Thoughts on ways to become more obnoxious with money

I was reading through the Gourmet magazine cookbook I got for my birthday the other day (used because Gourmet is sadly defunct).  In the entertaining section it has a couple of pages recommending that when you throw a party, you just hire caterers and be sure to rent 3x the wine glasses you think you’ll need.  I guess not unexpected advice from a book that starts with 33 pages of cocktails*, though perhaps a bit unexpected from a cookbook that one has bought, presumably, to cook the recipes therein.  I’ve been to catered parties for work, but I’d never thought of actually throwing one myself.  In fact, other than Thanksgiving and the occasional playdate (either DC1 or DH will have a friend or two over to play boardgames, and/or in DC1’s case, video games), we really don’t throw parties at all.  That year in paradise we would have people over and we’d get take-out (usually dips and salads from the local Israeli place), which is sort of like catering, but much less expensive.  Here, presumably, we’d go into the city the weekend before throwing a party and get lots of frozen canapes from WF and TJ’s to reheat.

The military couple who owned our house before us set up the kitchen for caterers with lots of warming trays and heat lamps and an entire wall of our huge pantry filled with alcohol (the side where we keep tupperware, plastic cutlery, the mini fire extinguisher, extracts, and where the children keep their personal candy stashes).  So maybe catering is something that “normal” upper-middle-class people do, or more likely, they catered a lot of work events so someone else was paying.  The state-side military seems to be into government funded catering.

I wonder at what income/wealth point people hire personal assistants and if we will ever get there.  I’m guessing not.  (What would we use a personal assistant for, you ask?  This weekend we decided that finding a competent handi-person was too difficult so DH is in our back yard pressure-washing the deck himself and after it dries, 3/4 of us will work on staining it.  A good personal assistant would find a handi-person and negotiate a reasonable rate for hir services.  Similarly this PA would find a reasonable yard service that doesn’t have to be told every single week not to cut the grass so short, not to use leaf blowers, etc.  So, I guess a good PA would mainly find ways to spend more of our money.  I’m guessing we will never get to that point.)  I do know economics professors who have personal assistants, but they’re dual-economist couples at top schools who are jointly making somewhere around $500K/year (or more).  So, maybe the answer is $500K/year, adjusted for inflation?  Must be nice.

Is this why obnoxious people say you cannot possibly be rich in the Bay area on a mere 300K/year?  Because they can’t afford to live the life of movie stars from the 1930s?  Is this why the evil rich want more income inequality, so it’s easier to hire competent servants?

How could you become more obnoxious with (lots more) money?  Giving to charity or saving it not allowed for this thought exercise!  Hiring a toothpaste sommelier, on the other hand, is totally allowed.

*Two thumbs up for their Moscow mule.  Also the chocolate egg creme.

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obnoxious ramblings on income, unearned income, taxes, and so on

• We made 17K (!) in non-W2 income last year.  Some of that was honorarium and consulting (1099) and some of that was dividends and unwanted capital gains (I really need to do *something* about American Century Trust and its irritating habit of creating capital gains which it then reinvests in itself.  It didn’t used to do that.  But now it does.  Just selling it all will create an unpleasant tax situation come tax time, but maybe I should bite the bullet.)
• I don’t know what the breakdown between stocks and 1099 income is because DH mentioned this to me while he was trying to figure out our estimated tax situation for next year.
• He told me that our estimated taxes for next year would be 17K and I almost had a heart attack.
• Then I was like, wait… that can’t be right.  What was our non-W2 income?  We can’t be paying 17K in taxes on 17K of estimated non-taxed income.
• Then I said, on top of that, I switched all our Roth 401K/457 stuff to traditional (even though I know that’s not the optimal money thing to do, it’s part of my #resisting), so we should be paying lower taxes on top of the fact that we’re in a lower tax bracket despite higher income because congressional Republicans and their oligarch overlords are evil.
• It turned out DH had not paid any attention to the fact that we put tax-free (for now) money into a required retirement fund (6% of my income), a 403(b), a 457, and as much of a 401K as DH’s non-discriminating test failing fund will allow.
• Taking that into account brought down our estimated excess tax burden to something like $6K.
• We decided to take $500 out of each of my 9 paychecks and also send the government a check for $1000.  (They also have a small credit from this year’s taxes because we’d missed a bunch of charitable giving the first time we went through taxes and paid the bill.  Correcting that mistake put us into itemizing range and we saved something like $100, which we applied to next year’s taxes.)
• Our dividend income may be lower next year because PG&E which provides the bulk of my dividend income is having money problems (specifically, they’re waiting to see how much they owe for the CA wildfires) and has not been paying out quarterly dividends.  That’s about $700/quarter we will not be getting.  This has happened before– when I first got these stocks PG&E was bankrupt (but I still had to pay taxes on money I never got with money didn’t have… long story, but the dividends since have made up for that stress).

