Monday, December 22, 2008

Preparing for Baby Part 2

Interestingly, this holiday season has provided me with more time at home than I can remember for a long time.  Usually December is a month of running from task to task, from Christmas shopping to baking to gatherings.  This year we've been remarkably light in the gatherings arena, and due to doctors appointments and one giant snowstorm, I've been at home - either working or not - quite a bit.  

While that hasn't meant that we're completely ready for either the holidays or the baby - heck, it doesn't even mean that the house is clean - it has meant that our lives seem to be moving at a nicer pace than over most of 2008.  I've had time to plan and cook more, and I've even, as late pregnancy makes me more tired, fit in at least one nap a weekend.  

But now that I'm 3/4 of the way through my pregnancy, a sense of urgency is starting to hit.  It's time to get everything ready for the baby.  Over the last two weeks we've picked out paint for the nursery, ordered the crib and bedding (mattress still to come), and begun taking care of key items like pre-registering at the hospital, thinking about pediatricians, and so on.  All in all, we've spent the bulk of our $1200 budget at this point, but kept very much on track.  So far we've purchased:

  • A crib
  • A glider with ottoman (every single parent we talked to raved about their adjustable glider.  Since agreement about baby gear is rare, we took this universal agreement as a sign not to be ignored)
  • Paint for the walls and the ceiling - low VOC paint is more expensive, but worth it to not have the newest MoneyPenny inhaling volatile organic compounds in his or her new little lungs.
  • Chair rail for baby MoneyPenny's walls - a cheap but classy touch to go with a two-tone paint job
  • Baby bedding.  I skipped over the useless and not-recommended bumpers, and simply opted for a blanket, sheet and matching mobile.  Since we have curtains in the same fabric, which also matches the glider upholstery, that was enough.  For extra sheets, we've opted for plain ecru.
  • Cloth diapers.  While we'll use chlorine-free disposables for the first week or two, while we get used to round-the-clock baby care, we've opted for cloth diapers from in smalls for once baby hits 8 pounds
  • A coming home outfit.  Okay, this didn't fall into the land of necessity, but I spent $14 on a cute little warm and fuzzy baby footed onesie to go over a t-shirt and diaper on the way home.  
What's still left on the list?  Aside from those items that are on our registry and we'll purchase after our shower if we still need them, like a travel system and carseat bases, only a plastic pail for soaking the diapers, one with a lid to ensure safety, some wood for shelving, and the aforementioned crib mattress, not much.  Now it's just time to get to all the projects.  

The big thing I want to accomplish, aside from having a functioning nursery before our newest family member arrives - this is more because I know for a fact we have more time and less sleep deprivation now, rather than because the little one will need it immediately - is to de-clutter the house.  For the most part, we keep the house reasonably neat.  But we have clutter that has bred in the corners of all rooms, and we're trying very hard to get rid of it, a bit at a time. 

De-cluttering doesn't have to be expensive.  So far, we've just bought 2 plastic storage tubs - one for baby things, and one for maternity and other clothes for me.  What it has meant is that we have had to pack some things up for later, heartlessly toss other things.  It's about spending time figuring out what use and purpose certain things have in our lives.  

How's it going?  Slow, as you can probably imagine.  But it is going.  

More updates to come later. 

Saturday, December 20, 2008

Plan for the Worst, Hope for the Best

A recent article on MSN Money hit my philosophy on the nose.  In short, don't assume someone is at the wheel, steer your own ship.  Question assumptions, even if they are being made by some very bright people.  

Our current economic crisis is proof that all the brains in the world doesn't necessarily make you sensible.  Even Alan Greenspan expressed 'shock' that things turned out the way they did.  Really Alan?  Because speculation and over-leveraging of assets along with many, many bad loans is likely to turn out well?  

I wonder what planet he's been living on.  But this is true of a lot of my thinking about the economy.  NPR did a segment on a Massachusetts family worried about foreclosure - on a salary of $150k (keep in mind, in this high cost of living area, the average salary for a working couple is about $98k, and that still isn't a lot comparative to the costs of housing and other key items in MA) they had purchased a home for $640k with only $10k down.  And now that there were two children, they were shocked that daycare cost $3k per month.  

Now, just to provide some clarity, without any savings for retirement, $150,000.00 annual income works out to a bit under $8000 a month.  Just their mortgage alone, assuming it's a fixed loan with an approximate interest rate of 6% is about $3837 a month.  Yes, that's right - almost 50% of their take home. 

Add to that the $3000 in daycare payments - and really folks, if you think you are going to be a working parent, make some phone calls and find out the going rates now for your area - and they have used up basically all their income. 

And I haven't even added in food, possible car payments, fuel, heat, phones, dr. appointments and other bills.  Even if these folks are socking away money in pretax savings accounts for daycare and health care, and overtime makes up some of the shortfall, their ship is sinking. Sunk, actually, as they are also carrying tremendous credit card debt.

I'm a planner.  I realize not everyone is.  I wasn't, many years ago.  It was only once I learned lesson after lesson the hard way about money, often worrying about how to pay a bill or where money was going to come from.  I didn't come to my approach to money easily or quickly.  

But I have learned a few things over the years:

 Saving is more important than any acquisition.  It's the thing that allows you to sleep at night, even when bad stuff happens.  I recently learned that there's about a 60% chance that my client won't extend me into February (I am safely employed through January) because of budget cuts.  Was an extra month off before Baby MoneyPenny comes in the plans?  No.  But can we live through it with our savings just fine?  Yep.  It's not how I dreamed of spending our savings, but hey, that's life.  I can absorb the potential unemployment without batting an eyelash.  Not forever of course, but knowing that a job hunt at 9 months pregnant is unlikely to achieve much, I'm prepared and okay with the time.

