Dealing with a 10% paycut at work

When DH’s boss asked all the employees to take a 10% paycut everybody but DH and the guy who recruited him said yes immediately.  DH, said, as he always does when it comes to large decisions, that he would have to talk to his wife.

After talking it over with his supervisor, his colleague and with me and with his colleague again, DH has decided to accept the pay cut with the stipulation that he be allowed to use 4 hours of each week working on important but not urgent tasks for the company.  He wants to make the documentation, instructions, and examples for their open source code better so that they get more clients through that venue.

He thought about saying no, but we don’t really need the money and there’s no reason to be difficult.  He thought about asking for 10% unpaid time off instead, but he doesn’t really need that time.  He thought about seeking another job, but he really likes this one and this paycut isn’t enough of a reason to leave it.  What clinched it for him, though, was feeling like he’s made more of an impact on economics than he has on his own field.  His work does, eventually, save lives, but only if it gets used and not relegated to an electronic dust-bin.   So he needs to write papers or make their main product more user-friendly so more people will want to use it.  Given the time frame and the current state of their projects, he prefers the latter to the former.

So that’s how he’s dealing with a temporary 10% paycut.

How would you deal with a two month 10% paycut?  How about not being sure if your company was still going to be around in a few months?

December Mortgage Update and Trouble in Monetary Paradise

Note:  this post was written before the election results came out.  Now there’s a lot more uncertainty than just DH’s job.

This month (November)
Years left: 0.333333333
P =$1,194.19, I =$20.22, Escrow =$812.79

This month (December)
Years left: 0.25
P =$1,198.91, I =$15.49, Escrow =$812.79

Whenever I start getting used to not worrying about money at all (seriously, I just paid $1.95 processing fee for DC1 to have hot school lunches for a month without trying to optimize not having to pay the processing fee again vs worrying about DC1 deciding zie wants to go back to cold lunch… not to mention not even thinking about the costs of paying for hot lunch!), something happens to add a bit of uncertainty to the mix.

For example, we get an opportunity for unpaid leave or DH decides he hates his job or etc.   So I stop not worrying and start paying attention again.

This time DH’s company has asked him (and everybody else) to take a 10% paycut for the next two months.  The boss and lead programmer are taking larger cuts.

The reason is a cash-flow problem with an underlying cause coming from employee turnover several years ago resulting in too many little starter grants and not enough longer-term big grants right now.  Once this cash-flow problem is resolved, they’ll be ok until April.  Which isn’t exactly a long time either.

We don’t need DH’s salary on top of mine for our regular expenses, but we do in order to not care about money at all.  To eat out whenever, to max out retirement, to fly to see DH’s family over Christmas instead of spending two days driving (something we’ve already committed to), to just donate money where it’s needed, and so on.

So, once again, we’re back to being glad we’ve saved a lot and not increased our expenses to match our income.  I’m not sure how this warning shock will change our spending going forward.  It seems like the 30K emergency fund in cash is still what we will want to have, but I probably ought to start aiming for that now instead of in March when the mortgage is finished.  [Update:  see previous post about how we’re just going to stockpile cash until the US government is sane again.  No 30K limit.]

Have you faced income uncertainty?  How do you deal with it?

We got DC2 a cell phone

DC2 is 9 and in 6th grade.  There’s a lot of extracurricular activities and so on in 6th grade and we decided we’d be more comfortable if DC2 had a way of contacting us if something fell through or there was a miscommunication about pick-up etc.

When we finally decided to bite the bullet to add hir to our plan, we discovered that Ting had added the ability to add all four of our retired outdated dumb phones to the plan.  Back last year when we switched to Ting we actually had to buy new phones which is both why it took us so long to switch and why I am now addicted to an iphone.  But we were pleasantly surprised that we didn’t have to buy a new phone this time.  Zie is using my 2 phones ago phone because it has the strongest battery (I had bought a replacement battery right before DH decided to get new free phones when we renewed our plan many years ago).

