Archive for the 'Family' Category
Friday, May 17th, 2013
I just started reading a biography of Charles Munger, Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe, originally published in 2000.
Charles Munger is best known as Warren Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway. I find him fascinating on many levels – as a thinker, investor, philanthropist, and even philosopher. One of my favorite tips from him is to Work For Yourself An Hour Each Day, something I found in Warren Buffett’s biography The Snowball.
Here’s a memorable quote from the book dealing with his childhood:
Like Warren Buffett, Munger inherited no wealth. [...]
“While no real money came down, my family gave me a good education and a marvelous example of how people should behave, and in the end that was more valuable than money,” explained Munger. “Being surrounded by the right values from the beginning is an immense treasure. Warren had that. It even has a financial advantage.”
Right now, there is a lot of focus on teaching “financial literacy” – which is good – but if you’re a parent of young children I feel that you have to think differently. It’s not critical to give your kid some fancy allowance iPhone app or online savings account to teach them how to manage money. What you should really be conscious of is how you act around them. Positive character traits like self-discipline, being dependable (keeping your promises), and frugality (not being wasteful) are often best taught by example. Watching you and learning such traits will help them to avoid credit card debt more than showing them how APR works. If only I could just buy them a book or something.
Friday, April 12th, 2013
Originally posted here on December 3rd, 2005:
Thinking about goals and the future some more, I have this picture in my head of our dream future in 5-10 years:
- I work at a job I enjoy for only 20 hours a week
- My wife also works at a job she enjoys for only 20 hours a week
- We both share responsibility for taking care of our kids with minimal, if any, need for daycare.
- Our combined incomes still make it possible for us to reach our financial goals. However, we’re not really interested in being filthy rich.
We are gonna make this happen. Check back with me on 12/3/2015
We both really wanted this, even though we are more tired now than when we were both working full-time. (Even though we sleep at 9pm now instead of 1am.) Although I write about money daily (at times it may seem like an obsession)… it certainly didn’t feel like 8 years had gone by since I made this goal.
I recently bought a new print that will be in my daughter’s room eventually, but for now hangs in my home office. It says Don’t Forget To Be Awesome. I think we all have own personal definition of “awesome” – whether it’s starting your own business to being active in your community to simply being a good parent (even though that is anything but simple). Now, we are still far from reaching our “awesome”. But I think the phrasing is perfect; it’s so easy to forget to pursue our unique dreams in today’s hectic, noisy world.
Sunday, April 7th, 2013
We paid off our mortgage. We contacted Provident Funding and requested the full amount due including any accrued interest, the money was sent via bank wire, and the loan is recorded as paid in full. As you might imagine, I spent many hours contemplating this move. In a somewhat anticlimactic fashion, the letter below warning us we had to pay the property taxes ourselves was the first physical acknowledgement of the occasion. I found it amusing that it was addressed “Dear Homeowner”, as I never really felt like I owned my home until now.
A bit of history. When we first bought our home, we looked at the common rules of thumb regarding house affordability and ended up paying 20% down with a initial mortgage less than 3 times our combined income. Indeed, we qualified for the mortgage on my wife’s documented income alone. We thought about getting a 15-year note but went for the flexibility of the 30-year note, while paying it down at the 15-year pace. Over subsequent refinances, our interest rate dropped from 6% to 3%. Even though this made our required monthly payment much less, we kept up the higher monthly payments which had us on the pace of a 10-year payoff.
Read the rest of this entry…
Thursday, March 7th, 2013
It’s already March, and I’ve yet to make a New Year’s resolution. Then along comes this NY Times article about a mother of two who’s young, healthy husband was killed while simply riding his bike:
In the many months of suffering after Mr. Hernando’s death in July 2009, she beat herself up while spending dozens of hours excavating their financial life and slowly reassembling it. But then, she resolved to keep anyone she knew from ever again being in the same situation. The result is a Web site named for the scolding, profane exhortation that her inner voice shouted during those dark days in the intensive care unit. She might have called it Getyouracttogether.org, but she changed just one word.
