That's great to hear things are coming together. It sounds like you already have a path forward - and to be honest it sounds great. Retiring to a quiet area with mountains certainly sounds amazing.
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How do you manage your budget?
- Thread starter Monique
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That's great to hear things are coming together. It sounds like you already have a path forward - and to be honest it sounds great. Retiring to a quiet area with mountains certainly sounds amazing.
Congrats, Monique! It's fantastic to see you in such a good place after your terrible loss.
Have you considered purchasing a mountain condo as an investment property? You could use it when you want and rent it short term when you don't. It sounds like the analysis may have been done on the mountain home as an expense and not an investment. Was any consideration given to the increase in the property value over time?
In the long run, stocks and real estate have provided the highest rates of return. On your current path, you'll likely end up primarily in stocks and could be more diversified with additional real estate holdings. Stocks are great. Stocks combined with real estate is better.
I believe you've mentioned your current home is paid off. Putting the equivalent of a mortgage payment into an investment property could be a great option for you. If not in the mountains, somewhere near your home would be great, and would provide an even greater ROI than a mountain property, just without the benefits of your personal use.
Also, there is leverage associated with mortgaged real estate that amplifies returns (and losses) that you can't get with other investments at the same level of risk.
I'll also add that this is an example of why I don't like FA's that take a percentage. They are inherently biased to lead you into investments from which they get a cut. Your FA wouldn't get a percentage of an income property, but it's something you should be considering. I'd rather see you use a FA that gets paid on an hourly basis, or you are smart enough to figure out this investment stuff yourself!
Let me challenge this a bit.
Have you considered purchasing a mountain condo as an investment property? You could use it when you want and rent it short term when you don't. It sounds like the analysis may have been done on the mountain home as an expense and not an investment. Was any consideration given to the increase in the property value over time?
In the long run, stocks and real estate have provided the highest rates of return. On your current path, you'll likely end up primarily in stocks and could be more diversified with additional real estate holdings. Stocks are great. Stocks combined with real estate is better.
I believe you've mentioned your current home is paid off. Putting the equivalent of a mortgage payment into an investment property could be a great option for you. If not in the mountains, somewhere near your home would be great, and would provide an even greater ROI than a mountain property, just without the benefits of your personal use.
Also, there is leverage associated with mortgaged real estate that amplifies returns (and losses) that you can't get with other investments at the same level of risk.
I'll also add that this is an example of why I don't like FA's that take a percentage. They are inherently biased to lead you into investments from which they get a cut. Your FA wouldn't get a percentage of an income property, but it's something you should be considering. I'd rather see you use a FA that gets paid on an hourly basis, or you are smart enough to figure out this investment stuff yourself!
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+1 on the real estate as an investment if possible.
That said, most of the time vacation home/rentals numbers don't work out unless held for a long time to get the capital gains. Usually, the rents do not offset the cost of ownership.
Congrats on the progress made.
That said, most of the time vacation home/rentals numbers don't work out unless held for a long time to get the capital gains. Usually, the rents do not offset the cost of ownership.
Congrats on the progress made.
In general, yeah, I understand your concern. My parents lost a lot of money with a terrible FA (not clear that he was being greedy - possibly just incompetent). My FA was also Eric's childhood best friend, and I'm confident he's not primarily motivated by his percentage. For example, when I have mentioned possibly investing the life insurance via his company rather than buying a mountain condo for myself, he has reminded me that I have wanted the condo for years, that I always sound much happier when I talk to him from the mountains, and that not everything is about the money. But regardless, I am not concerned about his motivations.
I have about the same interest in owning an investment property that I do in owning a business or managing my own investments - zero. Blech. And I'm sure as hell not going to drive up every time someone does something dumb, so I'd have to pay a management company. In fact, for a long time, I was adamant with him that I wouldn't want to ever rent a place out if I bought one for my own use - even for the lucrative holiday times. Also, you can invest in real estate without having to actually buy property. Also also, as discussed earlier, there are emotional benefits from not having debt (aka a mortgage) that are entirely separate from the financial considerations.
More to the point, EVERYTHING in my life is in flux right now. I have a pretty serious relationship with someone who is already working the "passive income" angle and just bought an existing business. We're doing a ton of work on his house so that he can fully move into my house and rent out his own. I need to deal with this whole condo thing this summer. My financial picture - and my location - could change drastically in the next year or five. Ain't nobody got the mental bandwidth to think about buying an investment property right now. But don't worry - I am not planning to shove it into long term investments just yet. The insurance money is still fully available if I want to do something with it tomorrow, or in a few months.
