Lessons I've Learned from Being Broke

This article in Kiplinger made me start to reflect on my own life and the times when I was happiest. Ironically, the times when I had the least amount of "things" in my life were some of my happiest times. One of the things I can't explain to my husband is that right now, even though we don't have a lot of extra money, I feel rich. I own a home. I have two kids that I adore. We can afford to have birthday parties, go out for dinner and buy clothes that fit. For someone who grew up without being able to afford to either attend or have a birthday party (my mom wouldn't let me go because we couldn't afford a gift), throwing my son a party at the Children's Museum in Tucson made me very happy. We might have a crumby car, and my husband might have to save up for his iTouch, and maybe I make things from scratch during the week so we can have that Sunday morning breakfast at our favorite breakfast place, but the more I downsize and get rid of "stuff," the happier I feel.

Very un-American, isn't it? At least, what with all the newspapers and t.v. media encouraging us to spend our way out of a recession.

Here are the highlights from this article, which I found very interesting.

1. Know your priorities.
2. Debt is a vampire.
3. Have a cushion to fall back on.
4. Set goals and tune out peer pressure.
5. Small sacrifices add up to big rewards.
6. The size of my bank account doesn't matter.

My favorite quote from the article: "I remember my dad telling me that the only things worth going into debt for were those that appreciated in value: a home and an education. Anything else will suck you dry. Lesson learned."

Quote of the Week

This is from a comment on Get Rich Slowly by Catherine on downsizing your life:

"I don’t want to be rich, I want to be free. And freedom is worth more than stuff."

Credit card debt down another $1000

With the extra money coming in this month, we were able to put another $1000 on our credit card debt. We also put extra toward my student loans and toward the mortgage. We are slowly paying things down, and I'm looking forward to adding up net worth for February!

Here's a few things we did this month to further reduce our cost of living:

*I pulled out our old bread machine and started making my own bread. At 86 cents a loaf, I can make whole wheat, all-organic bread for 1/5 of the cost of buying it at the store.

*I started making things in bulk. I made homemade macaroni and cheese, which seemed more expensive at the time (about $8 in ingredients), but one recipe made a giant pan and it lasted for several meals. I also made pinto beans from dry beans -- 3 lbs of dry beans = $2.00. My kids absolutely love refried beans, beans and eggs, beans and quesadillas...you get the point. Since I make the beans myself, I get to control what goes in them. I put 2 strips of bacon in the entire pot, and the bacon flavor...mmmmm. And instead of one person eating 2 strips of bacon for breakfast, we ate the "taste" of the bacon in the beans for over a week. This saved money AND was better for us. (tip: I froze pints of beans, which were enough for about 2 meals. This kept them fresh, and the freezing actually makes the beans better for refrying.)

*I started making my son's lunches for school. This week I made him a lunch 3 days out of 4, and not only was he thrilled, he got fresh bread, fresh fruit and a healthy snack of root vegetable chips instead of his usual lunch at school -- pizza, pre-made bean burritos or a hotdog. I also put a note in his lunch, which made him really happy.

*I tried to get by on as little as possible. When I went to the grocery store, I stuck to fresh foods and bulk items. I found that, when I avoided the doomsday aisles of chips, crackers and juices, I could get everything I needed for under $50 a trip, or for around $100/week. This worked even at Trader Joe's.

*I bought in bulk from Amazon.com. This helped alleviate the costs of dry goods items like diapers and paper towels, and it allowed me to buy unbleached, recycled products like 7th generation. I didn't know at first if it would really reduce our total costs, but it truly has.

*I cancelled our YMCA membership. This was hard to do, but I have to go at least 10 times in a month to justify the $60 monthly cost, and it wasn't happening. I did use it last fall, when I went to Pilates 3x a week (and I loved the class!), but the nursery uses bleach and it made my daughter break out a lot afterwards, so I finally stopped going. I can still use the Y for $6-8/day, depending on which one I go to, but it was hard to give up the membership. However, $60/month was a pretty big expense -- $720/year. It is more than the insurance on our Volvo, and we're selling the car so we won't have to pay that expense, so I decided it had to be.

