Beating Broke

My Wife Quit Her Job

August 27, 2009 By Shane Ede 4 Comments

Before you get all excited, this isn’t a story of financial bliss. Less than 3 months after our second child, a daughter, was born and amid all this turmoil in the economy, my wife quit her job. Why? Suffice to say that she was extremely unhappy at the position and didn’t feel that she could return to it after her maternity leave.

The decision came much easier for her than it did for me. I didn’t have to work there, so I didn’t have the same problems as she did. But, most of all, my trepidation came from the fact that my salary alone could not support us. We would need to find a new source of income, and quickly.

Decisions made, my wife sent her resignation letter to her employer. And then they sent back a bill. You see, my wife was on maternity leave which is covered under the Family Medical Leave Act. In that law, there is a section that states that if the employee does not return from the FMLA leave, the employer can reclaim any expenses such as health insurance that they incurred while the employee was on leave. It was not a small bill. If I recall (who am I kidding. I remember.) it was just over $1200.00. As you can imagine, we were both devastated. Not only were we jumping directly out of the pan and into the fire, but now they had turned up the flame. We could pay it out of savings, but it would put a very serious dent in it. And that was money that we were counting on to keep our bills paid until my wife started earning money again.

You’ll have to excuse me a bit, while I digress. I want to explain how we planned on getting my wife making money again. We have, for several years, been active sellers on eBay. Never anything on any grand scale. We’d hit a garage sale here, and an estate sale or auction there and see what kind of easter eggs we could find. Having had that already in gear, we decided that ramping it up would be the easiest (and fastest) way to get some income coming back in. So, we began the search for more product and more suppliers for the product. End digression. I think I’ll leave any other details of that operation to another post.

So, being the natural arguer that I am, I started doing a little bit of research on FMLA law. I’m no lawyer, so basically all I did was confuse myself further. My brother, on the other hand, is a lawyer. Well, he will be sometime around May of next year. But, he happens to be working at a law firm and has access to all the lawyers and their resources. So, I asked him to look into it a little. A few text messages back and forth. An email or two. And a letter later. The bill went away. Turns out, that by requiring my wife to take all of her remaining sick/vacation time as well as using her short term disability insurance (both of which were enough time to cover the entire 12 weeks), they managed to make it so that they couldn’t reclaim that money. Sucks for them. Turns out very well for us. Thank you brother. And thank you law firm that he works for, for the pro bono work on the letter.

After that was taken care of, we could really concentrate on ramping up the eBay selling. We spent several weeks working out and implementing a way to grow the business. As it turns out, it grew a little bit slower than we had anticipated. And it certainly wasn’t going to make enough money to cover our expenses. At least, not right away. It might in the future. I, being the one that constantly worries (read stresses) about our finances, was beginning to think that it was about time for my wife to start looking for a part time job, if not a full time one. Little did I know the hidden paths that God reveals to us.

I told you before that the company that my wife worked for before wasn’t the greatest place to work. Truth is, it started out as a really nice place to work. Somewhere in between, it went very downhill. My wife’s best friend got fired, my Wife got passed over for promotions that she had been promised. And overall, everyone was fed up with the place. So, another of their ex-coworkers, who is also a friend, approached them with an offer. They would start their own company, doing the exact same thing as their previous employer. They all three loved what they were doing, just not the company, so it made a lot of sense.

That was about three months ago. They have since formed a corporation, gotten all their paperwork and such in order and opened for business on the 1st of August. So far, things are going very well. They’ve had more business than they had anticipated and things seem to be growing well. We’re all hopeful that it will continue to blossom and grow. Maybe one day, I’ll get to be strictly self-employed.

Of course, some of you will remember that I told you earlier that this wasn’t a story of financial bliss. It may become one, but it isn’t yet. We are still struggling to make our financial ends meet and likely will until at least the end of the year. My wife gets paid for the time she works at the company and will likely get a little bit of a shareholder bonus at the end of the year as well. And hopefully, they’ll be able to add a few new products to their line by then as well. Until then, however, we’re learning how to flex our frugal muscles and save as much as possible so that we can pay our bills.

You Are Not Losing Money In Your 401(k)!

July 6, 2009 By Shane Ede 2 Comments

I was watching my local news when they did a spot on people who were vacationing a little closer to home this holiday season because of the economy or other reasons when one of the people who they interviewed blamed their need for staying closer to having lost money in her 401(k). Besides the fact that that money is, for all intents and purposes, off limits until you retire, and really has no effect on your current financial standing, how do you lose money in your 401(k)?

Did it get misplaced?

I’m being a bit facetious here to prove a point. To lose money implies that the money is no longer yours. Except that the majority of your “money” in a 401(k) isn’t actually money. It’s shares of companies or mutual funds or index funds or ETFs. You aren’t losing money. You’re losing value. The securities that you purchased with your money are not as valuable as they were when you bought them. You still own the same amount of securities, which you converted your money to, so you still have all of your money. It’s the value that you’ve lost.

Better example. You buy a car for $10,000. After driving the car for 5 years, you sell it for $5000. Did you lose $5000 on the car? Not really. Very few people will think of it that way. Because most people do not assume that they will gain value in a car, so they accept that they will not be able to sell the car for the same amount they bought it for. And it is almost guaranteed that it won’t gain any value. Again, though, you lost value, not money.

Losing value isn’t as bad as losing money. Why? Because, unless you need to realize that value immediately, you have time to wait and see if the value does go up. And with securities, chances are that they will. And in a locked up instrument like a 401(k) with all it’s penalties to discourage realizing that value until retirement, many of us have decades to wait and see how things turn out. And, if I were a betting man (which I am sometimes), I would put pretty good odds on my 401(K) gaining value between now and when I need to withdraw any of it.

Note: I don’t encourage waiting to see if the value of your car will go up. Unless you plan on waiting decades for that also in hopes that it will become a classic collectable.

Being Debt Responsible

June 9, 2009 By Shane Ede 2 Comments

What does being “debt responsible” mean, and how do you do it?

Being debt responsible means taking responsibility for your debt and it’s payoff without making excuses or trying to find easy ways out through debt write-off, negotiation with creditors, or bankruptcy. In a nutshell, if you signed on the dotted line, you must pay it off.

Why must you be debt responsible? The most commonly referenced reason that you must be debt responsible is that, by signing the note, you were guaranteeing that the debt would be paid. You also accepted the conditions of repayment. Some of those conditions, such as interest rate, are somewhat negotiable even after you sign the note, but not the amount of the actual debt. The most important reason for being debt responsible (to me at least), is the moral requirement. Morally, whether you look at it religiously or secularly, you have a responsibility to repay the debt. Again, it goes back to your acceptance of the debt and it’s conditions. Morally, you have a responsibility to uphold your part of the bargain.

Luckily, for most of us, it’s extremely easy to be debt responsible. We just have to pay our bills each month. But what happens when an emergency strikes and you can no longer pay your bills? That depends. Can you really not pay your bills, or can you not pay your bills because you have to go out to Red Lobster next Thursday? If you really, truly cannot pay your bills, you have what is one of the only exceptions to any of the above rules. You are free to negotiate as much as possible to reduce your payments, delay your payments, and even reduce or eliminate your interest payments. Only in the most extreme cases should you try and reduce the debt or eliminate the debt.

Being debt responsible isn’t always fun. (Who am I trying to kid? It’s never fun.) But, it’s the right thing to do, not just morally, but for your personal finance as well.