That being said, if the market takes a dump and I can get something in a short sale next year, well, that's a fish of a different stripe ;-)
Terms of FA's and money, my takes been that for @Monique it sounds as if something needed or at least very beneficial given circumstances. One can always walk away once comfortable with running it themselves, etc. But one thing I'm a bit paranoid on is who has control of the money, I generally go with the idea of multiple pockets of savings/investments in different institutions and controlled by different people.
When I changed jobs years back my new employer asked if I wished to move my retirement to their funds/administrator, I kept them separate. I don't fear greatly that a Fidelity, Van Gaurd, etc will belly up completely or really .. if one general hell would break loose but I feel more comfortable about having money spread around.
I move retirement money away from my company stocks regularly as even though I think they will exceed in their sector, still recall friends with retirement money in Worldcom having lost significant % of it when they crashed.
Property has traditionally done well but rental in resort areas seem so mixed on what I've read. I considered this one even setting it up as a self directed 401 type plan but given distance I just couldn't gain the confidence that long term, fees, etc would not give the returns that more basic mutual funds could give.
When I changed jobs years back my new employer asked if I wished to move my retirement to their funds/administrator, I kept them separate. I don't fear greatly that a Fidelity, Van Gaurd, etc will belly up completely or really .. if one general hell would break loose but I feel more comfortable about having money spread around.
I move retirement money away from my company stocks regularly as even though I think they will exceed in their sector, still recall friends with retirement money in Worldcom having lost significant % of it when they crashed.
Property has traditionally done well but rental in resort areas seem so mixed on what I've read. I considered this one even setting it up as a self directed 401 type plan but given distance I just couldn't gain the confidence that long term, fees, etc would not give the returns that more basic mutual funds could give.
Oof, yeah. I worked for a company that had a very generous match plan, as well as yearly bonuses in the form of 401k (I loved this; many people did not), but they always directly invested it in their own stock. Understandable, but I made a point of moving it around.
I had to sign a waiver with my FA's company because of the amount of stock I own in one company - my husband's employer. That will be moved around, but I'm waiting it out - the company is in good shape for now and the probable near future.
Another update from the OP:
After about a year, I've finally decided that categories are going to help me. I was extremely anti-category at first, but I think that's because I just had no idea what categories to choose, didn't want to get too specific, and had no idea how to allocate the money.
Starting this month, I've introduced categories to my spreadsheet. Each category has its own set of columns representing its balance sheet. At this point, it's possible that existing software can display things similarly to how I want to see them, but I'm pretty happy with this set up. I have a lot better grasp on how to organize the data so that it makes sense to me. I am also just sooo much more able to handle even simple thought processes than I was right after my husband died, and even six months after that - for example, choosing window treatments and measuring for them after I ripped the old ones off the back doors was essentially impossible for me even six months ago. I recently took care of it, though, and it was ... not a big deal. Widow brain is real, y'all. Coming up with categories and choosing how to apply them would have been a nightmare at that time. I could handle a simple ledger, though, and see where I stood at the end of the month. Over time, I also gained a better feel for what data and presentation would be most useful to me (and easiest to maintain).
I've realized that categories have benefit beyond just "this is what I'm spending" - they allow me to save specifically for future anticipated expenses, like repairs as my car gets older or medical / vet care as my dogs and I get older.
I've also found it useful to think of categories as income categories, just as much as spending categories. I reserve $X for each category. It also expands to other notions - like, if I get a bonus or some windfall cash that I don't need, I can put it in a "splurge" income/spending category. Categories are essentially virtual savings accounts. I would go nuts if I actually tried to maintain separate savings accounts, though, for each category.
I doubt any of this is a great revelation to those who have experience with budgeting, but maybe it can help newer budgeters wrap their heads around it. For me, though, I don't think categories would have been that useful to start. I needed time to collect data and see all the different types of costs I incur. For someone else, perhaps starting with categories would have given them better insight from the start.
