November 28, 2014

A First Look At Next Year's Budget

Making budget decisions can be quite complex
The New Year is a little over a month away, so it is certainly not too early for me to review how how well my 2014 budget held up to our actual expenses and make adjustments for next year. I have lived with a budget for the last 40 some years. 2015 will be no different. 

This was a year of some significant changes: it was the first year I had Medicare coverage for about half the year and Betty purchased health insurance through the government healthcare marketplace. It was the first time we were away from Phoenix for part of the summer. We bought a new car to serve as my primary vehicle and to tow behind our RV. 

So, how did things work out? Pretty well, it appears. I am on track to be about 7% under budget for this year. A quick disclaimer: RV and vacation expenses are part of a separate budget. As I have noted in an earlier post the cost of gas during our 2 month RV adventure and a much higher than expected bill for repairs and maintenance knocked that budget for a loop (29% over). But, the main household budget did well.

What came in under budget:

1) Home Maintenance and repairs - usually there is a few things that go wrong with a 30 year old house. This year everything held together.

2) Medical lab tests - three of the tests Betty and I usually get and pay for are now covered by ACA or Medicare.

3) Pet Expenses - 2013 was not a good year for Bailey: a doggie chiropractor and several x-rays for a troublesome back problem. This year, she has been much, much better.

4) Dining out and entertainment - we found that we are spending more time with family and in-laws, which besides being more satisfying is much cheaper.

5) Betty's car's registration and gas expenses - an 11 year old car doesn't cost much to register, plus it is only driven about 5,000 miles a year. We are putting no more repair money into it but will drive it until it quits, then donate it to a charity.

6) Change in RV insurance - this one part of ownership I keep under an insurance heading in the household budget. By switching companies I was able to pay for only when I expect to be on the road next year, thereby saving $250.

And on the not so good side:

1) Real Estate taxes - even though real estate assessments lag by two years, our home's market value has rebounded strongly from the 2008-2009 disaster, making for a larger tax bill than I had planned for.

2) Yard work - while we were gone for July and August, I paid our yard service several hundred dollars above budget to do the trimming that I normally handle.

3) New set of eyeglasses: I thought I could make it until next year with my old lenses, but the change in my eyesight made a new pair important.

So, for 2015, with our income remaining unchanged, I will:

A) Trim the pet budget by 20%

B) Set aside enough to handle one or two major home fix ups, but not three.

C) Budget more for medical premiums. Betty's ACA plan will be about $37 more each month than this year, with somewhat higher copays and a much bigger deductible.

D) Trim the dining out amount a bit to reflect more family time.

E) Budget more for the real estate tax since it is bound to go up again.

All of this should allow us to stay at a 3% (or less) withdrawal rate from our retirement account and still be prepared for most of what 2015 may decide to throw at us.

How about your expenses for next year...anything lurking in the shadows?

November 25, 2014

2014: What Do We Have To Be Thankful About?

If you spend enough time with social media, cable TV news channels, newspapers, or on the Internet, the title of this post seems like a reasonable question. Between the mess that is the Mideast, Ebola, political dysfunction, and the general tension of 21st century living, Thanksgiving may seem like an anachronism: a pleasant idea that lives on more in memory than reality.

I disagree.  In America we have survived yet another election cycle with all the drama and cynicism that implies. The results were not pleasing to many, full of joy for others. But, we all woke up on November 5th, complained or rejoiced, and got back to living our lives. As much as politicians like to think what they do is critical to each one of us every waking moment of our lives, most of us spend our days with the political circus far in the background. Their "games" effect us in the long term, but for the most part they occupy their own world.

The fact that we had a contentious election and the country moves forward is the important reminder of our system. With the next presidential election less than two years away, the fun is about to begin again in earnest. It all may be infuriating, silly and wasteful, and often downright counter intuitive to common sense and logic, but there are no coups, insurrections, or massive social upheavals on the horizon.

In two years the country might turn the House and Senate back to the Democrats, not because they have all the answers, but because the public is always ready to "throw the bums out" regardless of who the bums are. That is just the way it is.

Personally, life couldn't be better. My wife and I not only survived but thrived during two months together in an RV this summer. We found new sides to each other, relished the time disconnected from normal distractions and connections, and saw beautiful parts of our country. We also learned being away from family for two months is our limit. 

My dad remains physically healthy. While his short term memory can be measured in days (sometimes hours, it seems) he enjoys getting together for lunch every few weeks and is generally upbeat. A new set of hearing aids seems to have helped his ability to participate in conversations.

Our daughters, a son-in-law and grandkids are happy and doing well. We spend time together frequently and enjoy each others' company.

I have had a series of medical tests provided by Medicare that don't reveal any issues of concern. My overall health remains good.

Financially, I remain on solid ground with no concerns. Betty and I are comfortable with our lifestyle and how we manage our resources. A summer in Portland is planned for next year and a trip to Europe for our 40th wedding anniversary in 2016 looks doable. 

This blog is doing well and remains fun and engaging for me and several thousand readers every day. I am moving forward on a third book that should be published sometime next spring. 

So, what do I have to be thankful for in 2014.....everything. 

