Ask the grumpies: How much to save when your salary is small?

Leah asks:

I comfortably live on my salary with no issues. I easily put away 50% each paycheck (between savings and retirement). But my salary isn’t huge. Should I be digging deeper to find some less-easy money to amp up my retirement or savings account? I’m contributing to my 403(b) but not really my Roth IRA because I don’t know how to use my bank’s interface. Yes, lamest excuse ever.

Also:  How does my spouse saving for retirement impact my savings? As in, is it okay to not save quite as much? I’m saving, but I’m not saving 15% of my income for retirement. [Ed:  this means 50% of her income is going to general savings + retirement, but less than 15% is going to retirement]

And: I started saving at 30 for retirement. How much do I have to save?

It’s only been a little over a year since you asked this question, and it’s not like your family situation has changed at all, say, by having an adorable baby.  (*Cough*)

If you’re really only living on 50% of your paycheck, then that means you’re doing fine for retirement. Saving 50% starting in your 20s (even late 20s) will allow you to have more money than you need later on, if you keep those living expenses low.

However, some of your living expenses are probably subsidized by your husband.  So you’re probably not really living on just 50% of your income.  You will need to figure out as a family unit what your joint savings and joint spending is and what it’s likely to be in retirement.  What kind of retirement do you envision as a family?  What risks are there in the future?

As a general heuristic, you want to save 10-15% of your (joint) income for retirement.  If you didn’t start until you were 30, then you probably want to aim closer to 20% (or more).  But again, this is going to depend on what your husband is doing.  Even if you have separate finances in most areas, you will most likely be sharing living expenses now and in retirement, just assuming that you want to keep living with each other.  (And in the unthinkable event of divorce, many states are community property meaning they cut your assets in half no matter how many assets there are.)

In terms of whether or not you should dig deeper… well, that depends a lot on what’s going on now and being able to predict the future.  You do have a child now, and for the child’s sake, you want to make sure that he doesn’t have to support you during your golden years.  At the same time, babies are a lot of work and you may have more time and more money to devote when the baby is school-age.  A lot of things change over time.

As a side-note, when your salary is *truly* small, because you’re one of the “47%,” Social Security will replace a large percentage of your income.  And, correlation-wise, you’ll die younger.  But that’s not really your situation.

Yes, not wanting to figure out your bank’s IRA thing is lame.  Don’t use your bank for the Roth IRA (unless the only way you are going to do an IRA is through the bank, but that would only be the case if the bank was super easy to use, satisficing is always better than doing nothing).  Give Vanguard a call and they’ll help you figure out what to do, assuming you have enough money to put away in a Roth IRA.  Stick it either in an S&P 500 index fund or in their Target-Date retirement fund.

So, um, take that advice for what it’s worth given your changed circumstances from when you asked it.  We can elaborate in the comments!

Grumpy Nation, anything to add?

Semi-annual (Biannual? Bienniel?) reminder: Just ask!

Our auto insurance went up $200 to around $1600 this year.  Even though our cars are a year older and more time has passed since our last accident and we’re a year older and so on.

So DH (my hero) called up the auto company and asked what happened.  After some lengthy conversation about how medical claims going up can’t possibly be the reason for vehicular damage costs going up, the person on the other end asked if we wanted to do a 20 min survey to get some underwriting done.  (She didn’t put it quite like that.)

DH said sure, because he called at 7pm and the kids were watching a show.

Less than 20 min later, he’d cut the bill by $600 (to just under $1000).

20 min = $600.  That’s a better hourly rate than Mr. Money Moustache’s latest post about the benefits of credit card churning.

If it’s been a while since you asked your regular providers for a discount… give them a call today!  You might be surprised at what they have to offer.

Do it!  And report back to us.  :)

How do you handle the mental load of partnered life?

For those of you with partners, of course.  Unless you have a personal assistant!

In married life, especially when you have kids, there are often things that you have to do or get done.  Appointments to manage.  Places to be.  Things to sign up for.  If it were just you, you’d take care of all of those things (assuming you’re not in the “personal assistant” bracket).

Once you’re married you have to coordinate things and someone has to remember things.  But it doesn’t have to be you.  In “traditional” marriages, the wife takes care of these things.  She even takes care of the husband’s social engagements.  She keeps track of everything, makes all appointments, and is responsible if something is forgotten or missed.

