The Contingency Fund

One of the things we’ve learned from watching home improvement shows on television is that in any project, things will go wrong. Things will break. A simple appliance installation will balloon into the need to open a wall and re-wire part of the house. Your intention to do everything yourself will transform into needing a professional on-site ASAP.

When we found the house we wanted, we were annoyed by the clause in our apartment’s lease that required a 60-day notice to vacate. As it turns out, we will be moving into our new home on Day 59 of that period, because we’ve encountered a few unexpected problems.

Mr. Vega decided he wanted to scrape off the ugly acoustic ceiling before we moved in. Our internet search for “how to scrape a popcorn ceiling” yielded the suggestion to test for asbestos before doing that kind of work on houses built before 1980. We found a local lab that could rush the results for $75. We found out we were indeed the proud owners of a toxic ceiling that would cost $2500 to have professionally and safely removed. Ouch.

Fortunately, we had prepared in advance to expect the unexpected: in addition to our down payment and closing costs, we made sure we had about 5% of the purchase price set aside to make the place feel more like home. We also maintain an Emergency Fund, but as the asbestos only poses a health risk during removal, we agreed that Ugly Ceilings are not an actual emergency. Still, we’d feel better having the job done before we move our furniture, our pets, and our own lungs into the place, so we went ahead and had the work done.

Then when the gas company came out to connect the gas and inspect the appliances, they discovered that the stove that came with the house was leaking gas, which meant they weren’t allowed to connect it. The appliance repair men said it would be an expensive fix, and as it wasn’t a good stove to begin with, we had it hauled away, along with the old, moldy fridge that was in the house. We were lucky enough to find an inexpensive, well-reviewed fridge with a freezer on the bottom and in the smaller “apartment size” that we prefer, but we decided to splurge on a professional-quality gas range, to the tune of about $1800 (which is a great deal for the kind of stove we’re getting, but it’s not pocket change!).

We’ve got some other issues, like non-existent insulation in our central Texas attic, a colony of ants that have chosen that attic as the place to build their home, and a central air condenser unit inexplicably– and quite dangerously– perched on the roof that is not designed to hold that kind of weight. While some of these issues could become emergencies, they aren’t yet, and we’re grateful for our Contingency Fund. It will be completely drained before we even move in, so we’ll have to postpone our plans of replacing the old drafty windows with double-paned ones or installing a rainwater collection system, but we’ll still have our Emergency Fund, and we won’t have gone into debt to fix the problems.

We Did it…

… We bought a house! Our first house. And we’re pretty excited.

Four years of hard work, paying off debt, saving money and one cross-country move later, and we have a house! Right now, I’m going to say that it has all been worth it. We made a 20% down payment and bought the house for exactly market value, which is kind of a bargain in the real estate frenzy that is Austin. So we’ve already got a good amount of equity, and our net worth hasn’t changed. Which is strange and wonderful, considering we just handed over almost all of our savings except for our Emergency Fund.

It’s small. As in 800 square feet, 2-bedroom/1-bath, single-car garage small. Buying a smaller, older house allowed us to stay within our budget, which was several thousand dollars less than the current median home price in Austin, but still stay close to downtown and some of our favorite South Austin neighborhoods. Having a smaller house also means, of course, that it will be less expensive to cool and heat as well as being easier to clean. We want to replace both the roof and the flooring at some point, and those things will also be cheaper because of the house’s smaller footprint.

The lot is a relatively large 1/4 acre, which gives us plenty of room for gardening and entertaining. And there is plenty of room for the house to grow, if we ever decide that a third bedroom or a second bathroom is a necessity. We’re planning to build a compost bin ASAP, planting a mini-orchard of fruit trees, and even considering getting a few chickens.

Built in 1968 and used as a rental property for the past decade, it’s going to need a fair amount of work. We see that as a benefit, though because it was another thing that kept the asking price low, and also because we can do most of the improvements ourselves, to get things exactly how we want them. Some of the first things on our list are high-efficiency appliances, double-paned windows, and a rainwater collection system.

There are train tracks just behind our back fence, but it’s in a “quiet zone,” which means the trains are not allowed to blow their horns except in emergencies. Houses that abut train tracks are generally considered less desirable, which helped with the affordability factor, and honestly, I find the sight and sound of freight trains nostalgic!

The neighborhood is funky and eclectic… No cookie-cutter houses, and most importantly to us, no HOA. Homes in our new neighborhood have interesting creative decor and landscaping: some of them even have their vegetable gardens in the front. We were also pleased to spot a few harbingers of creativity and a laid-back vibe in the area: free-range children!