I sincerely hope that your Thanksgiving review shows your life to be bountiful and satisfying. Perfect? Probably not. Better than many? Quite likely. 


November 21, 2014

Retirement and The Middle Class: Still Possible?

First published three years ago, the discussion about the fate of the American middle class and the growing economic inequality in this country has not gone away, in fact it has intensified. I'd welcome your thoughtful comment on this issue.

There has been a lot written recently about the decline, if not outright disappearance, of the middle class in many countries around the world. The original premise was that hard work and perseverance would result in a comfortable lifestyle and a satisfying retirement. That vision included decent retirement funds, health care coverage at an affordable cost, a home, a car or two in the garage, and enough money to send kids to college. It assumed that each generation's standard of living will be better than the one before.

In reality, that picture began to go out of focus at least 10 years ago. The stock market crash of the late 1990's damaged the hopes and dreams of many. It exposed the true risks of betting that the stock market would always go up and making money was simple. Just as things seemed to getting back on track, the world came crashing down again in 2008. Folks who had pinned their dreams on the value in the homes found themselves upside down, or worse. 

Again, stock performance tanked taking the retirement plans with them. The average middle class person has seen a steady erosion of their financial situation. Some are referring to the past ten years as "the lost decade."  Even while the top few percent of our society are richer and more isolated from reality than ever before, the middle class, and even more so the poor and disadvantaged, have watched the dream turn into a nightmare with few promises of a fix anytime soon. The big squeeze is getting worse.

Some will argue that we are reaping what we sowed. Flipping houses, taking out loans we couldn't repay, running up credit card bills of more than our annual income, betting that stocks would only go one way....we were acting like children let loose in a candy store, assuming that "they" would be sure we were OK.

Others will say that the system has been tilted in such a way that the rich and powerful have stacked all the cards in their favor. The financial meltdown was caused by their greed and their manipulations. The "main street" middle class person has no chance to get back on top.

I believe that both those views have some validity. Each side must share part of the blame for the mess we are in. Our government has shown, at least to this point, it either has no idea how the "fix" things, or is so dysfunctional it can't.

I will also state that a satisfying retirement is still within reach of the many of us. Am I being foolish or hiding my head in the sand? I don't think so. The research I do before writing certain posts and the tremendous feedback left by readers have increased my sensitivity to the realities that way too many of our fellow citizens face. 

What I have learned in this journey is that we are in the midst of a massive and probably permanent redefinition of some of what we were brought up to believe. The concepts of employment stability and generally benevolent employers, of having protections and safeguards in place against unethical behavior that would prevent large scale damage, and of having affordable health care available to most are no longer givens. In fact, they aren't reality at this moment.

So what does my vision of a middle class retirement look like? Since there is no universal agreement on what constitutes middle class, I suggest we not get hung up on that phrase. Your satisfying retirement is determined more by how you act, react, and what you accomplish than by a textbook term or a particular income.

Having the proper retirement mindset means you are flexible. You may stop working completely at the "normal" age of 65 or you may keep working into your 70's or beyond. You may take on the challenge of starting a new business or company. You may become a consultant to your old industry. You may work part time at a local retail establishment.

You may never work another day in your life, but spend countless hours volunteering to make someone else's life just a bit brighter and less burdensome. You may take care of your grandkids all day so mom and dad can go to work. You may find yourself on a mission trip for a year to Africa. You may be the primary caregiver to your mom or dad.

Whatever shape your retirement takes, it will look very little like what retirement used to be. Relaxing and doing lots of nothing all day while slowly declining in mental and physical ability holds absolutely no appeal. You will do everything in your power to avoid that path.

At the same time, it probably won't look like you thought it would. That isn't necessarily bad, just different. A middle class retirement may still mean travel, an RV, a vacation home...or it may not include any of those things. If you like a life of travel then you will make sacrifices in some other area of your retirement to make that happen. If you are more of a homebody you will devise a budget that supports you in that decision: maybe lots of flowers in the garden, books on every flat surface, music playing all day, and an inviting place to live. It may be a 300 square foot rented apartment or a 3,000 square foot house. It shouldn't matter. It is where you feel safe and comfortable and "home." You will not let your possessions define you.

Your retirement will accept that you must take on additional responsibility for your future happiness, health, and well-being. You will not expect others to do all the heavy lifting. You will eat right, exercise, eliminate stress, see a doctor when needed, but fight aging and decline with every power you have. You will keep your mind active by constantly taking on new challenges and responsibilities.

A middle class retirement means you are in control of much of the quality of your retired life. Will there be times when you have to pinch pennies, clip coupons, bypass a wanted (or even needed) item? Probably. But, you realize that you have the greatest gift of all: more control over your time and how you spend this irreplaceable asset.

People will continue to aspire to retire (I like rhymes!), but in a way that will be unique to each of us. I can be satisfied with a lot less than I thought I'd need or want just 5 years ago. At the same time there are parts of my life I need and will fight to maintain: being close to family, volunteering to help just-released convicts, building my spiritual life, and feeling safe and comfortable inside my home. And that sounds very middle class to me.

How about you?

