Turns Out Stuff Costs Money

Hello! A new post! I’ve spent much of the fall either deeply immersed in volunteering, traveling, or sick. It’s been a good season (apart from the two week-long colds) and although I’ve barely logged into mint and have no interest in looking at my investment account balances, I’ve mostly managed to pay my way with freelancing rather than savings, although that’s been precarious for the last month or so.

I’m still not logging into mint for a while 🙂 So instead of a net worth update, have this list of how money has recently been flying out of, as well as into, my accounts.

I’ve been thinking a fair amount lately about the balance between my expectation of spending little/no money and the reality of keeping my life running. This meditation didn’t actually start with the big unexpected car repair yesterday (more below) but rather with an L.L. Bean purchase a month or so ago.

Nice Clothing Costs Money

I am, to say the least, not a fashionable person. I don’t like shopping, always carry too much weight for my own tastes, and frequently wear the things I buy for years on end. I have a few one-week rotations (teaching clothes, summer tshirts/shorts/skirts, winter jeans/shirts), do a load of laundry every weekend, and then have a selection of dresses, suit jackets, and the like that I can pull out when needed.

Because of this I think I felt, a few years ago when I started to budget, that I shouldn’t really budget much for clothing. I basically bought no clothes while I was paying off debt, so I knew I would have to fill in some holes when that was done, but I thought after that maybe I wouldn’t need to buy anything for a long time.

But it turns out that I consistently and reliably spend around $1000 or more every year on clothing, even though I wear everything I buy for multiple years. It turns out, though, that things just wear out on cycle — this year I haven’t had to buy summer tshirts, but I did have to buy a new set of winter long-sleeved pullover shirts, the last set (from several years ago) having gone to their eternal reward. I haven’t bought sandals in several years, but both pairs I regularly used wore completely out this summer so I’ll have to replace them next year. And so forth. And buying the quality construction I enjoy wearing and that will stand up to 100+ trips through the washer or 1000s of miles walked isn’t cheap. So I just have to keep it in my budget unless I want to change my lifestyle dramatically.

Cars, sigh.

Yesterday my car demanded its annual blood sacrifice. The thing is, the car in question was free to me, and is 20 years old. Stuff happens, in this case, stuff like taking it in for an oil change and finding out the radiator is cracked and we really need to replace the original radiator hoses too. Cue unexpected $700 bill.

I mean, it’s ok. I have the money in savings, and voila, my parents hadn’t figured out what to give me for Christmas so they’re going to help me out too — I don’t “need” it but it’ll be nice to refill my emergency fund with that to some extent. But it’s just a really good example of the fact that keeping life running reliably does not have a zero cost. If I was poor, I’d be in worse shape — I wouldn’t have paid the bill, and would have just driven the car until the radiator gave out completely, then switched to the bus or something. I don’t know. Instead, I can pay the bill and keep going on my relatively merry way.

Health Insurance

Also yesterday, while I was spending money like a drunken car-repair sailor, I signed up for a 2019 Obamacare plan. I had to estimate my freelance income, and have no idea how this is really going to work out in the end (I won’t know for sure until I file my 2019 taxes) but at least for now I think I will get a subsidy and have purchased a plan that, including a separate dental plan, comes to $190 a month (after subsidy.) I haven’t had to go to a regular doctor in a couple of years; I just do a dental visit twice a year. So the insurance may end up not really mattering. But now that I’m nearly 40 and not broke, I do feel like it’s something I need to pay up for, since it’s accessible to me.

Christmas Presents

I am, for somewhat mysterious reasons, really feeling the present-shopping spirit this year. There have been many years where I’ve spent nearly nothing on presents, giving mostly homemade items. This year, though, I just kind of want to. My godchildren are old enough that they are interested in books; I have a baby niece that needs clothing; and I wanted to give some things to several friends, as well as to the kids and to my parents and brother/sister-in-law. Honestly, I didn’t really make a budget for this stuff. I’m just buying what I want, and will figure it out later, probably with money from savings. Not very fiscally responsible! Going forward I think I need an actual Christmas budget. I’ve never had one before, but I’ve also never had four or five kids in my life that I intend to consistently gift. I’ll add a “Christmas” line to my 2019 YNAB budget so I can save up throughout the year.

Conclusion

Things I like include maintenance/prevention and high-quality clothing, food, etc. I am not extravagant in any of those areas, but they really do cost money and are not expenses I can ignore in my financial planning.

$100,000 Net Worth: The Yearly Breakdown

I’m sick right now — just a bad cold — and haven’t been able to focus all day. Which strikes me as a perfect opportunity to write up my progress to a $100K net worth.