Anyway, here are the categories I've chosen. "Other" feels like a cop-out, but it's the only way to avoid the decision paralysis I get into when I can't decide how to categorize something. I also don't want to get too nuts with categories. I allocate a set amount of my budget for each category - essentially "income" for the category. Then I add the "income" + carryover from the previous month, and that's my starting point for the month.
KTLO - Absolutely required expenses like utilities, phone, mortgage/rent, etc
Household/Grocery/Fuel
Entertainment/Restaurant/Travel
Medical
Dogs
Auto
Savings/Emergency
Other
Bonus
Personal Training (I took a chunk of my bonus money and allocated it in advance)
Ideally, Savings, Dogs, Medical, and Auto will be (on average) accruing every month, so that I'm building up a reserve for future larger expenses. In general, I don't want to worry too much about a few dollars up or down every month, but I can watch the trends and change the allocations, or my spending, if it makes sense.
After about a year, I've finally decided that categories are going to help me. I was extremely anti-category at first, but I think that's because I just had no idea what categories to choose, didn't want to get too specific, and had no idea how to allocate the money.
Starting this month, I've introduced categories to my spreadsheet. Each category has its own set of columns representing its balance sheet. At this point, it's possible that existing software can display things similarly to how I want to see them, but I'm pretty happy with this set up. I have a lot better grasp on how to organize the data so that it makes sense to me. I am also just sooo much more able to handle even simple thought processes than I was right after my husband died, and even six months after that - for example, choosing window treatments and measuring for them after I ripped the old ones off the back doors was essentially impossible for me even six months ago. I recently took care of it, though, and it was ... not a big deal. Widow brain is real, y'all. Coming up with categories and choosing how to apply them would have been a nightmare at that time. I could handle a simple ledger, though, and see where I stood at the end of the month. Over time, I also gained a better feel for what data and presentation would be most useful to me (and easiest to maintain).
I've realized that categories have benefit beyond just "this is what I'm spending" - they allow me to save specifically for future anticipated expenses, like repairs as my car gets older or medical / vet care as my dogs and I get older.
I've also found it useful to think of categories as income categories, just as much as spending categories. I reserve $X for each category. It also expands to other notions - like, if I get a bonus or some windfall cash that I don't need, I can put it in a "splurge" income/spending category. Categories are essentially virtual savings accounts. I would go nuts if I actually tried to maintain separate savings accounts, though, for each category.
I doubt any of this is a great revelation to those who have experience with budgeting, but maybe it can help newer budgeters wrap their heads around it. For me, though, I don't think categories would have been that useful to start. I needed time to collect data and see all the different types of costs I incur. For someone else, perhaps starting with categories would have given them better insight from the start.
Anyway, here are the categories I've chosen. "Other" feels like a cop-out, but it's the only way to avoid the decision paralysis I get into when I can't decide how to categorize something. I also don't want to get too nuts with categories. I allocate a set amount of my budget for each category - essentially "income" for the category. Then I add the "income" + carryover from the previous month, and that's my starting point for the month.
KTLO - Absolutely required expenses like utilities, phone, mortgage/rent, etc
Household/Grocery/Fuel
Entertainment/Restaurant/Travel
Medical
Dogs
Auto
Savings/Emergency
Other
Bonus
Personal Training (I took a chunk of my bonus money and allocated it in advance)
Ideally, Savings, Dogs, Medical, and Auto will be (on average) accruing every month, so that I'm building up a reserve for future larger expenses. In general, I don't want to worry too much about a few dollars up or down every month, but I can watch the trends and change the allocations, or my spending, if it makes sense.
Just a thought. Savings/emergency would work better in two categories and two accounts. Crank on the Efund with the bonus money and extra until you have 6 months of expenses in a separate acct. that you can get to like a money market with check writing privileges. Park that there, then ignore it. That is a "car gets totaled" or "you are out of work" buffer. Dogs/med/auto are what are called sinking funds. You KNOW you will replace the car. You know it will cost XX,XXX.XX (ish) so you know how much you have to save over the years you want to drive what you have. You KNOW that car ins is coming up every 6 months, so you can save for that so it is no surprise.
Thank you! Great advice. Dogs/med/auto are all allocated so that I should be growing the "accounts" every month. Car insurance, home insurance, and other periodic expenses are also taken into consideration. I've spent the last year identifying yearly/semi-yearly/quarterly expenses so that I can build them into the budget. After the car is paid off, I plan to keep allocating that money into the auto "account" for repairs and eventual replacement.