/start rant One thing that annoys me about DH’s current school (as opposed to paradise) is that they often have “bring your own devices” days.  Kids are encouraged to play with their smartphones or to bring ipads or, to a lesser extent, hand-held game systems.  DC1 doesn’t have anything like that and we made the conscious choice not to give hir a phone with such things.  I have to say I’m really annoyed about something like that that makes kids whose parents can’t afford to get them iphones or kids whose parents are crazy hippies stick out in a negative way.  Last year in paradise, each kid had an assigned notepad device (I don’t think there was one for each kid–they didn’t all use them at the same time since there were 3 classes of fifth graders), but our school district isn’t rich enough for that, I guess.  But it is rich enough to do things that could hurt poor kids.  I really appreciate how the Paradise school district made everything equal for everyone.  It was a relatively rich district, but our school had a high population ELA and school lunch eligible and there was a lot of redistribution, which is how it should be, I think.  So my bottom line is, if you’re going to allow kids to play games in class, you have to provide the games. /end rant

Anyhow, if DC1 behaves hirself and doesn’t lose anything, having an extra cell line should cost us an additional $6/mo, and possibly the cost of an external battery charger since if DC1 treats hir cellphone like I did (leaving it at home and letting the battery run out), it won’t be much use.

What age do you think people should get their first cell phone?  If it depends, what does it depend on?

Getting an oxygen mask on: Protecting oneself monetarily

Before I could move to thinking about the horrors that are going to be inflicted on other people and what I can do to mitigate their influence, I first had to think about taking care of my family.

Worry 1:  Nuclear war.  This suggests not dropping everything and moving to paradise (where people are safer many other ways), because paradise is a more likely to be a nuclear target than is our current redstate for both geographical and population reasons.  Plus my mom said:  “Evidently when Nixon started drinking heavily during Watergate, the defense secretary alerted the military that they were not to follow Nixon‘s orders without checking with him first.”  So there’s some hope there.

We’re going to skip worry 2 because that doesn’t have a monetary effect.  Worry 3, the one about interment/mass deportation/nazi treatment of minorities/trail of tears, is less of a problem for us because I’m 100% Euro-mutt and by the time they get around to checking state registries to see that DH isn’t, we’ll have had plenty of warning since they’ll already have started taking other groups.  But still, we would need assets to flee.  For people in higher priority minority groups, this could be a primary concern.  :(

That leads us to Worry #4 which is already starting to happen:  Another large recession.  The recession will happen first because markets and businesses hate uncertainty and second because Republicans and Trump both are proponents of policies that will cause recession.  If either of them get their way, we’re in for one.  The Republican one will be smaller than the Trump one.

Knowing that a recession is happening, what should you do?  It’s hard to say what to do with money that’s already in the stock market.  Personally, I’m just going to let what’s in there ride out the next 2-8 years although this may turn out to be a poor decision.  The question is what to do with our new money.  This is especially important for us because there’s a non-zero chance that DH’s company will go out of business when federal funding dries up (and then I will have to cut down on savings).

Since this recession isn’t necessarily your standard Republican-caused recession, it isn’t clear that standard methods of thinking of the recession as an investment opportunity are the right ones.  If things get really bad under a Trump presidency, we could lose a lot of the property protections we’ve had since the Great Depression or before.  If he does something to the Fed or grabs assets (for example, if worry #5:  Russia taking over happens) or defaults on federal debt, nothing will make sense anymore.  So… should one dollar cost average in stocks during the recession and buy bonds before the recession… not all that clear.

When I looked up what to do in this kind of a situation, I got a lot of really stupid prepper sites.  They’d say things like, “if you expect hyper inflation, pay down your debt first”… which is the opposite of making sense (fixed-rate debt is good to hold in inflationary environments).  Or “if you don’t trust the government, invest in real estate” as if the government isn’t who enforces property rights.  Super stupid.  Don’t pay attention to those websites– in fact, I’m not sure they’re even trustworthy in terms of straight-forward things like emergency supplies just given their stupidity.

Right now, I think the best idea is to play it super cautious and to put excess money in cash and cds.  I think there will be a lot more warning about getting rid of FDIC or changing those kinds of rules than there will be even for defaulting on US debt (which I think is unlikely to happen, but it was a campaign suggestion so not outside of the realm of possibility), which means that those dollars should still be somewhat safe.

Of course, the dollar itself may not remain safe.  I looked up what to do when you think the dollar is going to crash and after ignoring all the prepper sites, it looks like a mix of foreign currencies is the best bet– the Swiss Franc, the Japanese Yen, and so on.  Every single one of these is potentially risky, but a mix may be a reasonable addition to one’s portfolio.  Gold and silver, the prepper’s favorites, are probably not the best idea because they’re probably already over-valued (and definitely don’t buy the actual metal– it is heavy and will be difficult to exchange for fair value).  I worry about investing too much in, say, Chinese or Russian assets or assets in some Latin American countries because there’s always a possibility that the government will just seize foreign investments for itself.