Here’s the big picture:

After a year-long false start, my tracking in Mint picked up in May 2014, the month before I crossed into positive net worth territory. Fortunate! Counting from summer to summer also tracks with my academic-year salary shifts — not completely since each contract didn’t begin and end at the same time, but fairly close. (Oh, you have to ignore the weird spike in March of this year. There was a technical error and one of my retirement accounts got counted twice, making it look like I had something like $17K more than in fact I did, just for that month. It can’t be corrected now without wiping out the whole account’s history. It’s a little aesthetically annoying but hey, it’s a free service.)

Year 1: June 2014 to June 2015

At the end of June 2014 I had a net worth of $2398, and at the end of June 2015 I had a net worth of $25,035. In Year 1, then, my net worth grew $22637. For most of that year I was bringing home (after taxes, but including 401k contributions) $3339 a month, so I made roughly $40000 in that time and spent about $17500 of it.

Year 2: June 2015 to June 2016

At the end of June 2016 I had a net worth of $49,000In Year 2, my net worth grew $23965. My base income during that academic year was the same as in the previous year, but I got a substantial freelance project too. Even though that project came with increased living expenses for a time, I still saved a big chunk of the cash.

Year 3: June 2016 to June 2017

At the end of June 2017 I had a net worth of $64,682. I had to check Mint for that number since I wasn’t doing net worth updates that summer…. Anyway, in Year 3 my net worth grew $15682. It wasn’t a great financial year. My base income dropped substantially as I went to 3/4 time at work, and I didn’t cut spending to adjust to that.

Year 4: June 2017 to June 2018

At the end of June 2018 I was back on track with a net worth of $92,000In Year 4 my net worth grew $27318. This number really surprised me. My base income did go up with a new job during the academic year, but I also spent two months unemployed (you can see the dip in the chart above where my net worth declined for two months) and my monthly expenses were quite high compared to my baseline of the previous years since I was living in a new, very expensive city. For quite a bit of this year my net worth didn’t grow that much per month. However, at the end it started to pick up, since I cut expenses and got the first of my freelance income.

The final push: June 2018 to August 2018

In the last two months of the push to $100K my net worth grew $10,424. That is crazy! It’s 2/3 of the entire year’s growth in 2016-17! In the Mint chart above you can see how the rise in net worth poked along, slowly and steadily, and then the line really slants up sharply at the end. During this time I had my base pay; extra pay from an adjunct course; AND freelance income. So, no wonder I had a sharp increase. I’m so thankful that I not only was offered the extra work, but had the good sense to take it.

So, all in all from $0K to $100,000 took 50 months: 4 years/48 months plus two months extra.

Funnily enough, my rough goal all along has been $2000 in net worth growth per month. Many, many months I didn’t make it. I had a whole dismal year in there. And yet there were exactly enough good months along the way, months with big stock gains or big freelance payouts or unexpectedly low expenses, that it all balanced out and I averaged just about $2000 over the course of the entire project.

I can’t claim any special insight here, nor do I know how to lay out a how-to guide. I had variable income and never really had a clear plan where I could project how much I would make — let alone what the stock market would do. I suppose what I can say is that there was a lot of value for me in having the goal in the first place. It helped me set that $2000/month target, which in turn gave some shape to the budgeting I did during the first couple of years. I put more in savings than I might have otherwise. That in turn gave a foundation so that even during a low year I was still increasing things, and during this last 14 months, when I pushed hard to get to the goal, I was able to make some specific moves (=taking on extra work) to ensure I got there even when I gave up conventional employment 2/3 of the way through the year. I felt motivated to put away as much as I could, simply because I had this goal.

This suggests that I should probably have another goal. I’m feeling a bit intimidated by the logical one, though — will it take another four years to get to $200K? Eesh. That may be something I have to think about for a little while.

Net Worth Update, August 2018: The One With $100K!

Look, I spoiled it right in the header, and I’ve been spoiling it for a couple of weeks on twitter. But it’s still exciting! I’m finally here — and after nearly giving up on making it before my 40th birthday, earlier this year, instead I’m celebrating it five months early.

Continue reading “Net Worth Update, August 2018: The One With $100K!”

Net Worth Update: July 2018

It’s that time again! My final paychecks from my old employer are being paid out on a different schedule than I expected, so I didn’t quite make it over the $100,000 mark — but I got pretty close, and am hopeful about next month’s results. Let’s go straight to the numbers:

Continue reading “Net Worth Update: July 2018”

I’ve Stopped Letting “Extra” Money Disappear

One of my minor bad habits over the years has been occasionally acquiring small amounts of money — typically anything under $100 — and immediately putting it in my slush fund, where it inevitably gets spent within a month. It might just as well never have come into my life at all!

