Breakup song

(This post is for you, Penny. Hugs.)

You said you wanted to have some space,
Slow it down some and take a break
Well, fuck you, too!
Give me my money back, Give me my money back, you bitch
I want my money back
And don't forget to give me back my black T-shirt!

--Ben Folds Five, "Song of the Dumped"

You know how the story goes. Two people meet and fall in love. Maybe they get married; maybe they don't. Either way, they build a life together, and they live happily ever after.

Until they don't anymore.

Then what?

Breaking up often means losing a part of oneself. If that wasn't bad enough, it can also be financially devastating. The worst part is when the couple hasn't been playing in the same financial ballpark: What's fair and right? If the major breadwinner is a frugal person, is it right for that person to hand over an enormous share of assets and future earnings to a spendthrift former partner? If the major breadwinner is a spendthrift and the former partner plays great financial defense, does it make it any more fair?

I don't know the answers. There aren't any easy ones. I thought I was doing the right thing by setting up a prenuptial agreement when I got married, but the joke was on me when my spendthrift husband's salary doubled in two years. After four years of my scrimping along to pay half our expenses on what ended up being half my husband's salary, he headed for greener fields and I had to raid my investment accounts to cover the rent. I left the smoking wreckage with nothing but my own savings, and $10,000 of that went to my lawyer.

Maybe that's fair. It sure didn't feel fair at the time, though.

Last week, Forbes published an article for unmarried couples about not getting stuck paying for a partner's financial problems. The worst-case scenario for unmarried couples is that when the couple has a major disparity in personal financial responsibility and the better-off party co-signins or guarantees loans or credit cards, the better-off party can end up fighting claims against his or her assets following a breakup - just like in a divorce.

The Forbes article suggested five tips to prevent couples from risking their assets if a relationship goes south. They are:

1. Maintain independent financial identities
In other words, don't merge everything: Leave at least one major bank account and credit card in each of your own names.

2. Consider the emotional impact of financial decisions
Does buying a house together mean that you're going to get married? Chances are, your answer and your significant other's might not be the same. If you understand the emotions behind each of your decisions, the financial aftermath of a breakup might not be quite as messy.

3. Avoid joint big-ticket buys with a financially strapped partner
In other words, generosity can backfire big-time, especially if it leads to claims against your assets. Forbes suggests starting small and measuring progress over time before jumping into major joint financing endeavors.

4. Review all joint bills
If your name is on the account, you're on the hook. It's in your interest to know when money is being spent and how. Even more importantly, you don't want to let a joint credit card loose with your ex in the aftermath of a hostile breakup.

5. When in doubt, get legal guidance
Laws vary by state in the US, and possibly by state or province in many other countries. It's important to understand the impact of your financial decisions in advance, because it's a whole lot cheaper than finding out after you've been held responsibile.

This is a decent list, but I think it's missing one important component: Regardless of the health of the relationship, no one gets to fly blind when it comes to money. At best, it shows an unwillingness to be an equal partner in an important aspect of the relationship. At worst, if things go south, it's stupidly dangerous.

What were your best and worst experiences with money in a breakup?

Countdown

Last night, I was delighted to meet the lovely Revanche from A Gai Shan Life. We went for coffee at Cafe Lalo, and it was so nice to get to know a fellow PF blogger in person - especially one as open, friendly, and easy to talk to as Revanche. I hope she enjoys the rest of her stay and keeps in touch after her departure.



I've got a handful of Euros in my pocket and I'm shoving off for the airport shortly. I've set a bunch of posts to publish automatically while I'm gone, so check back during the course of the week if you want to stay up to date.

See you on the flip side.

Where did all the money go?

As I wrote in my quarterly review, I'm nominally on track with my savings for the quarter, but the reality is that I spent like a drunken sailor in the past three months. I used up my $3600 cushion that came back from Uncle Sam, and then some. Here's a breakdown of the bizarro world of spending I entered in Q2:



I got a little stressed out just looking at that. Seeing the numbers doesn't do much good without understanding more about why they're there, though, so here's a drilldown into some of those expenses:

Suits and shorts: What can I say, I'm a full two sizes smaller than I was in February. I looked ridiculous swishing around in clothes that were falling off, and safety pins are not my friends. I could have gone thrift store hunting for replacements, but I didn't.

Family visit: I bought lots of extra food to cook at home and also took my family out while they were staying with me, and that added up quickly.

Time share: After my dad died, my mom wanted to sell her entire time share. My sibling and I insisted on buying a small piece of it with the idea that we'd continue to take my mom on trips, just without her being stuck with the financial responsibility. Once a year, we each have to pay $242 in maintenance fees.