The latter paragraph is most important if you think you will have to leave the United States.  Staying in the US, it should be more ok to keep your assets in dollars and in mostly US companies because you’ll still be buying things in the US and hopefully making money in the US so you’re more insulated from shocks than if you had to flee the country (you’ll still feel the price increases, but they won’t be as disastrous).  If you are thinking you may have to leave the country, then definitely put more foreign stock indices into your portfolio (don’t switch it entirely– when the US sneezes, the rest of the world gets a cold).  We’ll be staying in this country unless my worry #3 happens because really we have no place else to go.

All of the above are secondary concerns, however.  If you do not have an emergency fund that can support you for at least 6 months of job-loss, then that should be your first order of business.  Save for a regular recession.  If you’re a tenured academic, your job is probably still safe in the short term, but make sure you could handle a 10-20% future paycut (again, probably not likely to happen immediately).  Do a financial fire drill What could you cut?

Paying down the mortgage is pretty irrelevant for us at this point.  But mortgage pre-payment may be a good idea if it has a better return than your bank account and you don’t want to be in a position where you may have to short-sell (and you wouldn’t foreclose).

So what we’re doing:

In the short term, we will continue to max out our retirement accounts and put money into 529 accounts in the same stock/bond percentages that we had been.  (I’m assuming 529s won’t be seized given their popularity with the wealthy.)  We will continue to do this until DH loses his job.  All extra money, instead of being put into taxable stocks, will accumulate in our savings account.  This contradicts our next mortgage post because that was written before the election back when all I thought we had to worry about was DH’s job going under.  We are also no longer going to be so free with money– no more cosmetic car repair, for example.  We will, however, be upping our charitable donations including charities like the ACLU that aren’t tax exempt.  That’s because now that I have a saving plan and emergency escape plans (are your passports up to date?), it’s time to start thinking more about other people.

Are you changing your monetary plans?

DH’s relative is getting laid off in December

This was originally going to be a post illustrating how the working class gets screwed over in the informal labor market using DH’s relative’s wife as an illustration.  As you may remember, she is undergoing chemo after a successful surgery to remove cancer in her brain.

She had been working as a waitress, but she can no longer do that.

Unfortunately, she dropped out of high school to raise her ex-husband’s kids, then worked briefly as a waitress, then married DH’s cousin and helped take care of his kids from his first wife, then started having kids of her own.  During the recession she tried getting a job but without a high school degree and with terrible credit, neither Walmart nor the Dollar Store were interested.  Eventually she went back to waitressing and bartending.

Doubly unfortunately, a lot of this waitressing work was tips only and under the table.  That’s not exactly legal, but it’s how she was able to make money.  Under the table doesn’t count towards Social Security.

Most of you reading (with the exception of academics in states like Illinois which has its own pension system) have already qualified for Social Security.  You worked in high school some, in college some, and then more or less steadily in respectable above-the-table jobs as an adult.  You need 40 quarters, or about 10 years, of work history total to qualify.

DH’s relative’s wife is six months short of that.  Because much of her work was under the table.  She’ll still get the spousal credit (half her husband’s SS) if she’s alive when she’s 62, but 62 is a couple decades away.  The problem is that she can’t work now and she can’t qualify for Disability Insurance.  She can’t even try to get SSDI because she doesn’t have enough of a work history.  (There’s SSI, but it is difficult to meet the resource limits for SSI.)

That was the news as of yesterday.  I was going to write out this post and then talk about how this under-the-table thing is a way to exploit our most vulnerable workers.

Today, DH’s relative called up DH to give him the news that he’s being laid off.  The state hasn’t been paying for construction projects and has stopped funding projects for state and local areas, so there’s a lot less business for the firm he works at.  And, because of the amount of time he’s had to take off because of his wife’s brain cancer treatments, he was the obvious person to let go.  At least they’re giving him more than 2 weeks.

Right now they have 3 teenagers at home and 1 of the older daughters with her child.  The daughter has a job at the Walmart a town away.