During the last five years’ worth of financial education I’ve had periodic crackdowns on this habit. For a little while I was putting all “extra” money in my Roth IRA, but I haven’t been seriously contributing to that for several years while I built up my giant Life Fund instead. (I’m starting in on the Roth again next month after my last 403(b) contribution is made.)

I’m going to have another go, though, in this season of freelancing/volunteering. Actually, I’ve already started! This month I cashed in $94 in credit card rewards and got a $60 reward from Saverlife. Transferred them both immediately to my emergency fund. (Side note: Saverlife is worth doing! You have to link a bank account and it has to end each month for six months $20 higher than it was at the start of the month, but then you get a $60 payout. I mean, I’m not retiring early here, but $60 for ten minutes of setting up the account and autotransfer and then waiting around doing nothing for six months is just fine.)

In August, I’ll get about $85 from Ebates and intend to do the same thing. (Side note: that’s a big Ebates payout for me; some of it is from buying contact lenses, some of it is from godaddy for setting up my professional editing site, and some of it is a referral fee from the blog: thank you, person who clicked the referral link, for helping keep the lights on at The Single Dollar!)

Capturing all the extra money is much less significant than making a higher salary would be. But given that I am where I am, capturing this kind of money is better than not capturing it, right?

Freelancing: Then and Now

Although I still have a few paychecks coming from my old job, I have no further work responsibilities — those ended June 30 — so I’ve now officially been a freelancer for two weeks. While I’ve always dabbled a little, with side hustles ranging from a few hundred to a few thousand dollars a year, I haven’t been fully freelance since I returned to grad school at age 26. I’m now 39, so that’s 13 years of steady paychecks. (Brief pause while I bemoan how little financial progress I made during that time.)

During the four years between college and graduate school, I was a full-time employee for only one year, and a freelancer for three. Those three years were a wild ride in many, many ways. I often wonder what my life would have looked like if I’d spent them in, say, law school, or if I’d continued with the job I started right out of college (it wasn’t the right job for me, so I’ve always been pretty glad I didn’t continue with it, despite my weird life path since.)

I’ve been thinking a lot over the past two months about what it was like to freelance then, comparing it to “now.” Here are some preliminary thoughts — though I’ll probably have more in six months or so.

In my early 20s I looked for, and took, every kind of work that would have me. Ultimately, I let my freelance career be led by others: the kind of work I was getting the most of, which was a little random, led to more work in that field, and about 1.5 years into full-time freelancing I was making enough doing that so that I just did that. I started to specialize. But if events had fallen out differently I might have pursued a different angle. I was really being driven by who was offering me money rather than by my interests. And especially during that first 1.5 years I said yes to the most random stuff, because I desperately needed money. I spent a lot of time on craigslist looking for small gigs, and got a few more other things via word of mouth. I remember one gig where I held a dog on a leash outside NBC for a couple of hours (it was a publicity thing). I think that officially qualifies as the most random!

Also, I was just generally afraid to go on vacation, or leave town for any reason, or not pick up my phone. I did lose gigs sometimes because they simply went to the first person who picked up. But sometimes I would arrange my schedule around something that just never materialized — I remember one month I really wanted to be out of the city for financial and social reasons, but I was supposed to start work on a new project so…. And it just didn’t happen. Sigh.

I definitely feel some of that same reluctance to say “no” now. A kind of professional FOMO. I might not be that interested in the specific job…but if I turn it down, what if I never get offered anything again? I think I will probably end up saying yes to pretty much anyone offering me work in my price range this year.

That’s a big difference though: I have a price range! I’ve set a minimum amount I’ll accept per hour and I’m determined not to undercut that rate.

I can do this now, when I could not do it then, for two reasons, one of which is much more important than the other. The less important one is that I am much better networked now than I was then, and am confident that if I turn down work that isn’t worth it, I will get other work from other sources. The more important one is that unlike then, when I typically had an average of zero dollars in my bank account, I now have an absurdly large cash reserve. I ballpark that at my current (granted, quite low) spending level it’s about three years’ worth. So I just don’t feel compelled to undercut my rates.

Another difference is that, while I am open to work that involves being on-site, most of the work I’m looking for now is remote. That will help a lot with the vacation problem I had in my early 20s, when virtually everything I did required me to show up in person. I’m not planning major international travel that will take me out of reach of my email for more than a day, and there’s no reason why I can’t go hang out in my friends’ living rooms and edit or research/write.

A third difference: health insurance. I just straight-up didn’t have it for several years in my 20s. I’m basically a very healthy person, so I really only need coverage in case of catastrophe. However, I am going to get that coverage now: because the ACA has made insurance available in a way it wasn’t in my 20s; because I am older and the likelihood of a catastrophe has gone up; and because I can afford the premiums now, when I simply couldn’t spare a dollar at age 23.