Home improvement: I went above budget on the paint for my home improvement project because the final cost per gallon was almost twice what I anticipated. I recouped a little on the painting supplies because I was able to return a couple of Dremel bits that I didn't end up using on the grouting project, which helped somewhat.

Fun: Did I really need a new duvet cover and pillow shams? No. I bought them anyway because I loved the pattern and caught a 50% off closeout sale. The New Yorker and the trip to San Francisco were already planned in advance, as were the other flights I'm taking to see my family.

Gifts: $81 is a lot for champagne, right? Right. It was actually two bottles: an $11 bottle of prosecco, and a $65 bottle of champagne. I normally bring a cheap bottle to drink together whenever I give an expensive bottle so that the hosts don't feel pressured to open the expensive bottle while I'm there. The background on this is that the recipients are near to being family. They've been incredibly generous to me over the past two years (dinners, shows, holiday gifts, and in this case an invitation to their new weekend house) and they've never let me reciprocate properly before now. I was glad to do it and I'd do it again in a heartbeat.

This is why it's important to always, always, always have a cash reserve. As you can see, the final total goes way beyond my $3600 cushion that I had built up, and there's more to come: I owe another $1500 on the cabinetry when it's finished, and $825 of the costs you see above are on my credit card for payment in full in August. On top of that, I'm leaving for a week in Europe tomorrow.

I'm expecting to be about $3000 in the hole relative to my savings goal by the time the Q3 summary rolls around (spank away in the comments if you must), but my new challenge is going to be to see how much of that I can recoup before year end.

I love challenges. Wish me luck!

The good, the bad, and the truly fugly

Q2 of calendar year 2009 has come and gone, and that means it's time to check my progress against this year's goals.

Financial
Max out Roth 401(k)
I'll do this through ongoing payroll deductions into diversified investments throughout the year, and I'll try not to throw up when I look at the volatility in the short term.

Q1 result: On track.
Q2 result: On track.

Max out IRA
I'll do this through one to four investments totalling $5000 before the end of December. Ditto the throwing up part.

Q1 result: Complete. I caught the second half of the recent rally and dumped the entire $5000 into my IRA at once. Tsk, tsk, tsk on me for attempting to time the market.
Q2 result: Complete.

Save $65,000
Between my 401(k), IRA, and after-tax savings, I plan to sock away this amount in total over the course of the year. I'll do that by maxing out my 401(k) and IRA, and by dropping a predefined amount every month into a money market fund. I haven't decided when or how much of those after-tax savings I'll invest, but I'll assess my options, outlook, and investment priorities on a monthly basis.

Q1 result: On track. Total long-term savings in 2009 so far = $16,000.
Q2 result: On track, but on the verge of slipping behind. So far, I'm at $32,000 in total, which is on track with where I expected to be since I normally pick up a little extra savings towards the end of the calendar year. Unfortunately, that figure doesn't reflect the fact that I was ahead of the game by $3600 after my tax refund came through. I've blown through that extra cushion in this quarter, and next quarter I guarantee that I'll be behind on this goal. I'll tell how you I did that in my next post.

Commit to keeping my monthly spending under $1500
$1500 is enough to accomodate regular spending on everything in my budget (including apartment maintenance fees and property tax), with a little extra for entertainment and gifts. I also left some wiggle room between my budget total and my savings goals to cover five or six flights to the West Coast to see my family.

Q1 result: Not succeeding. I'm consistently running about $100 to $150 or more above goal. I'll track this one for another three months and possibly revise at mid-year.
Q2 result: Blew this one completely out of the water. Check out my next post to see how, why, and what I'm doing about it.

Maintain elite status on my preferred airline
I'll do this by taking either four trips to the West Coast to see my family and one elsewhere, or five trips West.

Q1 result: On track. One trip down, one coming up, and one more booked for San Francisco in the fall.
Q2 result: On track. I've booked all planned flights for the rest of the year, and I should just squeak by with 25,000 accrued air miles in 2009.

Fitness
Run at least three half marathons
I'm already registered for two, and I should be able to pick up the third with no problem before the end of the year. I haven't had a concrete fitness target to work towards in a while, so let's see what this does for my motivation.

Q1 result: On track. I missed the second half that I was registered for thanks to the flu, but I ran a decent first half marathon. I'm scheduled to run one in San Francisco in the fall, and I'll probably pick up another one locally before then.
Q2 result: On track. I did a second half that became a fun run because of unseasonably hot weather, but it still counts. I also signed up for a full marathon in the fall.

Increase my flexibility
I'll do this by taking a yoga class once a week throughout the year no matter what, and twice a week whenever possible.