That type of arrangement makes economic sense on the whole.  It makes sense to have one person taking care of everything so the other person is free to think about other stuff.  It’s a division of labor and one person specializes in appointments and filing paperwork and so on.  There’s no accidental double-booking unless the person in charge does that double-booking, and presumably that person will notice.  It doesn’t have to be the wife, but it makes sense to have one person in charge.  That person doesn’t have to be in charge of everything– it might make sense for one parent to take care of all the adult stuff and another all the kid’s stuff, or one person the house stuff and another the school stuff.  There’s lots of different ways to arrange it that are both egalitarian and efficient.

We don’t do that.  We are both in charge of almost everything.  We have little black books that we coordinate.  We have a list on the refrigerator for groceries.  I do take care of all the bills (even DH’s credit cards, though he is responsible for reviewing it each month for fraudulent charges) and DH is mostly in charge of the cars (even mine, though since I’m the one driving it I’m more likely to notice when the sticker says I should get another oil change), but for the most part, and especially for the kids part, we both take care of everything.

I noticed this lately when I emailed one of my colleagues about a play-date.  Our kids go to the same school and are friends and I know him but I don’t know his wife.  He forwarded to his wife and she emailed back.  Similarly, we got a birthday party invitation for another child who is DC2’s age from another colleague’s wife, not from him.  Usually the invitations for things go to me via email or to our joint junk mail account, but to DH by text because I never have my phone with me.  With DC1’s best friend whose mother is super-mom, and often on-call, we’re equally likely to get a text playdate from the dad or the mom (and occasionally the college-age uncle who babysits for them)!  Generally we email the dad, but just because that’s the email address that pops up first (alphabetical order).

There’s drawbacks to our non-method.  We have to consult each other.  We have to make sure our books are synched.  (Yes, we could have a calendar in the kitchen near the grocery list like my family did growing up, but that would be an additional thing to update!  Once DC1 is old enough do start doing hir own social calendar, we may switch to that.)  It’s extra effort, extra time, and extra mental load that only one person could have.

But there’s also benefits.  The biggest benefit is that when we forget to do something or forget to go somewhere, it’s both of our faults.  It’s hard to be mad at someone for forgetting when you forgot too!  Also with both of us needing to remember and both of us checking our planners and our shared junk email account, there’s a bit of overlap and perhaps a greater possibility that one of us will remember or notice even if the other doesn’t.  I’m not sure if that works, but we’re both so busy I bet either one of us would forget just as much if it was just on us all the time.

#2 doesn’t have kids, so this is much easier.  We delegate, and we talk.  For example, we just moved to another state.  This requires SO MUCH COMMUNICATION, folks.  I mostly coordinated that, since I have the time, but he has most of the money.  Every day we would say, what do you need me to do for this move?  Did you hear back from the movers?  Did you pay the security deposit or shall I?  We have a joint savings account, and we need to talk to each other about planned transactions because of Regulation D.  We share spreadsheets and lists in Google Docs (drive).  Sometimes we IM each other during the day, and then we each have a chatlog of what we talked about.  It can certainly get tedious having this conversation every day — there was a point during the moving process where I lost my shiz because he asked me about tasks one too many times — but mostly it’s been working for us.  We’ve also found in other areas (e.g., kitchen) that it’s helpful to put one person explicitly in charge– doesn’t matter who– and that person directs and delegates to the other.

 

For those of you with partners, how do you divvy up the mental load of planning and deciding and answering and filing?  For those of you without, what methods do you use to keep track of everything that needs to be done?

How often do you get your flexible savings account moneys?

Every month $555.55 is taken directly from my paycheck and put into a dependent daycare account.

Every month I write a check to the daycare for $630.

I do not, however, request a reimbursement every month from the DDA.

Instead I tend to let the months build up and then sometime during breaks (usually Winter, Spring Break, and Summer) process the DDA paperwork, get the required signatures, and fax the signed papers to the DDA folks.

Then a few days later, I get a lump sum deposited to my savings account.

Why don’t I just request the money every month?  Two reasons.

1.  Effort.  It takes a lot of mental load to remember to process the paperwork AND take the forms to daycare AND pick them back up again AND fax them in.

