was that getting it in the right place might involve racking up some Stupid Tax because I didn't have enough time for an ACH transfer back from emergency savings to clear before the credit card bill was due.

I checked my dental insurance provider's site, and fortunately the reimbursement for my out-of-pocket dental expense had been processed. I figured that if the check arrived in time, I'd cash it straight away and that would not only cover the outstanding bill (due today), but also replenish the buffer. If the check didn't arrive in time, the alternative would be to call the bank on Monday and pony up $30 of Stupid Tax for a same-day wire transfer from my emergency fund back to my checking account.

As it turned out, the check arrived on Saturday. I cashed it on Saturday, most of the funds (more than I needed to cover the credit card bill) were available on Sunday, the rest of the check cleared on Monday, and today my credit card automatic payment went out in full without a hitch. All's well that ends well, but the angst and potential Stupid Tax were both completely avoidable.

Don't mess with the buffer. Okay, lesson learned.

Did you have any less than stellar financial moments during the holiday season?

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Hey, we resemble that remark

Here's an article that hit a little close to home. It's about a middle-aged married couple in which the husband has been out of work for two years.

Two years. Oy.

The article mentioned a word I hadn't heard before, mancession. Apparently, it means that men have been hit much, much harder than women in the waves of layoffs that swept the US over the last couple of years. The article claims that there actually isn't that much difference between men and women in terms of who's unemployed (11% vs. 8.8%, respectively). It also noted that people over 45 who become unemployed are unemployed longer than their younger counterparts, 33.4 weeks versus 26.8 weeks.

The husband profiled in the article is struggling with despair, and the couple's marriage has suffered. For entirely personal reasons, that's the part that I found the most disconcerting: My SO has been out of work for ten weeks now, and it's been very, very hard on him.

I'd be lying if I said it hasn't impacted our relationship. It has.

The good news is that he's treating job-hunting like a job. He's had several interviews and I think he's close to landing something, but he's not there yet. In the meantime. . . well, we're just slogging through.

Has unemployment impacted your relationship(s) in any way? If so, how?

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Getting more bang for the buck

Last year, I got a yoga mat. I bought it as part of a set that included two blocks and a belt, all for the (relatively) bargain price of $29.99. I wasn't under any grand illusions of what I was getting: I knew it was low-end, but I figured that a.) I suck at yoga anyway, and b.) I wouldn't be doing enough home practice for it to be a problem.

I still suck at yoga, but the mat's a problem. It's not sticky, so the mat slides all over the floor and I slide all over the mat. That's dangerous. Since it's less than a year old and only gets pulled out once or twice a week, I'm also not happy that it's starting to tear.

Before Christmas, I got some running socks online. At less than $4 for three pairs, these really were a steal. Unfortunately, two pairs developed holes on the on the very second wear, with only one wash in between.

I can live with the holes for now; they're not that bad. It's still annoying, though.

When I shop, I always try to strike a balance between price and quality, but I don't always weight them equally. Cheap wins out much more often than quality does, and the end result is that I end up rebuying a similar product a few months or a year down the road.

I'm tired of this. It doesn't square with my priorities on spending, and it's not good long-range planning or environmentally conscious. I'm still not at a point where I can finalize and post my goals for 2010, but one of them will certainly be to spend a little more if it means getting a quality product. To that end, I'm thinking of dropping $90 on a PrAna Revolution yoga mat, which is supposed to be the best one out there. Next time I buy running socks, I'm going back to Feetures, which retail for $9 per pair but are often available for $6 to $7. I got through my last marathon with only one blister thanks to good socks and shoes, and the Feetures socks last forever.

Quality versus price: What matters more to you and why?

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A chicken in every pot?

It sounds like the economic tide has turned in the US, and for all intents and purposes the recession has been pronounced dead. The job market hasn't come full circle yet, and it's not likely to do so for a while given that jobs are a lagging indicator of the current economic situation and short-term forecasts. That's why I wasn't enormously surprised to read in the New York Times today that one in every eight Americans relies on food stamps, with a significant and growing proportion of that population declaring no source of cash income whatsoever.

The article presents food stamps in a couple of different lights: From one perspective, food stamps are a lifesaver for people hit hard by the economy. From another, it's a shortcut to enabling people to develop long-term dependence on government assistance. As usual, my perspective lies somewhere in between.

For the record, I'm not a fan of relying on government assistance, but I do recognize that there are always going to be people in society who are not capable of functioning independently. I'm not addressing those people's situations here, okay? For everyone else, it's vital to have a short-term safety net for unexpected interruptions of income. Where I get annoyed is when people use the protection that government assistance provides to make bad decisions.

What do I mean by bad decisions? Here's one example from a blog: Someone who depends on subsidized housing and food stamps to keep a roof over her family's head decided that while her safety net wasn't ideal, it was enough to allow her and her husband to forge ahead and have another child, so she discontinued birth control and they are actively trying for a baby. Meanwhile, neither the blogger nor her her husband are working: she's hell-bent on being a stay at home mom, and her husband has a long history of not being able to hold a job for more than a couple of weeks before being dismissed. This couple's choice to have a second child while knowing full well that they can't support the family they already have is, in my opinion, a very bad decision from a forward planning and financial health perspective as well as a thoroughly unconscionable abuse of government assistance.

As annoyed as I am by circumstances like this one, I don't see that anyone benefits from this family being made homeless or left to starve, either. This is where I think non-cash assistance programs like food stamps are beneficial: Since food stamps can only be used for food, as long as there are adequate protections in place to prevent them from being sold or traded (New York uses debit cards containing photo ID), I think they have the power to effectively help people who are struggling with less risk of generating a mindset of ongoing dependence than cash assistance programs.

And yet, as the example I gave you above illustrates, there are people who will use non-cash government benefits as a justification for making inappropriate choices. This is where monitoring and counseling are key: I think any government assistance program should be designed to motivate people to want get off of assistance as soon as possible. To make this happen, I think government assistance should come with mandatory financial counseling/budgeting skills and job skills training, as well as regular checks to verify both incoming household income and how the household money is spent. It would be uncomfortable and no doubt intrusive, but I don't think receiving government assistance should ever be comfortable. More importantly, I think it's critical to help people develop the skills, confidence, and motivation to stand on their own two feet.

What do you think: Is this perspective too gentle? Too harsh? How closely does it reflect how government assistance is handled where you live?

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