This is the thing we’ve worked so hard to do, and we’ve been able to do it on our own terms, so we’re very happy. We’re looking forward to what lies ahead, as we continue our journey toward self-sufficiency and financial independence.

How We Became Average Americans (And What We’re Doing to Stop It!)

Last year, Mr. Vega and I were living in a 486-square-foot apartment in a not-so-perfect neighborhood tucked into the vast urban sprawl of Los Angeles. We had a thriving container garden on our balcony, and we supplemented the soil with compost created by a colony of red wriggler worms that also lived in a container on our balcony and fed on our fruit and vegetable scraps and coffee grounds. Our meals were all organic and made-from-scratch, often in a slow-cooker, and supplemented with green vegetable juice fresh-made daily. We kept a batch of kombucha brewing on a kitchen counter, a small bottle of organic vanilla beans and bourbon (otherwise known as “vanilla extract”) in a cupboard, and a bigger bottle of cherries, sugar and bourbon (otherwise known as “cherry bounce…” if you haven’t tried it, you might want to!) under the kitchen sink. Our refrigerator was a smaller apartment-sized unit, and we liked it that way, because it was harder to overlook what we had put in there and let it go to waste. We did our laundry twice a month, two loads at a time in our building’s communal laundry room, and hung about half of that to dry on a rack out on the balcony.

We were weird.

We seemed like perfect candidates to move to Austin, Texas… the city’s motto is “Keep Austin Weird,” after all! Housing prices in Los Angeles were proving pretty unforgiving, and we had our hearts set on homeownership, so we packed up a U-Haul and headed eastward, towing one car and shipping another. We had come out a month earlier and secured jobs and an apartment, but because we didn’t know the area, we chose an apartment in a more expensive part of town than our old place in L.A. This one came with a much smaller balcony, and we moved in mid-summer, too late to start a garden. It also has an in-unit washer and dryer, which came in handy, as we weren’t used to the longer drying times required for hanging laundry in the humid air of central Texas. We also weren’t prepared for how we might have to adjust our home-fermenting efforts: my first batch of kombucha grew a healthy layer of mold, and I haven’t found the motivation to try again. Although our apartment in Austin has 50% more square footage than our last place, the storage options are not well-designed, and so the kitchen is much less functional. And we still haven’t learned how to cook on an electric stovetop without burning things!

After a lifetime spent working freelance and part-time jobs, I took full-time work about six months ago, in addition to keeping a couple of my part-time gigs, so that we could save for the house we came here to buy. While I’m glad I did, I now find myself without the time or energy to shop, prep and cook like I used to. Week after week, we found ourselves letting our fresh food languish in the standard size fridge while we stopped for takeout or reached for convenience foods, and without a compost bin, 100% of our food waste has been headed to the landfill. We decided to fill our freezer with some Trader Joe’s frozen options, just to get us through the transition… not ideal, but healthier and less expensive than takeout, or most of the big-name convenience foods. After Mr. Vega sustained a sports injury that makes it difficult for him to walk without pain, even the trek to our closest Trader Joes was proving difficult to fit into my busy schedule, and I found myself shopping at the chain grocery store nearest my workplace, buying and consuming the very products that we’ve avoided so diligently for the past few years. There’s a bit of a vicious cycle going on here: our busier schedules and poorer nutrition means that we have less energy to shop for and cook the healthy foods that would give us, well, more energy! But at the end of a typical 9-hour workday, all we really want is to eat something that we don’t have to cook, lie on the couch and watch TV. And we’ve gained weight. Like most of America, we are now overworked, overweight, malnourished, and trying to function in a state of near-constant fatigue.

Our expenses have gone up, too. Living in a “safer” neighborhood in Austin costs us more in rent than our dodgy-but-familiar part of Los Angeles. The landlord-tenant laws are different here, so our rent is about to go up $200-$400 (the amount would depend on the length of the lease we sign). And our incomes decreased considerably when we left the West coast. We’re fortunate to still be earning enough to give us some margin, even with our current spendy lifestyle, but we’re keenly aware that adding children to our family, needing to care for aging parents, or experiencing a health crisis of our own would change the balance considerably. From where we sit, it’s very easy to understand how some “low monthly payments” for anything that makes life easier would start to look pretty good to a lot of people right about now.

Now we’re average.