What we decided to do with “all that extra money”

In the end, DH was a voice of reason and noted that we really don’t know how long his job is going to last (they have funding for ~2 years, but it’s touch and go after that, and the company owner is in his 70s and keeps putting off succession plans), and he would much rather have 10K in the stock market than a 10K vacation to Hawaii (or anywhere else).

That said, we did make a few changes:

1. DH increased his allowance from $35/week to $40/week, with a 10x lump sum of that at birthdays and Christmas.  It’s been $35/week for a long time and was $30/week before that and $25/week back in graduate school, so this isn’t that big an increase.  He is looking forward to buying a new super fancy monitor.  (Work will be upgrading his computer for him, but he wants a nice monitor for gaming!)
2. I impulse bought a $75 pair of jeans online without knowing if they will fit based on this post from anabegins.  There was a woman in the reviews who sounds like she’s the same size and shape I am who gave her size which is what tipped me into purchasing.  [Update:  They fit and are as advertised.]
3. After we get the water filter thing figured out, in theory we will move on to replacing the counters (I want quartz that looks like marble), the stovetop (DH really wants gas), and the sink (it’s cracked, showing the iron beneath it) in the kitchen.   [Update:  My sister’s car died recently and her car shopping got me looking at cars and there’s a lot of new stuff out there so we might replace DH’s car prior to remodeling the kitchen.  We will see.  Update:  We bought a base model Clarity for $35,500– it’ll be a while before we update the kitchen!  DH wanted a new car more than a gas stove.]

Other than that, all our plans are still puttering ahead back from when DH got back from layoff.  So that means we’ve been donating more.  We’ve funded backdoor Roth IRAs.  Our 529 saving was already bumped up to $750/kid/month (previously it was $500/kid/month).  The DCs will be going to various daycamps as expected (this will be the first year for DC1 who previously had daycare!)  I’m trying to keep 50K in the Capital One savings account (currently 40k), 30K + the month’s expenses in our Credit Union [currently down to one and a half month’s expenses with the car purchase], and ~20K give or take in Wells Fargo. (I don’t mind having less in Wells Fargo, mainly I put any reimbursements or side income that comes to us in checks in there and write most of our checks under $500 from it, so the amount varies.  We need at least 2.5K in there to keep the checking free.)  Additional lumps of money will go into a taxable Vanguard broad based stock, though I’m not sure how much to build up before making a transfer.  Back in graduate school I invested when it got to 6K over what I thought we needed (I think because that’s what it took to fully fund two IRAs!).  The last time I put money in taxable stocks it was 30K because we had excess leftover from living in Paradise.  Maybe I’ll do 10K now since that’s a nice round number.

DH got a 10% raise and now we’re really going to have some obnoxious money posts

What do we do with all this extra money?!?!

I think we’re going to really have to sit down and think about our money goals.  The alternative is to not do that and to just put all excess money away in taxable stocks until we actually need money and then see where we stand.