The site offers some basic financial advice, gives away free templates for a master checklist and provides starter forms to draft a will, living will and power of attorney. There’s also a guide to starting a list of all of the accounts in your life that someone might need to access and shut down in your absence.
Let’s be direct; The site is GetYourShitTogether.org. The site is okay, but I felt the story itself was more powerful.
After his death, this much was clear: The family with the six-figure income and the four-bedroom house that they had bought in the Mount Baker neighborhood one year before had a will with no signature, little emergency savings and an unknown number of accounts with passwords that had been in Mr. Hernando’s head.
I haven’t blogged about this as it brings up bad memories, but a few years ago a family situation resulted in us each hurriedly bought $1,000,000 of term life insurance. We didn’t comparison shop, I just walked into my State Farm agent’s office and asked to get the insurance as soon as possible. State Farm actually has some of the highest financial strength ratings available (AA S&P, A++ AM Best). The final rates we got were probably somewhat higher than I could have gotten with slightly lower-rated company, but I don’t regret the decision.
Having life insurance along with hefty savings gave me adequate peace of mind for a while, but now with a child I worry about the future differently. We have a lot left to do. We contacted a lawyer friend who specializes in estate planning and trusts to help us with our first will. We talked to family members about child custody if something should happen to both of us. We’re looking into long-term disability insurance beyond what is provided at work. I already track most of our passwords using software (1Password), but after reading this article I’ve been filling in the gaps in the database and quizzing my wife every day to make sure she knows the master password.
We are one of those households where one person takes on all the financial duties. I pay the bills, track our monthly budget, and manage our retirement investments. I need to teach her the essentials and lay out a simple plan for managing things if I’m not around one day. I don’t worry about the spending as she is a frugal and smart person, but I have nightmares of some high-cost, low-quality financial salesperson mismanaging her money. Lots of smart people end up trusting the wrong person. I thank Mrs. Reynolds for helping me make my 2013 resolution.
Monday, February 11th, 2013
A few readers asked for a baby update, and the 6-month-old mark felt like a good time. At this point, she is kinda-sorta sleeping through the night, kinda-sorta eating solid food, kinda-sorta becoming mobile, and 100% awesome! When people ask me how I’m doing these days, I paraphrase a quote attributed to Tina Fey:
I’ve never been so tired. I’ve never been so happy.
Before I go any further, let me say that parenting is a guilt-ridden minefield of books and experts saying “you should ALWAYS do THIS and not THAT”. But really, I feel like the longer I am a parent the less I judge others. What works for me may not work for you. What works for you may not work for me. Most of us are sleep-deprived and just trying to get through the day.
Baby gifts as risk-pooling. I haven’t really written about frugality and parenthood, and I blame it all on my generous and fantastic set of family, friends, and co-workers. I have never received such a large quantity of gifts in a such a short period of time. This gifting custom turns out to be a very clever form of “baby cost risk-pooling”. When a friend has a baby, you get them a gift, spaced out over decades. When you have a baby, 100 people give you a gift. We really didn’t have to buy very many things on our own, and still have a huge pile of unopened clothing and toys to this day. (Also see baby registry review and follow-up.)
Formula & Breastfeeding. Mrs. MMB was very determined and motivated to exclusively breastfeed our child, and she succeeded. I emphasis her, because if it were up to me, we’d probably at least supplement with formula since waking up every 3 hours for months in a row would have broken me. Both of us were primarily formula babies. The hospital was helpful in giving us lactation consultations.
Recent healthcare law changes now require insurance plans to provide a free breast pump for every new child. I don’t know about now, but this led to shortages in our area. We had to wait in line at a Target before it opened as if it was Black Friday, but half an hour later we walked out with a nearly $300 Medela pump for free. Pumping at work has been difficult at times, but with some effort she has obtained a private pumping area.
