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Tuesday, December 06, 2005

Our money-handling strategies

Part of the reason I have a blog is to write posts where I clarify things in my own head. This will be one of those posts...

In handling money, we're fairly frugal, although we definitely aren't sandwich-bag recyclers. Between 401Ks, Roth IRAs, and taxable savings, we save about half our income, and much of it is earmarked for retirement; we won't get any sort of pension and we figure Social Security is a bonus if we get it at all. My wife is self-employed, so to deal with taxes we withhold enough of my pay to hit the withholding safe harbor, and we save half her income into an account that we pay extra taxes from when they're due. The rest of the money is our "refund", which we use to fund retirement accounts.

In daily life, our general rules are as follows:

o Things which save lots of time but are relatively cheap, or save us from work we'd really hate doing on an ongoing basis, we pay for. So, we have a gardener and house cleaning service come every two weeks. We figure this "buys" us at least four weekend days per month - as well as a trim yard and a clean house. Total cost: about $250/month total.
o We take our lunch to work, and don't do Starbucks. Since eating out would cost a minimum of $8 or so each day for each of us, this is a big savings.
o We pay cash for cars, and drive them until they are no longer reliable.
o We eat out about once per week.
o We fix things that are easily fixed.
o We carry no debt other than our mortgage.
o We review our recurring expenses about every six months and reorganize them as things change. For example, we're about to drop our DSL, get a cable-modem, and switch to VOIP, since VOIP + cable modems is cheaper than DSL + landlines, even though DSL itself is cheaper than a cable modem. Also, the $8/month that SBC charges for voicemail really annoys the heck out of me.
o We like to go on vacations, but are more backpacker types and don't need five-star accomodations, although we're happy to stay in nice places if they can justify the expense.
o We aren't afraid to talk about money and finances.

We don't use SBC voicemail, instead we have a cheap answering-phone from Costco. I hate the SBC $3.37 a month long-distance charges, when month after month we don't make any LD calls.
Maybe we can get my wife's job to pay for the DSL, since they're going to make her work from home two-days a week on a laptop... :-)
Those are definately good 'frugal' rules to live by.
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