We’re again at this point where we can easily buy all our needs and all of the upper-middle-class wants we ever dreamed about as lower income kids, but we can’t you know, quit our jobs and buy a house in Northern California.  We’ve paid off our house and don’t want a bigger one (or a second one).  We’re maxing out our retirement and saving at a heavy clip for the childrens’ college.  We have a hefty cash emergency fund and an even heftier secondary fund in taxable stocks.  We have yard service.  We eat out once or twice a week.  We don’t really want a cleaning person because that’s not a priority and I find it really irritating to have to pre-clean or to have to deal with cleaning people in the house when I want to be relaxing.  (I understand that truly excellent cleaning people don’t require such things, but I wouldn’t know how to find a truly excellent cleaning person.)  I don’t mind doing our laundry or loading/unloading the dishwasher.  I just bought myself a whole bunch of Cat Sebastian Kindle books, but that really wasn’t a huge expense.  I’ve also started (as of DH’s re-employment) regularly giving to charitable and political causes when they ask, usually to the tune of $25/pop, on top of our regular previous giving (mostly to educational causes).  And we’ve stopped driving to visit DH’s family and fly instead.  But all of that was before this 10% raise.

But now there’s more that we could do.  Things I’ve never really thought about doing before and maybe they’re things we should do or maybe we should just keep stockpiling money because if we didn’t want them before, maybe we don’t need them now.  (And yes, many of these are things that lots of bloggers who regularly complain about money make priorities rather than paying off their debts, so maybe we’re not thinking big enough.)  And even with all this excess money, we can’t do all of these things, only a subset.  So it isn’t obvious that the answer should be yes to any or all of these.

We could go to Hawaii!  Or Europe!  Or the Caribbean.  (But… vacations take time away from work…)

We could send the kids to fancy away summer camps.  (But they’re still pretty young.)

We could spend the summer someplace that isn’t a bazillion degrees Fahrenheit.  (But moving is a pain, especially with cats.)

We could spend the summer (or part of the summer) someplace where only Spanish is spoken and let the kids get immersed in the language.  (See above, plus I wouldn’t be able to spend time with econ colleagues.)

We could fund a scholarship for someone low income to go to private school or college.

We could remodel the kitchen and bathrooms (though actually, we could remodel the kitchen even without this raise [update:  maybe not right away—see below update]).

We could landscape the lawn to make it less thirsty.  (But… Bermuda grass…)

We could replace the roof and put in solar tiles before the roof dies (but we’ll probably wait on this until the roof is older and solar technology has improved).

We could buy a super fancy electric car or a minivan.  (This is not going to happen.  Ditto having a third child…) [Update:  the Honda Clarity that we just discovered existed is affordable after the federal tax incentive…]

We could eat out a lot more each week, or order fancy food online, or get a subscription service that doesn’t require chopping.

We could buy empty land around town and keep it empty and make sure it never has obnoxious advertising for evil political candidates posted on it.

What is missing from this list because of the limits of my imagination?

Should you ever fill a non-tax-advantaged IRA (answer: maybe): An obnoxious post from having upper-middle class income

Now that DH’s income is back and I’ve GOTTEN PAID(!) for the first time this school year, it’s time to start up our obnoxious money posts again.  (Maybe you’ve noticed the new tag?)

This time we turn to planning for college.  If I’d known where we were going to be today I’d have planned things differently back when DC1 was born and opened up 457 plans earlier instead of saving in 529s or prepaying the mortgage.  Sunk cost!

People with upper-middle class income who plan to send their children someplace that isn’t a state school have an incentive to do some creative things with money before their children hit their junior year of high school.  The reason for this is that they’re on the margin of financial aid for some pretty expensive places.  Forbes has a bunch of articles about our “predicament”.  Check out the colorful charts in this one.  In it, you’ll note that AGI of 125K to 275K are eligible for some financial aid at various 4 year colleges if they play their cards right.

