Beating Broke

Personal Finance from the Broke Perspective

Personal Finance Reassessment

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Occasionally, there comes a time when you have to take a look at your personal finances and do a little personal finance reassessment.  While the need may arise to do a complete overhaul once in a while, a simple reassessment can usually suffice.  All it takes is a little attention, and some dedicated time to making sure that your finances are in order.

Recently, my wife and I were, more or less, forced to do a little personal finance reassessment.  That’s such a nice, delicate way of saying it isn’t it?  Truth be told, our finances were (are) in a mess. The ripples from when I quit my job last November are still plenty big, and the new job that I have seems to have come just in time to keep us from completely going under.  Combine the drastic decrease in income that event brought about with a couple of people who remained stubborn in their budget, and it was a recipe for disaster.

financial peace jrLuckily, we’re usually pretty good at talking about money with each other.  Don’t get me wrong.  There’s plenty of room for improvement.  But, we’re good about not getting into any heated arguments with each other, and being able to figure out where we’ve gone wrong and correcting it.

So, we sat down and caught up our dreadfully behind budget.  And, let me stop here to say something.  What kind of idiot doesn’t keep doing the budget when he quits his job and is making a fraction of what he used to?  This guy.  Dumb.  So, yeah, we caught up the budget.  About 6 months worth of financial data entry.  Some by hand because our bank doesn’t keep history online over 90 days.  So, one by one, directly from the statements I printed off.  Did I mention how dumb that was?

In case you’re curious, catching up on about 6 months of budgeting takes about 6 hours.  6 HOURS!  It’s done though.

One of the things that we discovered, after having done all of that, is that the reason that we were in the pickle that we were in wasn’t because of the loss of income, although that played a part, but more because of how badly we had slipped in the last few months with our spending.  July and August in particular were well above what June was.  In our defense, those are usually higher spend months because they’re usually the only real summer months we get up here in North Dakota, but it was still way off.  And it cost us.  The last several weeks have been pretty hairy, financially.

The scary part of all of that is that we haven’t had a bad financial situation like that for over 5 years.  And, maybe, in that 5 years, we’ve become a little bit lax in our budgeting, and in our finances in general.  No more.  We’re taking the control back, and keeping our finances in order.  Not doing so could mean disaster.  It surely means stress, and that’s something we just don’t need.

During our little reassessment, there were several things that we picked up on.  Like the fact that we didn’t have any life insurance on me.  In my previous job, my employer kept a policy on me that would have been more than sufficient.  For some reason, they decided to cancel that policy when I quit.  😉  So, we’re now budgeting for life insurance policies. Or, the fact that our spending on eating out and groceries had gone way up.  A simple attitude adjustment helps with the eating out, and we’re going to start trying to use menu plans to keep our grocery bill down and to spread it out over the month. Another thing that seems to be part of the issue is the timing of some of our bills.  Before, I made enough that it wasn’t an issue when the bills came due, we always had at least enough to make it to the next payday.  Now, with my lower salary, it’s getting a bit tight right before the 15th (when my wife gets paid), and a few of the bills that come in right before the 15th are adding a little extra stress.  I need to call a few of them and try to get them moved to a slightly later due date.

In the end, our personal finance reassessment came just in time.  We kept a close enough watch on our finances to see the need arising, and were able to meet the need and keep things from getting any worse.  Chalk it up to a lesson learned.  The (almost) hard way.

When was the last time you had a personal finance reassessment?

img credit: Matt Mcgee, on Flickr

Parents Tax Bill Rising?

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Tax season is right around the corner.  Before you know it, we’ll all be holed away in some corner of our house punching numbers into our computers as we try to squeeze a few more of our dollars back from the IRS.  That’s a task that might get a bit harder for some parents this year.

According to this CNN Money report, on January 1, 2013, several tax credits are set to expire.  And, unless Congress manages to pull it’s collective head out of a dark place and extend those credits, many of our tax returns will be quite a bit heavier come April.  For parents, specifically, this could cause quite the burden.

Specifically, the Child Tax Credit, Earned Income Tax Credit, Child/Dependent Care Credit, and the American Opportunity Credit will expire.