Those are some of the things I've done the last 6 weeks to try to save money, and it really has worked. It is surprising how the small things make a difference, and even more surprising how your attitude changes. I "treated" myself to a lunch at Barnes & Noble, and I was terribly disappointed in my $6 half-sandwich that was overcooked and drowning in cheap Italian dressing. The kids got a cookie, and for $1.95 I expected a good cookie, but it was stale and tasteless, and I thought, how their quality has gone down! But then I realized that the cafe has not changed -- I've changed. Making my food from scratch, and realizing the actual cost of a thing has changed how I look at things.

We are waiting on a possible buyer for the Volvo, so that, combined with (hopefully!) a tax return could pay off a pretty big chunk of debt. I'm feeling good about our 'debt snowball' at this point; next stop, reducing our energy bills.

The Month Of February: Success!

This month we rented out our guesthouse by the week and made $450 ($100 more than monthly rental). We would have made another $80 but there was some confusion on the dates. That amount, combined with the $256 I made doing some light babysitting, brought my salary this month to $706, or roughly twice what I brought home when I worked part-time at a real job (after daycare).

The hardest part is not knowing what next month will bring, but hopefully more renters. We had a great experience this month and hope it will continue.

Fixed Costs Continue to Rise

I've recently begun to address some of our fixed costs to try to pare them down as much as possible.

Unfortunately, it seems that we are fighting a losing battle -- all our efforts have merely kept us in the same place we were a year ago. The chart at the top shows our monthly gas usage for the past year; even though we used about 2/3 the amount of gas for the month of January 2008 than we did for January 2007, it cost us a third more. Our gas bill, which usually runs around $85/month in the wintertime (we live in Tucson and keep the heat around 64 degrees in winter), shot up to $144, 169% of last year's cost. We cut our use by about a third by buying gas-efficient appliances and turning the heat down as much as possible, but we are paying about 2/3 more -- which means the cost of natural gas has doubled in Tucson. This is unbelievably frustrating! Although I suppose, on the brighter side, that it could be worse; if we hadn't upgraded, we'd be paying well over $200/month for gas this winter, which is unheard of in Tucson (our house is only 1200 square feet and we have a brand-new furnace and new gas stove). We usually save money on utilities in winter here, so it's especially hard.

Whether or not this is fuel-related I don't know, but the cost of groceries in Tucson has also skyrocketed. We buy healthy, whole grain bread and usually I don't balk at the cost -- about $2.99/loaf. I tried making the same in a bread maker a few years ago and found I hardly saved any money doing it, and if I counted all the loaves I messed up, well...I was losing a bit in the process. I noticed that my bread went up to $3.29 this summer, which is high but not horrible. Then, just last week, I went to the grocery store and my bread is now $4.29 a loaf! That's a 143% markup in just six months!

This comes just after I started using the Amazon Subscribe and Save Program. Basically, if I order an item to be routinely delivered, I get free shipping plus 20% off. I can choose 1, 2, 3 or 6 month intervals. Since my daughter has extremely sensitive skin, I can't buy a lot of regular soaps or diapers, and it's been killing me to spend $12/pack for non-chlorine diapers when the regular cost $9/pack for about 1 1/2 times as many. I pay close to double; fortunately, the "hippy diapers," as we like to call them, are close to the same price if I buy them in bulk via Amazon. Unfortunately, our savings here are going to pay our expanding grocery bill in other areas. I'm not sure what to do about this, except that maybe it's time to renew that Costco membership and start shopping on the other side of town again.

I will be pulling out the bread machine again. If I can still make a loaf of multi-grain bread for $3, I can save myself over a dollar a loaf now. Other staples have gone up as well. Maybe it's time to pull out my Japanese cookbook and switch to rice?

What are you doing to save money this winter? Leave a comment and share! I need all the help I can get. :)

Extra Cash -- How To Earn More and Spend Less As A Family (Part 2)

You know, I've spent several days really considering what I wanted to write in this post. After all, this is it; this is why I'm writing this blog, to talk about what it takes to save money as a family and how to avoid the pitfalls. Meanwhile, I'm trying, myself, to save money and avoid pitfalls.