2.  $555.55 is a lot less than $630.  If I let a few months build up, then I don’t have to deal with claim denials followed by the additional $74.45 a month later followed by some smaller number than $555.55 etc.  (It used to be I’d have to redo the denied part if I over-requested, but now they send it automatically when the coffer gets refilled, which is nice.  Also the direct deposit is much nicer than the checks they used to send.)  I have a much better idea of how much is left when I do it in lumps and keep all but the last reimbursement under the amount actually in my account.

Another reason that might make sense if we were tighter on money (and therefore the effort cost might be worth it) is that this DDA can serve as an additional emergency fund– additional savings not in the checking account that could be tapped into in case of emergency.  We used to treat credit card savings like that, but these days the amount of credit card rewards isn’t the difference between us being able to buy groceries or not that week.  $555.55 isn’t chump change, but our emergency fund these days is large enough to cover most such emergencies, even including things like unexpectedly large tax bills or months late travel reimbursements.  Yes, rationally it still makes more sense to keep such money in an interest-bearing account, but not being able to see it still has psychological advantages when it comes to budgeting when you don’t have a lot of slack to play with.  (And #2 adds that interest-bearing accounts don’t pay bupkis these days.)

I do process travel reimbursements and rebates right away, but that’s mainly because if I don’t, I’ll lose the receipts or forget about processing them at all.  Plus, there’s also no advantage to putting it off– the same number of steps need to be taken no matter when I do the reimbursements– I can’t just do all of my travel for the year at once in one step.  With the DDA, I could, in theory, put it off until we’ve spent $4999.95 or whatever I’ve put away for the year on daycare and I’d only have to get one signature and do one fax.  I don’t do that either– usually I request 3x/year.

Do you request flexible spending account money and credit card rewards as soon as you can or do you let them build?  Why or why not?

Academic side hustles

#1 occasionally picks up $100 or $500 here and there to review a paper or a grant or a book.  She will also do these things for free, but is perfectly happy to accept money for the opportunity when it’s offered.

Sometimes she’ll do free-lance writing for a policy brief or a news article or encyclopedia article, though she doesn’t seek these out and hasn’t actually done one in several years.

Her colleagues moonlight as expert witnesses or do big consulting contracts for various state governments.  But she hasn’t been offered such things and doesn’t seek them out.  She does seek out grants, but those aren’t really side hustles, as they fit under her regular job heading.

#2 has reviewed textbooks and is supplementing her unemployment spell with small bouts of copy-editing for academics.  She’s also hiring herself out as an experimental subject, for Science.

In grad school we picked up side work as advisers, research assistants, and experimental subjects.

How do you get money outside of your regular 9 month contract?  If you’re not an academic, what kind of side hustles do you have?  Any ideas for #2?

Ask the grumpies: Umbrella Insurance

SP asks:

 What is your opinion on umbrella insurance.  I saw in one comment (I did search your blog) that at least one of you has it.  My current quote [in CA] is $184/yr for $1M of coverage (deductible not clear right now).

Umbrella insurance is something you get if you have substantial assets someone could potentially take from you if they pursued a frivolous lawsuit against you (or even a not so frivolous lawsuit!  but we assume our readers will only be pursued by frivolous suits).  It also fills in some of the gaps from your other insurances, but in our opinion the lawsuit thing is the big thing.  $184/year for $1M seems reasonable.

The insurance is nice because you won’t go broke if you lose one of these suits and because the insurance company has skin in the game, they will often go to bat for you and help you out with the lawsuit itself (so I’ve heard, anyway).

If you are the type who thinks that a potential lawsuit may not be a random act of chance, then be sure to read the fine print on your policy.  Many things that could be your fault are excluded from the insurance plan, and if one of those is your particular vice, the umbrella policy isn’t going to help you if you get sued.  You also may be excluded if you run a home daycare, and I’m sure there are other exclusions for other higher risk (of lawsuit) occupations.

We got ours at the point that we had “real” assets that we were willing to pay something under $200/year to insure that we didn’t lose them.  We also thought at that point our assets might be attractive enough for someone to bother going through a lawsuit to get them if given the opportunity.  We bought umbrella about 3 years after getting real jobs, but I don’t know what our net worth was at the time, just that it was high enough that $200/year seemed worth it to our loss averse selves.

So that’s our thoughts on umbrella insurance.   Grumpy readers, what are your thoughts on umbrella insurance?  Do you have it (and why or why not)?  When did you get it?