So: do I feel better or worse about freelancing at this point, vs then? I sort of don’t know. Financially I definitely feel much more confident, and that’s a vast improvement. It also affects me psychologically on a day to day basis. I used to worry so much about money that I didn’t really take advantage of the many days I had “off” from work (read: nobody had hired me.) Sometimes I read or went for walks or went to free events, but I didn’t do a lot of civic engagement or self-improvement, which is one of the things I regret when I look back at that period of my life. Now, since I am not concerned about my finances, I feel much more able to take on unpaid projects on days I don’t have paid work to do. That’s a good thing, especially since much of the point of this “freelance” year is really to volunteer.

On the other hand, I have to admit that I feel a bit weird about becoming a freelancer again at age 39 — when I am also not FI. At 23 it felt kind of normal to be working a bunch of oddish jobs. And I also had a fairly clear career path in mind, though ultimately I turned away from that too and went back to grad school. At this time of life it feels much less conventional to pause full-time work. Not totally unheard of or anything, but certainly kind of weird. I do want to go back to full-time work eventually, whether it’s a year or three years from now, and I worry that when I want to, I’ll have trouble finding a job I really want to do. On the other hand, maybe taking this period of 1-3 years will ultimately be a good thing for my career. It’s just difficult to know from this vantage point. Managing feelings of uncertainty: that’s a full-time job in itself!

Net Worth Update: June 2018

Well, it’s that time again. I do use my finances to cheer me up, and I need more cheer right now.

My expenses were on the high side this month because of moving, but I also had a good month of freelance income — I took home $750 — and my second and third super big checks from work because of the summer school class I taught on top of my normal salary. So I was able not only to easily pay the moving expenses but also to put quite a bit in savings.

OH YEAH, and I blew out a tire in 110 degree heat while I was moving! Very exciting! Luckily, before it went I knew something was wrong — car started shaking — and I’d slowed down and moved to the right lane. I was also within sight of an exit ramp and not in the middle of nowhere, but in a big suburban town. So I was able to get back on the road with two new tires in under three hours, including a bunch of waiting around (for the tow truck and then at the tire shop.) Why a tow truck, you might ask: well, half my worldly goods were in the trunk on top of the spare tire. If I had absolutely had to, I could probably have shifted most of that, but honestly it was worth the $90 I spent on the tow. Also, I have never changed a tire under live conditions; in theory I know how but… And it was 110 degrees and I wasn’t at my best. So I feel fine about it, especially because I got a good deal on the tires themselves so the total cost was only a bit over $300. No big deal. And I was and am glad to be safe and to have made it across the rest of the country successfully. I’ll shift some $$ from my emergency fund next month to cover the cost.

OK, now that we’re talking about cost: to the numbers!

Continue reading “Net Worth Update: June 2018”

Budgeting Freelance Income

Last time I discussed my upcoming volunteer year/freelance year/career transition/whatever this is, I wrote about my no-income budget. But I do in fact hope to have some income! As a matter of fact, even though I wasn’t necessarily intending to start seriously scouting for editing and writing work until July, I’ve already found some. More accurately, I did “find” some by cold-emailing old contacts, but some was referred to me by generous friends–you know who you are! By the end of June I currently project I will have billed, though not necessarily received, around $1700. If this pace keeps up I might end up in better financial shape than I thought I would — whether that’s just depleting my savings more slowly than planned, or even adding a bit to them. (My favorite part is that the three projects I’ve either completed or booked this month use three different skillsets and came from three distinct sources. Diversification!)

Freelancing is where the old YNAB method of living on last month’s income really comes into its own. I’ll know in advance which months I’m going to have to be very strict about the no-income budget, and which months I can maybe loosen up a bit. I’m going to have to feel this out as I go along, but I’m thinking that up to $1500 of income a month will look pretty much the same as the zero-income budget (including health insurance premiums and setting some aside for taxes.)

However, if I make more than $1500/month, I’ll start by allocating any extra money this way:

25%: tax savings

20%: cash savings

10%: retirement savings (Roth IRA)

10%: gifts & donations sinking fund

10%: travel sinking fund

25%: slush spending

I think that’ll be a reasonable balance between saving and spending. What I want to do is to use freelance income both to extend the lifespan of my savings accounts (hence, the cash savings) and to supplement the bare-bones nature of that zero-income budget. 25% of freelance income allocated to slush means that I can go out to eat sometimes, or buy some music, or whatever.

I guess if I unexpectedly do REALLY WELL in the freelance game, and am making thousands of dollars a month, I will end up rethinking this. But since at least at first I’m not going to really hustle, so that I can focus on volunteering, I think this ought to be fine.