Read the rest of this entry…
Tuesday, October 16th, 2012
As you probably know, I’m not an advocate of market timing. Jumping in and out of stocks is usually based on fear – either fear of missing out on hot returns or fear of more losses. However, if you’re going to do it, I figure you should announce your move beforehand, as opposed to making self-congratulatory pronouncements afterwards. “I sold all my stocks and my houses in 2007, right before the crisis hit as I knew something was fishy.” You never hear “I sold most of my stocks in 2009 and missed the potential doubling of my money since then.”
This is the predicament where I am today. I don’t think the stock market is very attractively priced. I don’t think locking up 2% yields for 10 years is a very good option either. Everything seems to be up, and our investments have swollen significantly. So while I’m not complaining, from what I can tell none of the things that were previously broken in the world have actually been fixed.
In addition to me being “meh” about the current investment outlook, having a new child has refocused us on shifting into part-time work as opposed to going all-out towards a full early retirement. Having the house paid off will free up our cashflow needs significantly, as our mortgage remains over 50% of our total spending. Once that is taken care of, it’ll be much easier to shift into part-time work as we want avoid using daycare as much as possible.
So for the rest of the year and probably into 2013, I am going to focus on putting new money towards paying down the mortgage. (Our 401ks and IRAs are maxed for 2012, and our current portfolio will stay invested.) This will effectively gain us a yield of 3.25% (our mortgage rate) for however long it takes to pay it off completely. Yes, we just refinanced this year, but we actually netted a thousand dollars from that refi due to negative points. Today, the S&P 500 Index is at about 1,435 and the 10-Year Treasury yield is 1.66%. Let’s see how wrong I can be.
Friday, August 24th, 2012
Last week I finally got to meet the most beautiful girl in the entire world:
I’ve only been a parent for a matter of days and am actively suffering from sleep deprivation, but here are some thoughts which I can revisit later and probably laugh at my own foolishness and naïveté. I look forward to the adventure!
How does the arrival of children affect my journey towards financial freedom? Of course, having kids means I want to spend time raising them as opposed to paying someone else to, so not having to work would definitely help with that. However, I also imagine that when the kids are at school then I’ll have at least a half day free for other pursuits. We’re definitely talking more about a scenario where we both work about half-time. In fact, that day may be coming soon. Health insurance remains a concern here, I’ll have to report back on my search for self-employed health insurance.
The cost of raising kids. In general, I think my philosophy on raising kids will be to teach them how to fish as opposed to giving them fish. So I’ll spring for lessons for things like swimming and musical instruments – and even world travel in hostels with kids – but I’m fine with being the weird house with no cable TV, no video games, and instead having lots of books and a vast board game selection. Is it hard just to temporarily subscribe to cable once every two years only for the Olympics?
As for baby time, we plan on trying a few things to save money. Breast milk is obviously cheaper than formula. (Breast pumps are covered by health insurance now, as part of the Affordable Care Act.) As she grows, I expect her to eat pretty much what we eat, perhaps either blended or pressure-cooked. Cloth/reusable diapers seem to save money over disposable ones, especially if you can stretch them across at least two kids, and we do plan on having more children. We’ve got a ton of clothes as gifts, some hand-me-downs, and new grandparents itchy to spoil her, so we’re not worried about that part just yet.
College tuition? Seems so far away. I’m personally okay with them taking on some student loans, but Mrs. MMB got a lot of parental support for college, so she wants to pay that forward. Actually, we already started a 529 years ago ironically due to a credit card, I just have to switch the beneficiary once her Social Security number comes in. Let’s hope that the tax sheltering lets compound interest do its thing.
Tuesday, July 31st, 2012
The baby shower is over and we’re on the home stretch. As a follow-up to my baby registry comparison, here’s our experience using both the Babies R Us and Amazon.com baby registries at the same time. We are blessed with lots of generous friends and family, and as a result have more stuff than we ever imagine a baby really needing! Baby Girl MMB isn’t even born and has more clothes than I do already.
Babies R Us (BRU) Baby Registry
We chose BRU since we have one of their big box locations nearby and it was best for people who wanted to buy something at a physical store.