In my first post about this, I talked about how truly difficult it can be to have both parents working without one or both taking on a second job. The cost of babysitters or childcare is a big problem. For those with family nearby who will watch the kids for free, well, I wish I were you. But for the rest of us whose family is in another city or state (or country), there are other issues to consider.

But I see the hole in my story, and actually it is the first thing we did when I started working, so it is my first piece of advice.

1. Stagger your hours. If you can work evenings and your spouse can work days, then you can trade off watching the kid(s). Most parents do this at some point or another, and my spouse and I traded off for nearly three years. Pitfalls include:

• One parent who feels insecure about watching a very small child, or overwhelmed watching two or three. This sounds a bit silly, but the first time my husband left me alone with our first-born, who was two weeks old, I was terrified. Some families leave the role of watching young children to the mother, and the father may feel ill-prepared. Word of advice: get over it. And men? Never use the term "babysitting" when you're watching your own child. Please!
• Stress on your marriage. I worked Saturdays, all day -- for three years. Even when Saturday was the only day I worked, it was hard not having a whole weekend with my spouse. We rarely got to do things as a family. It wasn't as bad when I worked nights, for some reason, probably because I worked a swing shift and was home by 9:30 p.m., but the Saturdays killed me. That being said, it can be done, but maybe not for too long -- after all, divorce is expensive too.

Despite the problems, this is the easiest strategy for most families. After all, your kids are with a loving parent, they are home, and the care is free. Even if your children go to daycare, there are really good reasons to limit their time there, and with 2 working parents, staggered hours are the best way to do it.

My next solution for families in financial trouble is really over-the-top. It is controversial, and I would hesitate to talk about it except that it just simply needs to be brought up.

2. Have one parent quit working.

If you want to earn more and spend less, and you have small children, don't get a 2nd job -- quit the one you have. Really. Particularly for lower- to middle-class families, that second job might pay for a nicer car, but most of the money will go to childcare, emergency take-out dinners and the required niceties for work (dress pants, leather shoes, etc.) Take home pay ends up being quite small; you also miss all the milestones your children go through (first steps, first words, etc.).

Quitting work doesn't mean the same thing as giving up your career. Maybe you want to finish up a bachelor's degree, or work on a master's degree. You can keep up with your former co-workers by dropping in to chat occasionally. A lot of studies show that women (I don't know of any studies regarding men) who leave the workforce have a hard time re-entering - if they re-enter with the same, old set of skills they had when they left. Taking a class is a minor expense and can be crucial to keeping your working skills sharp for when those childcare expenses drop (the older the child, the cheaper the care).

I know there is a "culture" of stay-at-home moms (SAHMs) and working moms, and the media love to play off of the culture war. I personally was a part of a "mommy group" and was irritated when they considered me a working mother (the connotation was negative) -- I worked 6 hours a week on Saturdays, and my husband was with our son the entire time -- but this kind of either/or attitude was and is simply ridiculous. I actually dropped out of the group, the prejudice among them was so strong -- they were all "devoted SAHMs" who had given up their jobs deliberately. I know that writing about the financial aspects of this just plays into the hands of these helicopter-mom types, but please note I didn't say mom should stay at home -- I said parent. I know several stay-at-home dads and my husband and I have traded off over the past 5 years; sometimes I worked part-time and he worked full-time, sometimes it was reversed. It's just good to be flexible about this as a family (for a good read, try The Two-Income Trap by Warren and Tyaqi).

(Side note: A lot of people don't realize that the FMLA, or Family and Medical Leave Act, covers fathers as well as mothers. Dads are guaranteed 12 weeks of unpaid leave after the birth of a child. My husband and I staggered ours, keeping our daughter out of care for almost 6 months. I had short-term disability insurance and received 75% pay for 8 weeks; my husband's boss asked his co-workers to "donate" leave so he got three months at home with full pay. It was the best money we've ever made!)