There’s no savings.  There’s lots of bills.  They have terrible credit.  Their house is underwater because they’ve used it as a cash account for years (and it was overvalued when they started taking “equity” out).  I don’t know what they’re going to do.  The relative is only 40, but years of hard working and hard living have aged him significantly.  There aren’t jobs in the area (he already commutes an hour to work each day) and they’ve never moved to the city (>2 hours away) where he could get a better paying job because she’s wanted to stay close to her (abusive) family.  Will they even be able to do that now?

And thank goodness (and thank Democrats) for the Medicaid expansion.  There’s still a lot more chemo in their future.

It is so hard to be poor in America.

One week of spending with #1

Inspired by Yuppie Millenial’s post.  [link updated to refinery 29]

Grocery shopping: $176.56
Cream sodas and donuts for the kids (we went because I wanted a donut, but when I got there they were out of the kind I like so I didn’t get anything): $10.50
DH ordered a replacement door handle for my car since he broke one at the donut shop: $12.97
By dinner time I was really starting to feel under the weather, so DH picked up ramen from the new from-scratch ramen place in town (they make their own noodles! no msg! so good): $39.80

DH decided to try a new Mexican place with the kids. It was meh. (I stayed home and slept.): $34.06

DC1’s after school care for the next month (paid early via credit card): $115
DH ordered replacement earphones for himself out of his allowance: $31.88

DH put gas in the car: $15.55
DH also bought a ton of stuff for work that he’s getting reimbursed for, so I’m not going to count it. Our garage is gradually turning into a workshop. But that’s a trade-off for telecommuting.

DH decided to get burgers for lunch and brought one to my office: $20.30
Replacement booster seat for the carseat that was in the accident (DC2 is big enough for this particular booster and refused the super expensive convertible one that I wanted to buy because zie didn’t like the cowmooflage, thus forcing me to look at other brands and saving us ~200): $53.01

No spending

Paid violin teacher online (usually this is $80, but she’s taking a week off): $60

So is this a typical week?  Hard to say.  Usually we eat out as a family 2x/week and DH goes out for coffee or for lunch in order to get out of the house during the week.  Usually he doesn’t bring me any and pays for it out of his allowance.  Most weeks we spend ~$200 for groceries, but some weeks we spend more because we go into the city or we skip entirely because we’re too busy or need to eat the pantry down some.  Also this misses most of our major first of the month expenses like daycare, mortgage, and so on, though I guess I did pay for after school and violin a bit early.

Does anything surprise me?  I guess how many small purchases got made?  DH tends to buy things right away when he thinks we need them, but I tend to buy things in lumps.  His frequent buying of small things is definitely a function of having amazon prime.

But an interesting snapshot.

Have you ever tracked your spending?  Why or why not?  How in detail did you go?  Did you learn anything?

Humblebrag: My monthly retirement savings is equal to my monthly take-home

That’s right, folks, with my retirement accounts maxed out, I am saving 50% of my net income (after taxes, health insurance, parking etc.)

Of course, this would be a lot more impressive if we weren’t spending the bulk of DH’s monthly income… sure, we’re maxing out his retirement too but he’s only got the one account and it doesn’t have the best match in the world.  There was  time when we were saving a much larger percent of our joint income, but now we make more and spend a lot more.

Also mind-blowing:  If I made more money, then I would be taking home more than I could save for retirement.  Because retirement is maxed out.  (I wonder if this means I should turn it all to Roth instead of Traditional so I can get those last drippings of retirement savings even if it means my taxes this year go up… a difficult decision problem.)

But still, when I got my first paycheck stub for the year (I *heart* getting paid!) I thought that was a pretty neat thing– once you include the employer match, I’m putting away almost exactly what is going into my savings account.

I love money so much.  It provides so much security.  So much opportunity and possibility.  You can spend it too, but my favorite thing about it is that I no longer have to worry so much about most things.  If DH loses his job or I get sick of mine, we’ll be fine, at least for a while.  We can’t retire and continue to live the life to which we’ve become accustomed, but we could take a chance that required us to stop saving for retirement for a while.  We still can’t buy a house in Paradise, but we could rent one, at least for a while.

This message brought to you by the first paycheck of the school year (and the first full paycheck in over a year!).  Being paid is so much more awesome than not being paid!

Do you like getting paid?  Do you have any humble-brags about money you’d like to share?