Ease of use. We went to the store and used their “gun” to scan all the items we wanted, and then we could go online to edit the registry further. Overall, the process went smoothly. However, the only way to discover if someone bought an item off the registry is to check the website regularly. You don’t get any notification e-mails, and you don’t get told who bought the gift until it arrives.
Returns. If the item is on your baby registry, then they take it back for store credit without a receipt or questions. If the item is not on the registry, then a gift receipt is required. If you don’t have a gift receipt, then I believe you get credit for the lowest price on that item for the last 30 or 60 days. With items like clothing that goes on sale frequently, that can result in a greatly reduced refund.
(Tip: You can add things on the baby registry at any time. Since we were juggling two registries, to avoid duplicates we would have to delete things on the other registry. However, sometimes we weren’t fast enough or someone bought it without removing it from the registry. Therefore, we just made sure we added the item back onto the registry again before our BRU return run and that minimized any potential hassles.)
Completion Discount. We received the 10% off completion coupon in the snail mail as promised. It works on only one purchase, so make sure to bring a list of everything else you wanted. You can also use the 10% discount online the same day you used the physical coupon.
Amazon.com Baby Registry
We chose Amazon as it had lower prices, wider selection, and free shipping on most items.
Ease of use. Adding items to the registry was easy, but Amazon can be quirky as the default buying option isn’t always the cheapest after you factor in the free shipping. I noticed that some friends paid too much for shipping, even though we always looked for items “sold by Amazon.com”. They don’t offer notification e-mails either, but if you check online they do tell you who bought what. It’s even condensed into a handy “Thank You list”.
Returns. Even though they offer free prepaid shipping labels, we didn’t return anything to Amazon. Whenever we had a duplicate, we just returned the one from Babies R Us. However, looking back I think I might have preferred Amazon.com credit since we really have too much baby stuff.
Completion Discount. When you become eligible (30 days before event date), the 10% completion discount option shows up on your registry page. The fine print was pretty vague, but didn’t really list any specific restrictions. However, we discovered that even though you could add anything to the baby registry at any time, only items that were deemed baby-related were eligible for the 10% discount. So no 10% off Macbook Pros or power tools (I tried).
Baby showers and the baby gift-giving custom is a nice cultural tool to help expectant parents defer the cost of babies. Really, you can view it as a payment plan of sorts since instead of one big lump sum we just have to continue giving baby gifts for the rest of our lives.
Friday, June 15th, 2012
I’ve been thinking about fatherhood and my own father/son relationship. When I was young, my father was a comfortably-employed engineer, with two small kids and a house in the suburbs. But he decided that he wanted to go back to graduate school. All of a sudden we were a family of 4 living in a small 2-bedroom apartment with both parents working long hours and still only earning a fraction of the income. But he eventually got his PhD, became a college professor, and I always remembered how he continued working long hours but told me about how it was great because he loved it and he had no boss. Nobody told him when to go to work or what to do on a daily basis.
I understood the autonomy part, but was always bitter about the lack of time he spent at home. Still, he was my role model. So as I went off to college, I pursued the goal of being a professor as well. I did all the right things and got accepted into one of the best engineering graduate schools in the country with a full fellowship, meaning I had full tuition covered plus a small stipend. I was set. I could make him proud… except for the little discovery that I didn’t like doing research.
Dropping out of grad school was one of the more difficult decisions in my life. I felt I was disappointing my father, as I wouldn’t be able to “do better” than him. At least I had employable skills. Still, I was unhappy. That led to starting this blog and learning about how managing your money properly gave you more freedom to do what you wanted. I was afraid, but I still felt I had to switch gears yet again and try something new, and today I work on my own terms and am well on the path to financial freedom and being able to live off investment income.
It took me a while to understand some of these things that my dad’s experiences taught me, but late is better than never. Happy Father’s Day!
- A son always wants to make his dad proud, even if he won’t admit it to anyone including himself.