Q1 result: Mostly on track: The flu flattened me for two weeks and I didn't do squat for yoga while I was out of town in February, but I've been consistent otherwise. Improvement in flexibility is only incremental (and the increments are small), so I might need to squeeze out more time for another couple of classes or home practice every week.
Q2 result: Mostly on track. I was getting to yoga consistently three to four times per week until I started the heavy lifting with the mini-home renovation a few weeks ago. I'm going to two classes this week, will miss a week over vacation, and then it's back to the regular schedule until the end of August.

Bring my cholesterol below 200
To my chagrin, I cracked 200 for the first time this year. I'm achieving this goal by reducing consumption of saturated fats (goodbye eggs and ice cream), exercising regularly, getting enough sleep, and hopefully shedding a few extra pounds in the process. This is an ongoing goal, but I'll check in on a quarterly basis to measure my progress.

Q1 result: On track. The unofficial, non-fasting results from an on-site health fair at work pegged my blood pressure at 100/70 and my cholesterol at 144.
Q2 result: Probably on track: I'm due for a checkup this summer and will confirm at that time. Unofficially, my self-measured resting pulse is 42 beats per minute.

****I decided to break out the goal above into three additional goals, since this one covers a lot of ground in just one sentence.***

NEW GOAL: Get off of refined sugar
On January 09, after a massive chocolate binge that followed a layoff at work, I gave up sugar in the form of sweets and as an additive in more than trace amounts. (Naturally occuring sugar - like fruit - and alcohol are still on the menu. Honey, agave, and artificial sweeteners are not.)

Q1 result: On track. If I make it through today, that totals 81 days sugar-free to date.
Q2 result: On track. As of today, I've been sugar free for exactly six months. The periods between sugar cravings are getting longer, but the sugar cravings themselves are still awful, awful, awful.

NEW GOAL: 7 hours of sleep per night during the week
After I had the flu, I started getting more vigilant about getting enough sleep. Lights out is 10:15 during the week.

Q1 result: Mostly on track. I've had a few late nights during the week, but very few relative to the quarter as a whole.
Q2 result: Not on track. I've slipped far, far back into the land of five hours of sleep per night or less. I definitely need to recommit to this one.

NEW GOAL: Achieve and maintain goal weight
Losing weight at my age is suddenly both difficult and agonizingly slow. Despite a great deal of effort, I lost a grand total of two pounds between my last physical in June and January. Intense stress triggered another five-pound drop, and then I lost a whole lot more (too much, in fact) while I had the flu. I regained a few pounds after I recovered, and my weight stabilized at at one pound above goal, possibly the most irritating thing it could do.

Q1 result: Mostly on track. Overall, I'm sixteen pounds lighter than I was last June and it feels really, really good.
Q2 result: Mostly on track. Aside from occasional fluctuations, I'm maintaining a sixteen pound loss. That leaves me one pound that I just haven't been able to shake above goal.

Personal development
Read more news and ideas
I don't always finish the New York Times and the New Yorker, my two favorite subscriptions. I think I can do better in this area by spending less time at home indulging in escapism on the internet and more time facing up to what's in the news on a day to day basis. This is an ongoing goal, but I'll check in on a quarterly basis to measure my progress.

Q1 result: Mixed. I switched to reading the New York Times online during the week because the paper started arriving after I left for work. After six weeks and numerous complaints, I finally cancelled the subscription except for Saturday and Sunday. To my chagrin, I've found that I have less focus when reading the paper online. On a more positive note, I'm reading the New Yorker during my commute, so I'm having much greater success in getting it read consistently.
Q2 result: Mixed. I'm focusing better on what I read, but the lack of breadth bothers me.

Give more
I plan to spend more time helping people I know who need it (like my New York mom), more time volunteering in my community, and more money on donations to charitable causes. This is an ongoing goal, but I'll check in on a quarterly basis to measure my progress.

Q1 result: Mostly on track. I've done several charitable donations this year so far, and I've continued helping my New York mom. I'm short on the volunteering front, though.
Q2 result: Mostly on track. Did one more charitable donation during the quarter, and I've been helping out during my New York mom's most recent hospitalization. (She just got out this week.)

Professional development
Keep my job and continue building my career
I don't want to delve into jobworld too much on this blog, so let's just call this doing my best work every day, with the understanding that I have much more specific and concrete goals in real life.

Q1 result: No details, but this one is on track.
Q2 result: Got an outstanding performance review, plus one of the best compliments ever: Someone in the office approached me a few weeks ago and said "I want to come work for you." That's the third time that's happened over the past nine or ten months, but it never gets old.