November 18, 2014

Is College Always The Right Choice For Our Grandchildren?

Not long ago I was contacted by a fellow who works for an Internet training company. The CEO had just posed a provocative question on their web site. The question asked was whether a college education is worth the money. Is there enough of a return on the investment of tens of thousands, maybe even hundreds of thousands of dollars for everyone who goes?

The author, Dave Dunn, cited figures that projected the costs of sending his three children to private colleges several years into the future. The totals were over $1,000,000. He used that million dollar figure to raise the issue.

Aside from the obvious fact that no one has to go to the most expensive private universities (unless on a full scholarship!), his point is still one that we, as parents and grandparents should ask. The mess that has become the college loan industry has been in the news. We are probably quite aware that the cost of a college education, even at a state run university, averages close to $40,000 for in-state students, and $100,000 for out-of-state attendees. Triple that for a top flight Ivy League or private college and there is serious money involved.

When I was in high school, it was expected that everyone who could afford to do so would go to four years of college after graduation. For those with limited means, two year junior colleges (now community colleges) were an option. Technical schools were available for those with mechanical interests. But, in my neighborhood of suburban Boston, college was simply a given.

As post high school education became increasingly expensive, folks began to ask the question: is college right and necessary for everyone? Well, for some professions like doctor or lawyer the answer was, and remains, yes. But, how about for other careers or job paths? How many require a four year degree versus shorter, specialized training and experience? 

For this post, I raise the question because grandparents are sometimes asked for help in sending a grandchild to college, or of their own volition establish a college fund for a child's child. If the money is available is college always the best option? Do we accept that a high school graduate may leave college already seriously in debt?

As the graduate of a well respected private university I will add two thoughts:

1) I have freely admitted that the money my parents spent on me was largely wasted. I had decided on my career path while barely a teenager. My chosen profession did not require a college education. During my last two years in college I worked almost full time at a radio station in town, learning my craft and improving my future prospects. My college classes were an interruption. In my case, college was somewhat wasted on the young.

2) I wish I could have gone to college when I was older. I would have possessed the maturity and intellectual curiosity to have made full use of what college is meant to do: teach one to think and learn critically and independently. 

Before anyone starts leaving nasty comments I will make it clear that I know that continuing one's education after high school is essential for the development of many of the skills for success in our technologically oriented world. High School graduates face a daunting task to survive and thrive. When used to its fullest, those extra years of schooling can be a building block to a full and satisfying life.

But, with a college education becoming something that is being priced out of reach of all but the well-to-do, we should ask if a traditional college is always the best choice. And, as grandparents, whether we pay part of the bill or not, we should ask if a four year institution is in the best interests of the young adult.

What do you think? How critical is that diploma? Is the amount of debt often required justified?

What about on-line college degrees, where most of the work is done, at home, with only limited classroom time required? Technical colleges are readily available for virtually any career choice. Community colleges have developed well past just being a feeder system for four year schools.

Is the time away at school important in one's development as an adult? Is it more than just classes and study?

Your feedback is encouraged.

November 14, 2014

When Life Shrinks Your Glass - Get A Smaller Glass

An astute reader left a comment a month or so ago on a previous post. She noted she is a glass half-full kind of person rather than one who sees the glass of her life as half-empty. Then, she added a thought that I loved: if life has suddenly become more of a struggle because of some problem, rather than switch to a pessimistic view, she simply envisions a smaller glass...which is still half full.

I have written a lot about attitude and retirement. There should be little doubt as to which side of the half glass side I am on. But, her comment gave me new insight into how to react to the inevitable stumbles and problems we will all encounter during this stage of life.

Now matter how well you have prepared, how many hours you spend in the gym, how much you exercise your mind, and how many roses you buy your spouse, you are going to go off the rails at some point. It may be a series of small detours that eventually allow you back on track. Or, the derailing may be much more serious, resulting in a change in your life that cannot be reversed.

When that happens what will you do? Will that glass start to look more empty than full? Will you become withdrawn because of your physical limitations or the loss of important relationships? Will you lash out at the world for the unfairness of it all?

Or, will you have the ability to shrink your glass? Will you look at the limitations and be able to say, "OK, I can't do what I once did. I can't live how I once could. This is what I can do now. And even though my glass is smaller, my life is still pretty good, and that glass is still at least half full."

I will readily admit my life to this point has been a rather smooth ride. There have been a few problems, but certainly nothing on the scale of what so many of you share in your life stories on these pages. I will also admit I expect my situation to change at some point. My life is not a fairy tale; it will have some chapters that I would rather not experience but must.

Then my half glass take on life with be tested. I believe my faith will provide me with the support I need to handle what is coming at some point. But, how I will react is still an unknown. When those situations arise I hope I can remember the lesson of the smaller glass.

More than any other part of retirement, be it financial, health, relationships, passions.....whatever....I firmly believe attitude spells the difference between a disappointing or unhappy retirement and one that is satisfying. Why? Because my attitude is 100% within my control. The world can throw everything against me to try and break my spirit. But, it cannot determine how I decide to react.

That is up to me. And, my glass will remain at least half full, regardless of how small a glass life decides to give me.