  • The Child Tax Credit would be reduced to $500 per child, instead of the $1000 it’s currently at, and would no longer mean a refund of any excess credit above and beyond tax liability.  It’s debatable whether it should be giving that excess credit as a refund, but I’d certainly like to see them keep the credit at the $1000 number.  This is one that we use on our taxes every year, and I know it’s been quite beneficial.
  • The Earned Income Tax Credit will have several of it’s key income thresholds reduced back to previous thresholds.  The maximum credit will also be reduced by 5%.  I believe we exceed the threshold for this one, but reducing the thresholds will eliminate it for quite a few families.
  • The Child/Dependent Care Credit, like the EIC, would see several of the maximum credit and reportable expense reduced.  This is one that I know we’ve used every year, since we’ve always had some sort of child care expenses.  Could mean a significant loss of credit on our tax return.
  • The American Opportunity Credit is a credit that replaced what was called the Hope credit.  It allowed for a higher amount of credit and for some of the credit to be refundable to the tax filer.  If it expires on January 1, it will revert back to the hope credit which means the credit will be reduced by $700, and also reduced to something that can be claimed 4 years to something that can be claimed only 2 years.  The Hope Credit is also a non-refundable credit, so if you have no tax bill, it doesn’t mean a larger refund like the American Opportunity Credit would.  Again, I don’t necessarily agree with the refundability of credits, but this could mean a huge difference for some families still paying for college expenses.  I’ve never been able to use it since I was well out of college when it was put into place.

That’s just four of the parts of the tax code that are set to expire on January 1 if Congress doesn’t act on it.  In a Presidential election year, you can bet they won’t make any moves on it until after election day, so they’ll have a very short window in order to get something done.  I truly doubt that they’d let them all expire, but depending on the outcome of the election, it could be a pretty dirty fight.

How many of you have used these credits?  Would their loss on January 1, 2013 change your tax bill considerably?

Long Term Care: Are you Prepared?

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When we are young, our parents take care of us.  From the time we are mere babes, they wash us, feed us, clothe us, and give us the love and nurturing that we need to grow up into adults.  Even as young adults, our parents are often right there to help us get back up if we fall down.

As our parents age, there may become a time where we have to return those favors, and care for them.  For many, this will likely mean an independent living arrangement of some sort that may eventually become a full nursing home situation.  Not only can that transition be a very expensive one, but it can also be a very emotional one.  While I’m not sure that there is any way to prepare for the emotional toll caring for your parents brings, you can prepare for the financial toll it brings.  We’re financially minded folks, after all, and believe in preparation for all financial burdens.

If you’ve ever become a parent, you likely remember the months leading up to the first childs’ birth.  Baby showers, shopping trips, and plenty of DIY crib and nursery work. People come out of the woodwork to give you things that “every baby needs” or to give you advice on how to deal with “fussy babies.”  All of that serves one real purpose.  To prepare us for the coming of a dependent child.  But, we don’t have any elderly showers.  And we don’t usually know even a month or two in advance to do any shopping or DIY projects when our parents are suddenly in our care.  In most cases, we can’t be totally prepared.  But, there’s no reason that we should be totally caught off-guard.

How do you prepare for the long term care of a parent?

In a way, it’s not that much different from preparing for any life changing event.  There are certain things that we can do ahead of time to try and make any necessary transitions as easy as possible.

Know the possible costs.

There are plenty of ways to find the costs.  Personally, I’d start with something like the tool below.  The costs are going to vary some based on your city and whether you plan on having your parents live in a facility or in your home, but you can get a really close estimate from something like that.

If you think that your parents will need you sooner rather than later, you’ll likely want as accurate of an estimate as possible.  Do your research on the facilities in your area, and then call a few of them to get an idea of how much it the costs will be.

Knowing the costs of long term care aren’t the only concern, however.  Knowing your parents financial situation, and how they feel about the options they may have is something that you need to be concerned about.  For instance, my dad has always said that when it comes time for him to move into a nursing home, he’d rather we just drove him out into the mountains and shot him.  That’s an extreme example. A true one, but extreme just the same.  But, if you really care about your parents, and want what’s best for them, that has to include what their wishes are as well.

Your parents financial situation can sometimes be a touchy subject as well.   It’s something you’ll need to know, though.  Someone has to pay for the care, and if your parents aren’t financially stable enough to do so, it’s up to you and any siblings to figure it out.  Know what your parents finances look like ahead of time.  If there’s any question about whether your parents are getting close to needing care, get involved and get it figured out.

I’m not an expert on the subject.  But, as my parents age, and as my friends’ parents age, it’s a topic that is increasingly coming up in my social circles.  I do know enough to know that it can get complicated.  I’ve seen it get complicated.  I’d love to hear from any of you out there who have been through this process and have stories to share with us.  Sometimes that’s the best way to learn about something.  So, share your stories in the comments below!