What’s keeping us going is the knowledge that our situation is temporary: We’re currently in escrow on our first home. It’s a two-bedroom house, not much bigger than our current one-bedroom apartment, and we’ve got a healthy down payment so our monthly payments will be about the same as our rent. It’s got a couple of fruit trees in the front, a big backyard for gardening, a good-sized kitchen pantry, and a covered deck where we can hang our laundry but still have it protected from summer showers and the grackles that are ubiquitous here. There’s also a gas stove, more counter space and the opportunity to buy whatever size refrigerator we like. If all goes well, in a few months we’ll be collecting rainwater, composting, eating home-grown vegetables again, and playing host to bees, bats and butterflies. We’ll feel more comfortable inviting friends over for dinner and game nights, because there is ample street parking and zero chance of upstairs neighbors complaining about the noise we make when the conversation gets boisterous at our dining table. It will take some effort to keep our tired bodies moving after we come home from a full day’s work, but I think we’ll be able to do it, because we know from experience the good financial and physical health that any amount of urban homesteading can bring. And loathe as I am to do it, because I’ve come to love the people I work with, once we’re settled and have made a few improvements to the house I’ll be able to leave my part-time job and keep my workweek down to a more manageable five days a week instead of six.

We are not wealthy people, but we have had the luxury of working less-than-full-time, or at least of keeping flexible hours, for most of our working lives. Our year of living like “average” Americans has brought me a lot of compassion for people with fewer options. I now have answers to some of the questions in my head that start with “Why don’t they just…?” This experience has taught me that “they” probably don’t exercise the options I’m thinking of because “they” are exhausted and feeling unwell, and there isn’t always someone else to pick up the slack. I’ve learned that an unexpectedly busy week means that fresh fruits, vegetables, and even meats are likely to go unprepared and uneaten, so it’s easier to just not buy them in the first place. I’ve discovered that something as simple as a poor apartment design can have a big effect on a family’s ability to maintain healthy habits. I can see how a weeklong disruption in a steady income could throw off a working parent’s finances in ways that, if you throw in a few late fees and re-connection charges, could take years to recover from.

Living in this country, in this economic climate, is a real struggle for the average American these days. Working flexible schedules, growing and cooking your own food, staying out of debt, and maintaining a healthy work-life balance can go a long way toward making life easier, but those choices aren’t available for everyone. And they certainly aren’t options that I’ll ever take for granted again.

Have you been able to stay out of the “average” American cycle of work-spend-work? What choices have you made to accomplish that?

My First-Ever Tax Refund

For the entirety of my career, I have worked part-time and freelance jobs. For all intents and purposes, I have been the sole proprietor of a one-woman business, and my tax status has reflected this: every year, I receive up to a dozen 1099 forms and maybe a W-2 or three. Every year, I comb through all of the previous year’s expenses, making sure I haven’t overlooked any possible business meals, office supplies, or mileage. Every year, I sweat it out in the accountant’s office, waiting to be told exactly how much I owe.

I got into the habit of filing my taxes as soon as possible each year, so I could find out exactly how hard I was going to have to work in the two months or so I had left before the Tax Day bill came due.

Over time, I got clearer about how this tax thing works, and started putting aside a set percentage (corresponding to my tax bracket) every time I received a check. Eventually, even though I owed taxes each Spring, it felt as though I was getting a refund, because after paying my balance due, whatever was left in my Tax Fund was mine to keep.

But 2014 was the year we moved more than fifty miles away from our employers, and found gainful employment in our new home town, all of which means we got to deduct our moving expenses from last year’s taxable income. And we moved to a state with no income tax, which was a lot like getting a raise (both our salaries are actually lower than they were in California, but we’re still not complaining). Combine all that with the first year in decades that my business expenses outweighed my freelance income, and it all adds up to a not-insubstantial tax refund.

Our tax preparer e-filed for us today, so we won’t see the money for a few weeks, but I’ve already spent it several times over in my mind: I’d like a Spa Day, a trip to visit family, some new hiking boots, and a few of the ridiculously expensive bras I like. Maybe some new shoes and baking pans, too, because I really know how to party. And Mr Vega has suggested a solar generator and some new iStuff, too.

In the end, our little windfall is going straight into the House Fund, but you probably knew that already. It gets us close enough to our goal of a 20% down payment toward a house we could afford on a 15-year mortgage with payments totalling no more than 1/4 of our total take-home pay. We’ll probably start looking for financing next week.

Still, I’ve enjoyed spending a little time thinking of ways to spend the money, if we were going to…

Did you receive a tax refund this year? What will you spend yours on?

Welcome, Get Rich Slowly Readers!

Years ago, during a pretty bleak time in my life, I happened across an article by Donna Freedman called “Surviving (and Thriving) on $12,000 a Year,” in which she outlined some of the ways in which she intended to not only get through the lean times she was facing, but to do it with grace, dignity, and even joy.

I wanted what she had.