3. Be creative with your job. This can mean asking your boss if you can bring your child or children to work with you (this complicates if you have more than one, and is hard around the toddler stage). I was surprised to find that the affluent non-profit I worked for in Washington, D.C. was fine with me bringing my son (he cried during a call to the Undersecretary of State -- I was mortified) while the children's section of a library I worked at not only did not let me bring my children, they tried to ban them from the area if I was there (I threatened to quit -- after all, it was a public area). You never know who will be flexible -- and who won't. Here are some other job ideas:

• Work at home. You might be surprised that I didn't suggest this before I suggested one spouse quit, but that's because most studies show that a parent who works at home has very little time to watch their children, and they are better off in childcare with all the accompanying ABCs and art projects. However, it can be cheaper to find someone to au pair or watch the children while you are present. Working at home during off-hours is really the best option, both mentally and financially, but we've never been able to swing it. I think this option sounds better than it actually is in practice; most people I know end up needing to put their children in childcare, at least part-time, in order to do well working at home.
  
• Involve your children in your job. This, of course, very much depends on the job. Sometimes children can be taken along. Other jobs naturally involve your children; I worked at my son's preschool as a substitute for a while. He got 50% off tuition and I got a small wage. While I only made $7/hour, once I added the tuition break to my wage, it bumped it up to $10.75-$13/hour. It wasn't a great amount, but I could come to work when I wanted, and I received a lot of free training about discipline and child development.

4. Be creative with your non-job. Some of these ideas work for really ambitious working parents, too.

• Turn a hobby into money. This can be small or big; sell your creations on Etsy, like this person, or start your own business. A friend of mine was an avid fisherman; now he owns a little fishing gear business, employs his father, and his kids (aged 9 and 12) help out. He even hires my dad to fix boats for him.
• Watch someone else's kids. I just started watching an 11-month-old baby for $8/hour. Since my daughter and the baby just play together, this is up on my list of easiest jobs. The only drawbacks are all the laundry I get done while sitting on the floor, playing with them (wait, did I say drawback?)
• Fix stuff. A stay-at-home dad I know fixes people's computers and does small carpentry jobs for extra cash. A mom I know is a licensed hairstylist; she goes to people's homes (particularly the elderly who don't drive, or shut-ins) and does their hair.
• Be creative with your property. BostonGal rents out her basement; we are in the process of turning our guesthouse into a vacation rental.
• Join a food co-op. This is just another way to turn a hobby (gardening) into money, by selling your vegetables.
• Blog. I am waiting for this to work out. Still...waiting....

There are many ways to make extra money as a family, even if the difficulties of finding childcare are ever present. For the lucky, a flexible job can allow extra time for hobbies, making homemade food (cheaper) and still fitting in trips to the park. For everyone else, some life changes may be in order.

That's what kids do; they change your life. Those who try to avoid it fight a losing battle. Best to move on, cut back on costs, and occasionally remind your senator that daycare still costs more than a university education.

I'm Not Crazy

Here's an article, appropriately named The Childcare Crisis, about childcare costs that show that I was actually underestimating the cost of childcare in an urban area when I quoted $1800/month:

Wendy Brauner's rent clocks in at $1,800 a month -- what some might consider a great deal in San Francisco. But don't think Brauner is living the high life. With a son, 3, and another almost 6, she was spending $2,750 a month on child care until her oldest started kindergarten last fall -- nearly 20% of her household income.

"I was writing a check for $17,000 to the preschool and wondered why it sounded so familiar," she says. "Then I realized it was a few hundred off what I paid for my first semester of college at Wellesley. It's just an enormous outlay."

I get that. Even with just one child, child-care costs were a major chunk of my own family's monthly expenses until our daughter, Harper, started kindergarten. The tab never came close to the $3,200 a month we spend for shelter, but that was mostly because, as a freelance writer, I can shuffle my work hours as needed. And that saves money -- a lot of money. In part-time day care, Harper never cost us more than $900 a month.

Still, it's a serious budget item. And we're among the lucky ones. The cost of child care in this country is one of those little secrets -- like leaky diapers and colic -- that parents just don't share with friends who are expecting.