- Sometimes you just know something is missing, and you have to take a risk. My father quit a safe job and took a long, cloudy road but eventually found the key ingredients to a satisfying career: autonomy, complexity, and a connection between effort and reward.
- Being frugal and having the ability to live well on less money is a skill that allows you the flexibility to take on those positive risks and to weather those leaner times.
- Having a supportive spouse or partner in your life is priceless.
- As a soon-to-be father, I recognize the desire of having your kids exceed your own achievements. However, all I can do is provide them whatever life skills I can, and eventually let go and allow them take their own path. At least, I’ll try.
Friday, June 8th, 2012
When planning your baby shower, which store has the best baby registry? In general, baby registries are very similar to wedding registries. You go to the store, pick up a bar code scanner, and simply zap everything you want to put onto your registry. They usually provide you a checklist so you don’t forget anything. You can also add and remove items on registry online, and track what items were bought.
Here are the results of my research after scouring the respective sites and reading various baby forums, comparing factors including selection, price, customer service, return policies, and completion discounts:
Read the rest of this entry…
Monday, May 7th, 2012
As new parents-to-be, we have been exploring our options for paid and unpaid family leave from work. This is not meant to be an exhaustive list, but I was pretty surprised by all the possible permutations that you could do. I would add that while knowing your legal rights is important, I also support the idea of working with your employer and co-workers to make the process easier on everyone.
Your Work Contract
Most employers offer their full-time salaried worker’s some length of paid maternity leave, and it’s usually spelled out clearly in the lawyer-ese language of your work agreement. A few employers even offer paid paternity leave. Making an appointment to discuss all your options with Human Resources can be time well spent. Keep in mind that you are subject to the laws of the state where you work, not where the company is based.
In addition, you may be eligible for a longer unpaid leave-of-absence. For example, a big company may allow you up to one full year of leave and your same job (or comparable) will still be yours when you come back.
Short-Term Disability Insurance
Depending on your insurance plan and local laws, being pregnant or taking time off to bond with a new child may be covered under short-term disability insurance. This means you may be eligible for an additional period after your paid maternity leave where you will get a disability benefit that is somewhere around 50% of your normal pay (subject to caps).
Family and Medical Leave Act (FMLA)
The FMLA entitles an eligible employee to take up to 12 workweeks of job-protected unpaid leave for the birth or placement of a child, to bond with a newborn or newly placed son or daughter, or to care for a son or daughter with a serious health condition. You may or may not be required to use up your paid vacation days first. To be eligible for FMLA benefits, an employee must:
- work for a covered employer;
- have worked for the employer for a total of 12 months;
- have worked at least 1,250 hours over the previous 12 months (~24 hours per week average); and
- work at a location in the United States or in any territory or possession of the United States where at least 50 employees are employed by the employer within 75 miles.
Under some circumstances, employees may take FMLA leave intermittently – taking leave in separate blocks of time for a single qualifying reason – or on a reduced leave schedule – reducing the employee’s usual weekly or daily work schedule. If FMLA leave is for birth and care, or placement for adoption or foster care, intermittent leave is subject to the employer’s approval. To get that permission, you should approach your employer in a way that suggests that taking the leave in chunks would disrupt the office operations less than taking all 12-weeks at once. For example, you may propose a 4-day workweek over a period of several months to a year, as opposed to leaving entirely for three.
State-Specific Family Leave Laws
Each state can have their own separate family leave and/or disability laws that may grant you more time and/or pay. Running a Google search for “[Your State] Family Leave Act” or “[Your State] Family Leave Laws” should locate the appropriate information.
Let’s take the most populous state and the California Family Rights Act (CFRA). Under federal law, any leave taken for a pregnancy-related disability is part of your FMLA 12-week limit. However, in California, an eligible employee who is disabled on account of pregnancy, childbirth, or related medical conditions is entitled to take Pregnancy Disability Leave (PDL) for up to four months. In addition to that, an eligible employee could then take 12 weeks of family leave to care for and bond with a new child under FMLA/CFRA. That adds up to a total possible leave of 7 months.