I returned to that piece many times over the next few years, and continued to read everything she published that I could find. I followed along as she charted new-to-her territory as a midlife college student, as she healed her finances and expanded her career… I tried many of the money-saving tactics she wrote about and even began to do a little writing of my own about how things were going. I wrote about what it was like for me to begin that process– and begin againhere.

Nearly a decade after Donna’s words first illuminated a screen in my dark little studio apartment, I find myself sharing a life and a name with a man named “Vega,” who joined me on a journey to becoming debt-free, amassing a fully-funded Emergency Fund, and now, saving to buy our first home. Because we’re becoming financially literate a little “later” in life, we acknowledged that homeownership would be more likely for us if we left our native Los Angeles and struck out for parts unknown. Unknown to us, anyway: Austin, Texas is one of the fastest growing cities in America, and that trend shows no sign of slowing any time soon! You can read more about how we came to our decision here.

We’re learning our way around our new home town, working as hard as we can to make sure our “starter home” isn’t a retirement home, and trying to have as much fun as we can in the process without delaying our dreams.

Mr. Vega and I finally got to meet Donna in person last summer when she visited Austin on a short trip. We had only been here a couple of weeks ourselves, but I was happy to spend a little time talking with her over breakfast tacos in the Central Texas summer heat, and when she asked if I was writing anything, I mentioned this little blog that was only a couple of months old and was still finding its voice. It still is. But she took a look, and it was this post that inspired her recent article over at Get Rich Slowly.

If I could stumble across someone else’s blog and be inspired to make deep and lasting change in my life, then anyone can do it. And if some of the work Mr. Vega and I are doing inspires even one person to start doing it for themselves, then something wonderful is happening. Because if we can free ourselves from the burden of debt that has become the norm in our society, who knows what else we can do to alleviate the poverty and financial stress that keeps some of our best and brightest women and men from achieving their full potential?

That may sound pretty lofty, but every paradigm shift the world has ever known has started with just one person thinking quietly to themself: “What if I could really do this?” The idea of personal financial responsibility and freedom didn’t start with me, or with Donna Freedman, or with any of the other wonderful bloggers who have been brave enough to share their experiences with the public. But the most important thing is that the ideas don’t end with us, either.

Thank you for visiting, and I hope you’ll stick around and share some of your own thoughts in the comments. One person, one decision at a time, can change the world. But none of us has to do any of it alone. And the best part of all? We can have a hell of a good time doing it!

Minding the Pennies

There’s an old English saying: Mind the pennies, and the pounds will take care of themselves. When I discovered the writing of Donna Freedman back in 2006, I began to really understand that attention to smaller details– particularly in the area of personal finance– will definitely help sort out the bigger picture.

When we moved from California to Texas, we got a letter from our roadside assistance provider, asking whether we wanted to transfer our membership to the chapter in our new home state. We filled out the form to reply in the affirmative, sent it back, and never heard from them again. Not even when the membership was up for renewal, and so it lapsed without our noticing.

Several months later, we received a bill for $60, due to a service call Mr. Vega had made after our membership ended. Or so the bill said. Yesterday, I made a phone call to sort that out. It took me half an hour on the phone (most of it on hold while the California representative talked to the Texas representative), but eventually it was made clear that the service call had indeed occurred before the coverage expired: “Please disregard that bill, Ma’am, and thank you for your patience.”

I haven’t figured out my Real Hourly Rate (as outlined in Your Money or Your Life, by Joe Dominguez and Vicki Robin) for this job yet, but I promise you it’s a far sight less than the $120/hour I “saved” by making that phone call.

Another, shorter phone call saved us a $25 returned-check fee (our first in many years!) several weeks ago. I had misjudged the amount of time it would take for the funds from my new-job paycheck to be available, and the auto-draft from the credit card we use for airline miles showed “insufficient funds.” Although they had every right to assess the fee, I called the credit card company and asked politely if they’d be willing to remove it as a one-time courtesy. Because I had never made a late payment or bounced a check to them before, they removed the surcharge immediately.

Were the phone calls worth it? You betcha! I’m grateful that we’ve gotten to a place in our finances where we don’t have to choose between paying an unexpected bill and keeping the lights on, but just because we can afford to pay for mistakes (theirs or ours) like that doesn’t mean we should. I shudder to think of how many erroneous charges we’ve paid for over the years because we couldn’t be bothered to deal with it.

Taking a few minutes to carefully review our bills as they arrive, and sometimes a few more minutes to make those phone calls, has helped us get out of debt, build an emergency fund, and start saving for a house much more quickly than we would have without such vigilance. And perhaps more importantly, taking the time to track down those smaller amounts of money has taught us discipline in our spending habits: after all, if I just spent half an hour clearing up a bill for $60, I’m much less likely to blow that money on a concert ticket or a cell-phone upgrade, or a shiny new pair of… well, of anything, really.

