Sunday, March 23, 2014

Update on Mom's Finances

I haven't written much about my mom over the last 5 years or so since my Dad died. To make a long story short, it's been too painful and stressful to even think too much about her finances. She didn't want to take any of my advice on how to manage her money and I knew things would go badly.

Now I know just how badly they've gone.

After my dad died, my mother would have had about $350,000 in various bank accounts-- CDs, mostly. This was what was left of my dad's 401k and a life insurance payment. She also owned her house, with no mortgage.
Now, according to what my mom told me yesterday, she has about $30,000 in a bank account. She still has the house, and no mortgage. Her monthly income from my father's pension and Social Security totals a little under $3,000. She's only 70 years old.

Somehow in 5 years, she managed to blow through over $450k. I'm still reeling at trying to do the math. I know she did various renovations on the house, and some redecorating. She gave away perfectly good furniture and bought new pieces. She hired people to help her move stuff around and do painting and other minor repairs. But it's not like she gut-renovated the whole house. It's hard for me to get my head around how much all that cost, but I would guess maybe $75,000. Maybe $100,000. Her other major expense has been keeping my grandparents in a nursing home. Although they are quite poor, with no assets other than a small house and a coffee can full of small bills that my mother and her 3 siblings already spent, they'd apparently run into roadblocks in qualifying for Medicaid or any other benefits. (They live in Puerto Rico, where the laws are a bit different.) Just recently it looked like they might actually start getting some coverage due to Veteran's benefits, but for several years, my mother and her siblings have been footing the bill on their own. What's worse is that not all the siblings are contributing equally-- the one who actually has the most money has been delinquent in sending checks and arguing all the way over what kind of care my grandparents should get. Meanwhile the other siblings are dealing with disabled children or spouses with cancer and various other dramas, so my mom feels that she has to step in and do more than her share.
On top of all that, one of the siblings asked my mother for a loan of several thousand dollars to help pay for her daughter's baby shower, which is apparently going to be a rather grand affair practically on the scale of a wedding reception. That sibling will hopefully pay my mom back after a court case she's involved in is over, if the lawyers who have been working on it for years don't take all the proceeds of the settlement first.

Is that enough f**'d up drama for you? But wait, there will be more. My mom wants to sell her house and move down to Puerto Rico to my grandparents', where she can live more cheaply and take care of some of their needs herself. She insists that she will be able to live on her current income if she does this. She also insists that my father intended for my sister and me to have an inheritance, therefore she has been talking to a lawyer about how the proceeds of the house should go into some kind of irrevocable trust that my sister and I will manage, because she got it into her head that her biggest priority right now is to qualify for Medicaid when she goes into a nursing home herself. (She does have some health issues, but I don't see her needing a nursing home anytime soon, though I guess you never know.) The proceeds from the house sale could end up being about $500,000 after all the fees and taxes, perhaps a bit more.
I told my mother that the idea of us getting that kind of inheritance was insane in her circumstances, and that all my father ever wanted was for my mother to be taken care of and not stupidly bankrupt herself. She said that my sister and I could give her whatever she needed from the interest from the investment earnings of the trust, which of course we are willing to do, but if the principal is locked up for some period of time, I just know we'll end up having to dip into our own savings for other things my mother needs or wants. That is theoretically fine if we get paid back from the trust principal at some later time, but I'm not even sure my sister has savings to dip into in the meantime, and she has two kids to put through college in a few years. And even if we're just managing Mom's money to keep her from making bad decisions, that means we're going to end up butting heads whenever she wants to do something we disagree with. I don't know what's worse, the idea of my mother uncontrollably burning through half a million dollars and then being really truly broke, or the prospect of years of nasty arguments. Right now she's acting all saintly about it, saying she knows we'll take care of the money and do right by her and that this is really what she wants to do, but I can see her bitterly regretting it later if she thinks her daughters are denying her needs and forcing her to live like a pauper. The idea of her happily living on $35k a year when she's been averaging over $90k a year lately is just one more indication that my mother has no sense of financial reality. Even without the expenses of the house, I just don't see that working. Either way, she has to sell the house as it's just too expensive for her to manage, but she's already talking about all the work she'll have to do on my grandparents' house to make it a comfortable place for her to live-- like replacing the entire line connecting it to the sewer system because apparently you can't flush the least scrap of toilet paper without flooding the bathroom, which is indeed gross, but could be coped with in other less expensive ways, as they do in entire countries in other parts of the world!

So nothing has been acted on just yet, but that's what's up with me lately! Fun times ahead!

Saturday, January 25, 2014

I Forgot How Much Money I Make

Seriously, I can't remember my salary! I was thinking about it just now and I know it is over $100k, but I don't remember how much. At one point it was $102k, but is it now more? $106k? $110k? I have been getting small raises each year, and just got one recently, so I should remember this more precisely, but I just don't. 