Become a better public speaker
Public speaking is fast becoming an integral part of my job. Without going into more detail, let's just say that I've managed to wrangle a few opportunities to get more practice, and I plan to leverage them to the best of my ability.

Q1 result: No details, but this one is on track.
Q2 result: No details, but thanks to a few really good opportunities, this one is still on track.

Relationships
I have some goals here, but nothing I'm inclined to share. ;-)

Q1 result: No details, but mostly on track.
Q2 result: No details, but mostly on track.

Overall, this has been a great quarter professionally and personally, but some of my financial goals went down in flames. This is mostly due to the unplanned mini-renovation that I embarked on after a simple regrouting made me realize just how shabby my home was becoming, but that's not the full story. Check back here in a couple of days and I'll tell you where all the money went. You decide how much of a spanking that's worth.

How are you doing on your 2009 goals?

******Free! Free! Free!******

Fellow Frugal Blog Network member Tight Fisted Miser is giving away a copy of 10,000 Ways to Live Large on a Small Budget. The giveaway ends this Friday, so get thyself over there promptly and sign up to win. I just did.

That was awfully short for a long weekend

Sorry about the radio silence over here for the past few days. I got the rest of my apartment painted. It took two full days for the painting (with a total of six hours sleep in the entire period), plus another full day to completely clean up, especially after I knocked not one, not two, but three trays of paint off the top of the ladder and all over the floor.

Yup, missed the drop cloth. Three times.

It's not a perfect paint job, but I got a LOT better at fixing wall gouges and somewhat better at the actual painting part, so it sure looks a whole lot nicer in here. All in all, I'd call it an A for effort, B- for execution, and two thumbs up for white and lime green.

On Sunday, there was a work eruption that triggered a very long conference call and a fairly controversial judgment that I had to make. It turned out that the decision I made was the right one, so I came out of the situation in very good shape today.

Between these two events, I feel like I got run over by a truck that backed up and ran over me again. Two upcoming topics for later in the week: The Q2 report, also known as where did all the money go?; and money and relationships, by request.

Right now, however, I'm shuffling off to bed. G'night.

Help this reader buy a house

Meet Lulubelle.

Lulubelle lives in the Pacific Northwest, and she's a thirty-something residential and commercial property manager. Lulubelle got a late start on saving, but one of her personal finance goals is to buy a home of her own. Here's her current net worth:


As you can see, Lulubelle's retirement savings consists of a 401(k) worth $1000, plus a traditional IRA that's currently stored in a certificate of deposit valued at $9200. She also has $8400 in passbook savings and coins. Beyond this $18,000 in savings and investments, Lulubelle's net worth consists of a car and household items.

Now, let's look at Lulubelle's income and budget for July:



Lulubelle's total income for July is $2698, and her annual income is $39,780 per year. (I'm assuming that that's pre-tax.) Her job doesn't provide medical insurance or a 401(k) plan. Lulubelle doesn't have private medical insurance, but she does have a minor chronic medical condition that requires two prescription drugs to manage. She has a roommate to offset half of her rent and utility costs, and she has a cell phone but no land line.

Lulubelle's July savings rate is very high relative to her income, but since her budget for July doesn't cover periodic costs like travel, car and renter's insurance, or household items like detergent, it's probably safe to assume that some months, her savings rate is somewhat lower. Her target savings goal for 2009 is $15,000, which is 37.8% of her gross salary.

This, by the way, is a most impressive percentage, so two thumbs up for Lulubelle!

Lulubelle buys most of her food and household supplies at Costco, but she has two spending priorities: A gym membership and expensive shampoo for her fine, thin hair. Those two items are important in what looks like an otherwise spare budget, so let's consider them non-negotiable.

I checked salary.com to get an idea of what the normal income curve looks like for property managers in the Pacific Northwest. In a relatively small town that I picked at random, here's what came up:



As you can see, Lulubelle's salary falls in the bottom tenth percentile of the curve, so there appears to be fairly significant growth potential for her income in future. Given the aftermath of the real estate bubble, however, I think short term growth is unlikely.

I reviewed Lulubelle's budget from two perspectives: First, for general feedback; and second, to see what she can do to get her into home ownership. Here's what I came up with:

General feedback

• I think that more granular budgeting would give Lulubelle a clearer picture of where her money goes and how to plan ahead for periodic expenses like travel and car insurance. If she has a sense of how often and in what general intervals she needs to have a little extra cash on hand, Lulubelle can set aside money each month so that she doesn't need to tap into savings when one of these expenses comes up.