Pennies don’t buy much of anything these days, but keeping an eye on all of them is the best way to make sure their larger relatives don’t go too far astray.

What small savings have you come across lately, and how do you think they affect your finances overall?

More Than Money (Hidden Emergency Fund Ideas)

Last week, we got word from my sister-in-law that my husband’s mother had taken ill, and needed to be hospitalized. She’s home now, and on the mend, thank goodness, but we were naturally on high alert, preparing for the possibility of traveling the thousand miles that separate us from her. We’ve got a decent number of airline miles that we’ve accumulated for use in the event of an emergency requiring last-minute travel in the continental United States (we’d have to use our Emergency Fund to get to our loved ones in Hawaii, if the need arose), and that got us thinking about what other non-cash resources could get us through an emergency or hard times.

Years ago, I read an article by personal finance writer Liz Weston called “The Emergency Fund You can Eat.” In it, she wrote of maintaining a fully stocked pantry and kitchen as a first-line defense in the event of a financial crisis. Picking up an extra item or two with each visit to the grocery store may be easier for some people than trying to pile up a month’s or more worth of cash, but might ultimately yield the same results: if the money stops coming in for a time, a person or family wouldn’t go hungry while they sorted out their next steps. Bonus points for keeping a garden, no matter how small. This particular strategy has come in handy for us countless times: when we’ve been too sick (or too busy!) to get to the grocery store, during the gap between starting a new job and receiving our first pay, and since we moved to Austin, during the occasional Severe Weather Alert, when it’s safest to stay off the roads.

Savings can take on many forms, and one of the ways we’re ready for emergencies is that we’ve saved up some of our paid sick days and vacation time at work. Well, Mr. Vega has, anyway… Being new at my full-time job, I have yet to accumulate much paid time off, but it’s my intention to get and keep a couple of weeks’ worth banked to use if an emergency should arise. Not everyone has this option at work, but some places will let you swap shifts or cover for each other. Helping co-workers out when you are able can also act as a sort of Rainy Day Fund: even if it won’t replace your lost income, having people willing to cover for you can save your job when you have to miss work.

To that end, maintaining good health is another crucial component of a cashless Emergency Fund. Cooking up some of that healthy pantry and garden food, staying hydrated, sleeping well, and getting regular exercise can not only prevent missed work days and lower medical expenses, but it can also provide the ability to physically respond to crisis. It’s easier to handle the loss of a car for a person who is in good enough shape to ride a bike to work, or walk to and from a bus stop. Someone who finds themselves unable to afford their rent is also likely unable to hire movers; having spent some time slinging weights around will make a DIY move much less painful. And healthy bodies stand a better chance of thriving should the need arise to care for an ailing loved one, or to take a second job to make ends meet.

Sometimes it is nice to be able to rely on plastic when times get tough, and that’s when we reach into our wallets for our library cards. I went a year without internet service when I was paying off debt, with the help of free library wi-fi. When I was finished with my work, I’d head over to the easy chairs and spend a little time enjoying current issues of magazines that would have cost me $5 each to buy. I’d leave with an armful of borrowed books, CDs and DVDs that provided a sense of abundance in addition to the information and entertainment I got from them. Most big-city libraries also provide classes in financial and computer literacy, job search help, storytimes for children (it’s not child care, but just letting someone else read to the kids for half an hour can be a real sanity-saver for stressed-out parents), movie screenings (sometimes with popcorn!), and here in Austin, the public libraries even host monthly Adult Craft Nights!  And all of it is free.

Finding money to deposit into an Emergency Fund is difficult, and even when we have the money, it’s not always pleasant. But investing in supportive relationships is a fun way to create a strong safety net for ourselves. Healthy friendships and familial relationships lessen the risk of depression and reduce the length of unemployment. If we remember to stay in touch with and enjoy the people we love when things are going well, then in hard times, those same friends and family will be there so to help each other move, provide care and companionship during illness or after an injury, or even prevent homelessness. While none of us like to imagine it, we wouldn’t hesitate to do the same for them, and it’s important to remember that accepting and receiving help when we need it also provides the giver with a sense of meaning and importance in their own lives. And being part of a robust social network makes us more resilient, so our difficulties are likely to pass more quickly than if we were trying to handle them all alone.

Getting some money in the bank to rely on in an emergency is ideal, but there are also plenty of other ways to prepare for crisis ahead of time. What are some of the ways you’ve found to be ready for whatever life throws at you?