I wasn't going to get into it because it feels like bragging, but I am fortunate enough to have lots of savings. Eric and I always shoveled money into savings - it's just that we didn't save much given our combined income (which was primarily his). But we also didn't budget because, well, we didn't have to. We were ridiculously privileged. Once he died, I was terrified I would blow through savings - hence this thread and my anxiety about budgeting. I was afraid I wouldn't be able to scale down my spending habits. It was a big mental load at a time when I had almost no ability to think straight.
Most people would probably think I'm insane for being so preoccupied with budgeting given my situation, but I want to stay comfortable, not fritter it away. And every dollar I can shovel into savings gets me a little closer to retirement. I would love to be retired, like, yesterday. Got a while to go, though. So insofar as possible, I want to ignore the savings I accumulated through my marriage and due to Eric's death, and live off the income I've earned since I've been solo. But I have lots of cushion for unemployment, catastrophe, etc.
Currently, I have 5-6 months of run rate immediately at hand. Then lots in no-penalty CDs - lead time of maybe two weeks worst case. Then stocks, obviously not something I want to touch if it's a down economy. Then Eric's retirement accounts, which are structured so that I can withdraw without penalty. Then my retirement accounts. Again, enormously privileged. But if I had kept going with my previous habits, I'd be spending more than twice what I earn. Those savings wouldn't stand a chance.
Not insane in the least! Budgeting is what made the biggest difference in us being able to walk away when we did. You are on the right track and I commend you for working through this at such a difficult time.
My FA has been a huge help. He runs the numbers and tells me what budget will lead to what retirement age. He absolutely costs me money, but saves me in stress.
I'm a big fan of the categories idea as well; I have an Excel spreadsheet that I've developed that allows me to see exactly how much I've saved (and spent) from each category. Being a detail-oriented engineer (guilty as charged!), I have a lot of categories. I try to avoid "general" / "other" / "miscellaneous" categories as it's too easy to just spend that money and then wonder why the savings aren't growing.
Over the past couple years of "categorizing savings" I''ve added or adjusted categories based on incoming bills. i.e., you won't get it "perfect" the first time and you'll have incoming bills that generate a "oh, I should have been saving for that all along, that was predictable", etc., and you'll adjust your categories accordingly.
I keep "slow trip" money (i.e., expenses that I anticipate occurring within the next 1-3 years or so -- insurance bills, new tires for the car, etc.) in an online savings account. One, it pays much more interest than my physical bank does -- 2% vs. 0.1%. Two, it's a little more difficult to access the money -- I have to initiate the transfer and wait a day or two for the funds to appear in my physical bank.
That delay helps prevent me from seeing "oh, there $X in my slow-trip account, I won't miss it if I 'borrow' a little bit against myself". i.e., I can't get to it from an ATM. Those with more self control than I sometimes possess can probably keep it all in one place.
Over the past couple years of "categorizing savings" I''ve added or adjusted categories based on incoming bills. i.e., you won't get it "perfect" the first time and you'll have incoming bills that generate a "oh, I should have been saving for that all along, that was predictable", etc., and you'll adjust your categories accordingly.
I keep "slow trip" money (i.e., expenses that I anticipate occurring within the next 1-3 years or so -- insurance bills, new tires for the car, etc.) in an online savings account. One, it pays much more interest than my physical bank does -- 2% vs. 0.1%. Two, it's a little more difficult to access the money -- I have to initiate the transfer and wait a day or two for the funds to appear in my physical bank.
That delay helps prevent me from seeing "oh, there $X in my slow-trip account, I won't miss it if I 'borrow' a little bit against myself". i.e., I can't get to it from an ATM. Those with more self control than I sometimes possess can probably keep it all in one place.
I'm not really aware - is this an HOA thing?
What do you mean by "online savings account?" I'm not aware of savings accounts that pay 2% ... would definitely be curious about that. Are they maybe CDs behind the scenes?
Ally and Charles Schwab have online savings accounts that pay pretty well. My local bank is paying .9% on savings, but it's balance related. Schwab is paying .5% on any balance and. 4% on checking. Ally is paying, however, 2.2% on their high yield savings.