• I don't like to see anyone without health insurance in general, but if Lulubelle gets a serious illness or into a bad accident, she'll be wiped out. For that reason, even if she can't stretch her budget to cover regular medical insurance, I strongly recommend that she at least pick up catastrophic insurance.


• If Lulubelle's two medications are available in generic form and she's not already taking generics, it's absolutely worthwhile unless her doctor feels otherwise. Walgreen's, CVS, and several other big-box pharmacies have plans for generic medications that keep drug costs as low as $4 per month or $9.99 for a three-month supply.


• Lulubelle's IRA is in a CD, which is as safe as safe can be. With nearly thirty years left until retirement, however, I think Lulubelle can afford to take a little risk. Target retirement IRAs are designed to modify holdings to become more conservative and less risky as investors near retirement, and that's a simple rollover choice if Lulubelle doesn't want to get involved in tracking her investments closely. Alternatively, a total stock market index fund will give her average performance at low cost, although she'll need to remember to adjust to something more conservative as she nears retirement age.


• Today, Lulubelle's IRA is a traditional deductible IRA. Rolling it into a Roth may be a good choice, but it may not. The Roth IRA is flexible in that Lulubelle can take out up to $10,000 penalty-free for a down payment as a first-time homebuyer. In addition, the growth on a Roth IRA isn't taxed, so if Lulubelle can afford to pay taxes on that income today, she won't have as much to pay in the future. That's great if she expects to have a higher income in retirement than she has today. If her outlook is more modest and she doesn't intend to pull out any money for a down payment, however, she might do better sticking with the traditional.

Home ownership

• Small is beautiful, and that's how I think Lulubelle should start. By that, I mean a condo instead of a private home. In the past couple of years, we've seen what happens when people get overextended on mortgages. The conventional wisdom is that a mortgage should never be more than three times one's gross income. Personally, I think that for most people, two to two and a half times is generally more appropriate. Two and a half times Lulubelle's gross income is just shy of $100,000. I don't know the real estate costs in her specific area, but I think she'd generally find much more selection in the condo market anyway. Since Lulubelle should plan on setting aside about 5% of her home's value every year for regular maintenance and upkeep, without a major change in her income, there's even more incentive to buy a condo instead of a house.


• On the whole, I think it's going to be tough for Lulubelle to stretch her income to fund both retirement and down payment savings adequately unless she either spends less or earns more. There isn't much room to cut her budget any further, so I think Lulubelle should consider what she can do to increase her income. As the graph above shows, Lulubelle has potential growth in her salary, so she might consider negotiating for a raise or jumping to a new employer. She should be somewhat cautious, though, given that real estate in general has been hit so hard.
  
  Another alternative Lulubelle can consider is adding on a part time job to bolster her savings. The job market is bleak right now, though, so I think she'll need to think creatively. Hobbies can often be turned into a source of cash; alternatively, if she has flexibility in her schedule and either the patience to tutor or babysit or the ability to help other people look after their property (e.g. mowing lawns, odd jobs, and the like), she could leverage her talents to make a few extra bucks.

As it turns out, Lulubelle has already thought through all of these suggestions on her own and is working on putting some of them into place. She'd like to hear from f.z. readers to see what other ideas are out there, so don't be shy! If you have some additional thoughts, please drop a comment or send me an email and I'll make sure Lulubelle gets it.

Two caveats: First, I warned Lulubelle to consider any suggestions strictly amateur, and mine in particular to be the ravings of a drunken madwoman.

Second, the only rule that applies around here is the usual one: Treat Lulubelle the way you would want to be treated. She was generous enough to share her backstory, so please phrase your feedback in a courteous and constructive manner.

Can't wait to hear your brilliant thoughts. In the meantime, if anyone else wants me to bust his or her budget, feel free to shoot me an email at frugal (dot) zeitgeist (at) gmail (dot) com. Thanks!

I survived

. . . but barely.

I worked 20 hours straight (I'm being serious, 8 a.m. to 4 a.m.) on the last of the prep, the actual painting, and the cleaning up, but the bedroom is painted. Still have no electricity in there, though. Hopefully that'll get sorted out tomorrow (and that's another Stupid Tax I'm going to have to pay).

The paint store guy talked me into Benjamin Moore Aura for the accent wall on the grounds that it's self-priming and will cover just about anything (even my electric blue) in one coat, so I gave it a try. I HIGHLY recommend it! It's expensive, but it actually worked out to cost less in the long run because I didn't have to buy primer. I don't think I could have handled another coat anyway - I'm physically tapped out.

I made plenty of mistakes, but I know better what to do for the rest of the apartment, and that helps. It's not perfect, but it's pretty good. . . and for me, that's good enough.

PS. How do you get paint out of hair?