October Mortgage Update and Window Treatments

Last month (September):
Balance:$43,346.00
Years left: 3.25
P =$1,030.84, I =$183.56, Escrow =$788.73

This month (October):
Balance:$40,306.31
Years left: 3
P =$1,042.82, I =$171.58, Escrow =$788.73

One month’s prepayment savings: $7.90

Recall some of our windows.  We have two sets of these.:

So the first thing we wanted to do is get some of that professional reflective stuff put on on the outside.  One of the rooms gets really hot and no amount of crepe myrtle outside seems to be able to block the heat in the middle of the day.  Of course, that requires actually contacting someone and we’re still waiting for our bathroom flooring to show up. [update: they came, see last Monday's post]  Redoing the indoors doesn’t require talking to anybody or waiting for anything, so that’s what we started with instead.

We tried going without anything on the top half circles for a few days.  It was hot and occasionally blinding.  Other viable options we explored were Faux stained glass film and plantation shutters.  We’ve looked into less expensive options like paper fans and turning regular paper blinds into half circle blinds… but none of them seemed worth it to us.  (The more crafty among you may disagree!)   Here’s a pinterest page with all sorts of stuff.

In the end, we chose Bali half circle faux wood blinds in coconut, with matching 2 in horizontal blinds.  Cost:  $108 for each small half circle and $160 for each small one.  Total cost:  $752.  Then there was a 20% discount (down to $602) and tax and stuff.  The blinds were:  $67 each for the 4 little ones and $96 for the 2 big ones, $460 total.  DH decided he liked the smooth finish better than the fake wood-grain finish.  I’m good with that.  Total cost including everything:  $1050.

After: 019_crop

So a lot less expensive than roman blinds would have been, and I think roman blinds are kinda going out of style, so dodged that bullet.  Laziness for the win!

We still have the great room, and for that I really want to do something I recently saw at an upscale hotel, but I haven’t been able to find pictures of what I’m thinking of– perhaps it isn’t trendy enough yet.  Basically they had a rich grey thick outer curtain, a satiny translucent inner curtain, and a third white blackout curtain.  There was a nice grey rectangular valence over the top.  All curtains were openable with their own chains.  I can’t for the life of me figure out how to go about buying that kind of set-up without hiring someone or picking and choosing the separate parts through several different stores.  That kind of set up, especially with being able to open the curtains via chain, seems not to be available as a set anywhere, even though I would like to be able to just press a “buy this look” button and put in my particulars.

I think we’ll also replace the vertical blinds in the guest bedroom with a blackout curtain one of these years.  We’ll see.  My MIL got curtains to replace the blinds, but we didn’t take the blinds down because they didn’t block enough light even if they do look nice.

Something we noted when buying– the cheapest options on almost any site have a ton of reviews but some of the reviews say things like “blinds melted after two weeks.”  The more expensive options don’t have as many reviews and some don’t have any reviews, but they often tend not to have any negative reviews if they have reviews at all.  We rely pretty heavily on online reviews, which we believe have increased our quality of life in many areas (allowing us to pay extra for quality and to avoid hassle with returns).  So even if the most expensive options might be perfect and we might be willing to pay that amount if the quality is higher, if we have no information on the quality, we’ll go with the option that has 60-odd 5 and 4 star reviews over the option with 12 (or 2) 5 star reviews.  (And we’ll pick that over the 900 reviews where 5%, all from the South and Southwest, note that the blinds melt in direct sunlight.)  One of the online places we looked at didn’t have any negative reviews for even their cheapest blinds, so we really didn’t trust them.

Boy do we hate this sort of thing.  Why can’t stuff just last forever?  Or why can’t we have someone who loves to do interior design as a hobby pick stuff out for us?  I kept going, “You know, DH, we could just hire this blinds company to pick everything out for us.”  But… we still have to *pick* a company, and if we’re going to do that, we might as well just pick the blinds instead.  So we did.

How do you figure out these kinds of large home improvement purchases?  It’s easy to compare when it’s a water heater or what have you– but these kinds of aesthetic choices are so difficult for us.  Do you use online reviews (and what do you do when there aren’t any) or hire an interior decorator (and how do you find one)?  Do you just “buy this look”?  (And from where?)

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