Bankrate.com says:
Best online savings accounts & rates 2019
Here are Bankrate's selections for the best savings accounts of 2019:
As a senior, these online places I've never heard of make me nervous, which is why we are using Schwab as a "spare bank" for checking. They have no charges for ATM uses world wide. So if I'm stranded (as I have been) by my local bank deciding that this ATM in Austria is fishy, in spite of notifications both in writing and in the phone prior to departure, I've got another card to try. It was really the ATM card we liked.
...Hmmm. Citibank? I need to look into that one.
Bankrate.com says:
Best online savings accounts & rates 2019
Here are Bankrate's selections for the best savings accounts of 2019:
- Best Rate: CIT Bank - 2.45% APY
- Runner-up: MySavingsDirect - 2.40% APY
- Top Choice: CIBC Bank USA - 2.39% APY
- High Rate: Citibank - 2.36% APY
- High Rate: Citizens Access - 2.35% APY
- High Rate: PurePoint - 2.35% APY
- High Rate: Goldman Sachs Bank USA - 2.25% APY
- High Rate: Synchrony Bank - 2.25% APY
- High Rate: HSBC - 2.25% APY
- High Rate: Ally Bank - 2.20% APY
- High Rate: Barclays Bank - 2.20% APY
- High Rate: American Express National Bank - 2.10% APY
- High Rate: Discover - 2.10% APY
As a senior, these online places I've never heard of make me nervous, which is why we are using Schwab as a "spare bank" for checking. They have no charges for ATM uses world wide. So if I'm stranded (as I have been) by my local bank deciding that this ATM in Austria is fishy, in spite of notifications both in writing and in the phone prior to departure, I've got another card to try. It was really the ATM card we liked.
...Hmmm. Citibank? I need to look into that one.
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@Sibhusky gave a good list of the options. I use American Express as I had the same reservations regarding banks that I’ve never heard of.
Everyone is FDIC insured (I think that’s the federal bank insurance agency?) so you should be safe anywhere.
@Kevin F @Sibhusky thanks for that info! I really didn't know or hadn't paid sufficient attention.
With Edward Jones, I have CDs with no penalty for withdrawal, and they range from 2.35 - 2.6% . HOWEVER the links to online savings accounts point out the different interest accrual intervals, so that may play in. On the third hand (gripping hand, for you sci fi lovers), EJ takes a bite - they have two types of accounts with different fee structures, and I forget which one this is, but anyway, this is worth investigating.
@Sibhusky - Your age aside, it's just smart to consider the history of your bank. They raise my spidey senses, too, although some of these "hip new name" places are actually just divisions of long established banks. Also, some of those are actually well recognized in institutional settings or within larger corporate orgs, but maybe not for individuals - frex, HSBC and Barclays.
@Kevin F - you should definitely pay attention to FDIC insurance, which has a per-bank, per-person limit (not per account), although it's quite high.
With Edward Jones, I have CDs with no penalty for withdrawal, and they range from 2.35 - 2.6% . HOWEVER the links to online savings accounts point out the different interest accrual intervals, so that may play in. On the third hand (gripping hand, for you sci fi lovers), EJ takes a bite - they have two types of accounts with different fee structures, and I forget which one this is, but anyway, this is worth investigating.
@Sibhusky - Your age aside, it's just smart to consider the history of your bank. They raise my spidey senses, too, although some of these "hip new name" places are actually just divisions of long established banks. Also, some of those are actually well recognized in institutional settings or within larger corporate orgs, but maybe not for individuals - frex, HSBC and Barclays.
@Kevin F - you should definitely pay attention to FDIC insurance, which has a per-bank, per-person limit (not per account), although it's quite high.
Now that my employment status is a lot different than it used to be I have to pay a lot closer to budget items. I'm grateful for season passes and I definitely take advantage of things like my 50% off food and beverage discount at the mountain where I work. Come next weekend when we hit Killington for the remainder of the season we will resume bringing our lunches in a cooler and tailgating in the parking lot. Having a trailside condo at Magic is convenient but it's also bad for my wallet as we can walk/ski down to the black line tavern at Magic a little too often. We are going to adopt the practice of our friends that have a condo there. What Stan and Sue do is they'll have a drink or two in the BLT but they eat all meals at their condo, this helps cut down the bar tab quite a bit. I've also been using this program on my phone called Digit and it pulls money from my accounts and holds them in reserve in increments and balances I've preset. It also offers balance protection and transfers $$ back to my account should I go below the amount I've set.
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