What does playing your cards right mean?  Well, a lot of playing your cards right is moving income from places that the CSS and FAFSA consider to be available for paying for college to those that the CSS/FAFSA consider to be out of bounds.  A big portion of that is moving regular assets and investments into retirement accounts.  (Here’s an article on how much cash is excluded from FAFSA formulas.  Here’s info on how different asset types are affected.)  5.64% of your non-excludable assets are expected to be available for paying for college.  Retirement savings, even non-tax-advantaged retirement savings, are not included in any of the financial aid calculations.

And that’s where the non-tax-advantaged traditional IRA comes in.  If your (married) joint adjusted gross income is less than 186,000 (for 2017), then you can just fill up a Roth and hide money into a retirement account in a tax-advantaged way.  If you have a workplace retirement plan available, then you can only get the full tax advantage from a traditional IRA plan if you make (jointly) less than $99,000.  More rules for single parents, those without retirement accounts, etc., are available here.

So if you’re in that upper-middle-class income range, have extra money floating around in taxable string-free investments and have children likely heading to private colleges in the future, it might be a good idea to start moving those over into traditional IRAs at the rate of $11K/year for a couple.  Should you do this instead of filling up a 529 with that 11K (if you can’t afford to do both)?  I don’t know– it’s probably best to sit down and crunch the numbers yourself given your age, preferred retirement age, targeted colleges, income, expected student loan rates, and so on.

Of course, because of loopholes in the tax code, it’s possible to turn that non-tax-advantaged traditional IRA into a backdoor Roth.  Here are some pitfalls to look out for if you choose to go that route.  And don’t do it if your eldest is in college or even a junior or senior because it will show up on an aid form according to Forbes.

So where are we?  Accumulating assets while we’re both employed.  DC1 on track to go to college in ~6 years.  That leaves ~4 years to try to move money around.  The easiest way to hide money from colleges would be to move to Paradise and to buy a house there because then we’d be back in debt with all our extra cash going towards retirement and the mortgage, plus there’s no guarantee I’d be employed at all.  But it’s unlikely we’d be able to actually do that given my, you know, career and stuff.  So it probably wouldn’t hurt to start making these asset moves.  (And we should replace our cars and remodel the kitchen at some point and maybe time finally getting that donor advised fund to a year that will count for financial aid calculators.)

I already save in a 403(b) and a 457 at work plus have required retirement savings on top of that  I don’t really *want* to save another $5,500 for retirement in my name.  DH only has a 401(k) and it’s not set up properly, so he ends up getting some of the money contributed back after the company does their taxes.  Right now I think we’re probably only going to do one traditional IRA and it will be DH’s.  I believe we have about $30 in another traditional IRA (we converted all our traditional IRAs to Roths back when it was first allowed, but one of them dripped during the conversion).  So it shouldn’t cost much to do the conversion unless the stock market goes crazy between putting the $5,500 in and converting.

If we made more, it wouldn’t be worth even thinking about all this stuff.  But we’re in that range.  And I’m not crazy about our state flagship.  So, this is where we are.

Have you ever put money away for retirement without getting the tax advantage?  Are you thinking about hiding assets from college financial aid calculators?

It is harder to give directed donations to a public school than to a non-profit

This year, we want to give money to DC2’s classes (English and Spanish) to help them purchase items for “differentiation, independent learning, and/or enrichment”.  This is mainly because DC2 needs them, at least on English days.  (“Mommy, I’m in the green group which means that we have the trickiest problems, but they’re still way too easy.  I already know all the sight words from preschool.”)  We want this to be anonymous because it’s just weird giving money to public school when DC2 is a member of the class.  (We know the Spanish teacher already incorporates differentiation, at least in second semester from our class observation last Spring.  The English teacher does a little bit according to DC2, but maybe not enough for DC2 right now.)

When we did this back when DC1 was in Kindergarten in private school, it was super easy, we just wrote a check along with a little note outlining the particulars of the gift.  Since we were already paying tuition to the private school we were also able to talk to the teacher about what her ideas were and make sure the money would be of interest even given the strings attached (that it be for differentiation/independent learning activities).