We also could absorb the recent news that our mortgage bank had incorrectly assessed our escrow over the last year to the tune of $2100.00 - not exactly small potatoes.  We have a choice to either pay the balance immediately, make a partial payment and see our mortgage payments go up somewhat, or absorb it in higher mortgage payments over the next year.  We could do any of them but will probably go for the second option.  I'm cranky about it, but we can absorb it.

Budgeting and planning aren't always fun, but they are always worth it.  Just knowing approximately what we'll spend in a given month, including all the various expenses that pop up throughout the course of the year makes things saner for us.  Sure, it's annoying sometimes to sit and enter receipts into the budget, and sometimes we miss our targets.  But overall, we hit more than we miss, and it's kept our savings targets on track.  

Never assume someone is right just because that's the conventional wisdom.  I remember a conversation that I had with a good, very bright friend of mine.  Essentially the discussion was around the idea  - one that many people I've met believe - that if they go to college and get good grades and work hard, they will achieve financial success.  Quite frankly, that's a pile of bupkus. Going to college increases your odds in a job hunt, and working hard is great, but there's no guarantees about anything.  Ever.   

Over the last years, many new homeowners got told that they could refinance their incredibly expensive ARMs when the rates started to rise.  And then they couldn't....and fell behind...and got foreclosed on - and then it happened more and more, and the investment banks started to fall.  Nobody questioned what they were told, and as a result, they paid the price.  Don't believe everything you hear.  Question everything - even authority.  No one is infallible or can see the future.  

What goes up must come down.  If there's a huge price increase, there's likely to be a decrease - take recent gas price increases and rapid drops.  The fact that everyone closed their eyes to the housing bubble and was so startled when rapid decreases in value started to happen.  Um, yeah.  So next time someone tells you to jump in with both feet before you miss an opportunity, analyze the basic assumption that it is a) one you can't afford to miss and b) one you want in the first place.  

Be an opportunist.  While the points above may make me sound like a pessimist, quite the contrary - I'm a very optimistic person.  I am always looking for an opportunity - to grow, learn, increase my income.  And in chaos, like we currently have in our economy, there's a ton of opportunity.  It just requires creative thinking.  Contractors are reinventing themselves as green builders.  Information technology specialists are teaching themselves to become bridges between business requirements and the technology that gets used.  Look for areas where might provide value - and ask if you can.  One of my favorite quotes has always been by Thomas Edison "Most people miss out on opportunity because it's dressed in overalls and looks like hard work".  Don't miss out.  

You can't see the future, but you can sure as heck do your research.  If you know you want two kids, find out what daycare costs.  Or what you'll be able to manage for a mortgage payment on one salary.  Ask other moms what they spend on things.  And then live like you are in that position already today - to get a feel for how it will work out.  

Plan ahead a little - you'll be happier for it.

Saturday, December 6, 2008

Proactive Spending in A Bad Economy

Okay, things aren't getting better in the economy anytime soon folks.   Sure, everyone knows this, but sometimes I'm not sure that people really know it, if you know what I mean.    What I mean is, we're not going back to business as usual.   Not for a long time.   I think 2009 is going to be a long, tough year for many.  

The company I consult for went through a round of layoffs this past week, and more are coming. So far I'm safe, but we'll see how that goes.  My current goal is to make it to my maternity leave in March, and I think that's a reasonably safe bet.  After that, I have some prospects.  Still, things are getting scary out there. 

A result of the shaky economy and all the job cuts is an absolute reluctance to spend on anything nonessential.  But there are some things worth spending on if you can.  I call it 'proactive spending', or spending money in order to save some or be prepared for the worst.

Here's our list.

1. Firewood and heating oil
We're heading into the coldest months of the year in New England, and ensuring we can stay warm is a top priority.  Right now, home heating oil is cheaper than it has been in a while, so we're making sure the oil tanks stay topped off.  Same for firewood - that's up in price, but we're ensuring we have enough to last us a long time.  

2. Car maintenance
This is something to stay on top of when you are currently employed.  We're making sure all our maintenance is up to date  - we always do, but now it's even more critical.  And keep that gas tank full too.  

3. Insulating supplies
We live in an old, drafty house.  No getting around it, there's a lot of heat waste going on.   So while we've cut back on home improvements, this is one area that's still getting funded.  4 new basement windows are at the top of the list - we can feel the outdoor air blowing through the current ones in one area of the basement.  I'd love to do the windows in our bedroom as well, but for now we'll just caulk and seal as best we can.  

4. The pantry
I'm an advocate of a stocked pantry.  Now is the time to fill the pantry, freezer and cabinets with a bit of a stockpile.  A while back, Liz Pulliam Weston on MSN Money wrote a great article about the emergency fund you can eat.
How much and what you stock is up to you.

5. Retirement
I hear from a lot of people lately the desire to stop putting money into the uncertain markets. But just don't listen.   Save as much as you can, as often as you can.  Don't ditch those pretax withdrawals or the employer match.   You have the opportunity to get good stocks cheap.  Find a good solid mutual fund by reading ratings at and stick to it.  

6. Family gatherings
Christmas will be a little less generous this year, which is fine with me.  But we're still spending to see family (and friends!), even if that spending is more careful.  Relationships are worth it.