Sources: U.S. Department of Labor, CA Dept. of General Services, CA Fair Employment and Housing Commission
Wednesday, April 4th, 2012
The following is a guest post is from Elle at Couple Money. They live on one income, and have fun with the second!
When I read MMB’s questions about baby expenses, I shared a bit of our own experience with him. We are just a year ahead of him last summer we had our first baby, a little girl. It has been a wonderfully fun ride so far, with everyday bringing new milestones and challenges.
During the pregnancy my husband and I decided to track the baby expenses on Couple Money as we’re going through this process. We’re not the first parents to have questions about the finances of raising children, so I share our expenses and have asked others to give their input. Some wonderful bloggers have decided to join in the fun and share their own stories, tips, and advice on what works, what doesn’t, and what’s not worth stressing over.
Are Kids Really That Expensive?
For us, most of the expenses are just small bumps in our monthly budget. I think the main reason is that we made some financial decisions before we became parents that lent itself to reducing baby bills. For one thing, when we first were married we made it a family goal to keep all necessary expenses on 1 income. That allowed us to use the second income to pay down debts, save for goals, and invest for later.
Health Insurance and Doctor Visits
During the first trimester I was dehydrated enough that I needed to go to the ER to replenish; that was about $150 out of pocket. For the most part, though, my pregnancy had been uneventful. The health insurance policy we had when I was pregnant had a $2,500 deductible, so we saved a bit in our general funds to cover the deductible when our baby girl was delivered. Saving up to pay the bill in full allowed us to also get a 15% discount with the hospital.
Once our daughter arrived we quickly added her to my husband’s health insurance policy. That’s been the biggest change to our family budget – our premiums went up about $200/month for the family option.
No change in our housing bills. We bought our townhouse before we had our daughter. It had 3 bedrooms, so we converted the guest room into her nursery. We don’t have any plans on changing our location, right now we’re focusing on paying down the mortgage.
I know that for many parents daycare is a huge expense. From what I saw last year it was about $1,200/month for an infant. Right now I work from home and our daughter stays with me. While it has cut back on the hours I work, the savings from not having her in daycare offsets it.
Since we’re breastfeeding our food bill has increased just a bit to accommodate the extra calories I need to keep up. Since becoming pregnant, we changed our eating habits a bit. We’re focusing on making more meals at home and we a part of a CSA program with weekly deliveries during the part of the year. It’s been helping to keep groceries manageable and we’ve also discovered new recipes and dishes. Our daughter has baby food and some of what we’re eating in addition to breast milk.
Even before we found out we were going to have a baby my husband and I were saving up for the vehicle as we’re trying to avoiding taking out a car loan. However we saving up a bit more to purchase a family sized sedan, like a Sonata. Our budget is $10k for the next car. We have the money saved and we’re currently searching for a deal. It’s not an immediate need (tight fit in my Jetta, but fine), so we’re going to make sure we look around a bit before securing the next car.
The first 2 months our bills were higher than normal as we bought a few items we didn’t receive from the baby registry. We waited until our daughter arrived to see if we really needed them or if they were nice to have items. Fortunately most of the necessary stuff was already bought. After the first 8 weeks, our expenses have smoothed out.
We have received gifts from family and friends – both new stuff and gently used. We didn’t have to buy a baby swing, since a buddy’s son didn’t seem to like it. It was practically new and our daughter loved it.
Right now diapers are about $20/month give or take through Amazon Mom and they are delivered right to our door. We get her wipes through Costco where a huge box costs about $20 as well (lasts a couple of months). Any clothes that she needs we pick at Target, Old Navy, or the consignment store around the corner. That’s about $30/month.
Thoughts on Having Kids
This is just a snapshot of our family’s baby expenses. As our little one gets older we know things will change. I’d like to hear from you – what expenses to you have to cover for your little one? What has been the biggest unexpected expense? What’s been the best surprise?