This time DH called up the front desk and they said they couldn’t take directed donations of money, only general donations for the entire grade, but to contact the PTO president to see if she could help.  After some back and forth with her, the PTO president reiterated that she could only take donations for the entire grade and they would go towards defraying the cost of field trips, but she’d get in contact with the Assistant Principal on our behalf.  After a couple of weeks of not hearing from her, DH emailed the school Principal directly.   A couple days later the school principal emailed back and offered the following options:

1. Write a check to the school and the teachers would be told they could use that money, but only through the district’s preferred vendors.  The vendors are not actually that great, so their ability to make purchases would be pretty limited.
2. Provide several gift cards for Amazon/Walmart/Target so they have more options for what to purchase (though this also is limiting, and we might not get the amounts right).
3. Provide gift cards for cash from Visa/Amex/Mastercard.  This would be the least limiting of the choices.

Oh gentle grumpy nation, I have been trying so hard to get #3 to work.  But we want to get two $500 gift cards (one for each class) and Target/Walmart only carry Visa in $200 or less denominations, and it costs $6-7 to get one.  You can’t order Visa gift cards directly from Visa and we don’t belong to one of their participating banks that waives fees.  AmEx looked really promising with a flat $4 fee per $500 card until I tried to check out and realized there was an additional $8.95 shipping charge on top of that*.  But maybe it’s worth it since to get Visa cards at Target or Walmart we’d be paying $24 just to get $800 in gift cards.  (Mastercard is not an option because they start making the money disappear once there’s inactivity.)

I might be able to waive some fees if I wait for October’s promotion codes to show up somewhere– September’s AmEx promo code got rid of shipping costs but they’ve since expired.

Or we could just write a check and they’d be limited to the list of preferred vendors, none of which I’ve heard of.  (I have to wonder what kind of grift is going on there…)

Anyway, I’m leaning towards paying the exorbitant fees for turning plastic credit money into anonymous plastic gift money so that they can use the money wherever they want (albeit, maybe only places that take AmEx…).  Though with a minimum of $17 in fees, it’s tempting to go with Amazon cards since you can buy most things on Amazon.  Except, you can’t buy everything on Amazon.

We have our first (15 min) parent teacher conference uh… today.

*Looks like they regularly have online discounts for things like shipping fees, but October’s wasn’t up yet when I wrote this post.

What would you do, Grumpeteers?

I now pay convenience fees

Time is at such a premium these days that I just pay the little “convenience” fees that I used to refuse to pay out of principle.

It started with me deciding it wasn’t worth it to drive to a farther gas station just to not get hit with an extra fee for using my credit card rather than cash.  (And I haven’t carried cash with me in over a decade, so I definitely wasn’t going to start.  Plus, with cash the signs say you have to pre-pay for gas which means either overestimating or not getting a full tank.)

Then I started telling DH to just pay the “convenience fee” for electronic tickets at the movie theater rather than having to stand in line to pick them up.

Then I started paying our insurance with a credit card online instead of writing a check. (Though they’ve since dropped that fee. Yay.)

And mailed checks for all our small state taxes like car registration renewal instead of standing in line at the courthouse.  (Though maybe we’ve been dong this one for years…)

I’m not sure how I feel about this.  I mean, from an economics standpoint, they’re chipping away at my customer surplus through price differentiation, but it’s also rationally worth it to me to pay for the privilege of not jumping through their hoops.

And it’s true that these little fees add up.  But they add up to a dollar here or a dollar there.  Far less than the latte factor.

If we were making less money, every dollar would count.  But these dollars just don’t count anymore.  And our time and the hassle factor are just worth so much more to us.  This is another way it’s really nice to be upper-middle class.  A year of these fees is less than an hour of work.  Even saved and invested they’re not going to matter in the long-run.

Do you pay convenience fees?  If so, when did you start?  Do you notice convenience fees?