This just seems very unlike me. I pay so much attention to money in so many ways, but much less than I used to. I by no means advocate ignoring these things-- I have always said that paying close attention to your finances is the best way to keep them in control. But on the flip side, it can be a bad idea to micromanage them. Investments are often best left alone to sit and grow rather than fiddling around with too much trading. I check my Etrade account a lot less than I used to, which actually made it  quite gratifying recently to see that one of the stocks I bought a couple of years ago has doubled in share price. (At least it had before this past Friday's slump.) And sometimes it's good to avoid seeing a big downturn in investment performance, so you can avoid that temptation to panic-sell at a low. 

Anyway, I am really quite curious now to see what my current salary is, so I am going to stop writing for a moment and go check...

... OK, I'm back. $112,717 is my current salary. That is higher than I thought, so good news. But now I think I will try to forget again and try to behave as if I made less!

Monday, January 13, 2014

Happy New Year!

My, it's been a while, but I have been a busy girl and have lots to tell. I haven't wrapped up all my final numbers yet but I will give you a spoiler: my net worth is now over $900,000. I am wondering if I dare make my 2014 year-end goal the big One Million! Yikes. 

My income and spending haven't changed too drastically, or at least I don't think so. I was thinking about guessing which categories would be up or down, and predicted that my lunch spending would be up, just because I FEEL like I have been spending more on lunch... But a quick peek at Quicken told me I was wrong. So who knows what other surprises I will find. 

I need to spend more time analyzing those numbers, as there has been one major income/expense change that I have to account for-- I sold my apartment!

Yep, my tenants moved out and after doing a little research on the state of the real estate market, I decided to test the waters. The waters turned out to be steaming hot: I had multiple offers within days and ended up with a very quick sale  to an all-cash buyer for a little more than my asking price. Though of course there were a few more wrinkles to the story that made it somewhat more complicated! I will share the drama soon. 

The sale leaves me with some interesting decisions to make in the coming year-- how will I invest this cash? Sweetie may factor into this, in terms of some sort of joint property ownership. Oh, and Sweetie's unemployed now, just to toss in another financial bombshell. 

So stay tuned (those of you who are patient and loyal enough to still be tuned!) to see what 2014 will bring. 

Thursday, November 14, 2013

Poverty Among Young Adults

Interesting article on the Atlantic's website. Has Being a Young Adult Always Been a Financial Nightmare? Scary charts! The one below kind of made me glad I'm getting old! I shudder to think what the addition of a 2000-2010 date range would look like.

"Young people have never had it easy, but they (probably) have had it better. By the turn of the century, 20- and 30-somethings were much far likely to experience a stint in poverty than they had been in the 1970s. Rank's newest research implies it's become even more common today. 

That said, I think we should be cautious about simple comparisons across time. The truth is, poverty in 2000 was not quite like poverty in 1973. Consumer goods that make life more bearable (think air conditions and decent televisions) have become cheaper and more commonplace over time. We have cell phones and Internet. And some changes in the safety net, though certainly not all of them, have made life near or right above the poverty line a bit less harsh. You don't necessarily have agree that the poor are far better off today than at the start of the Reagan era, as some conservatives will argue. But their standard of living has improved in ways that make it hard to say definitively whether Gen Xers or boomers really had a rougher time when they were young.... "
It is hard to compare. I was in my 20s in the 1990s, and in my first few years of work, my net worth was negative by several thousand dollars due to student loan debt, and my earnings went from $5.75 an hour, to $19,000 a year, to $30,000 a year, to somewhere around $50,000 by the end of the decade. I was lucky enough to be able to live with my parents for a couple of years, and of course their help left me with a much lower debt burden than I might otherwise have had if I'd had to pay for all of my education myself. When I look back at that time, I remember feeling the stress in those early years when I had my first apartment and struggled to pay all my bills while doing at least a little bit of the fun stuff a young adult wants to do.

My career advanced quickly enough to help me get past that stressful time fairly quickly, but the other thing that made the biggest difference was that I didn't procrastinate about saving. I was always aware that I needed to start saving money, and from my first job, I started contributing to a 401k. It might have only been 5% or 10% or 15% of my income at first, but pretty early on, I pushed that contribution as high as I could, knowing that it would be less painful if I learned to live without that money from the get-go. And somehow, as I saw that retirement account balance growing, it made me feel more inspired to save money. For some people, having savings might make them feel like it's ok to spend all the other money they've got coming in. But for me, I saw that having money makes more money, so I kept thinking about ways to cut expenses and debt. I paid off my student loans, and had become a homeowner rather than a renter by my late 20s. Seeing myself succeed in saving money made me feel great-- and when you know you're doing well at something, you want to do it more. It's a snowball effect.

For so many people, it's just the opposite. They start out with debt. They can't get ahead and fall deeper into debt. They live paycheck to paycheck, unable to invest in things that will pay off long term. Thinking about the situation is too depressing, so they put it off til another day. All that lost time is lost interest, lost investment gains, lost appreciation of a home's value. By the time they're 30 or 40, they may be making more money, but without the foundations laid in those early years, they're still in debt, maybe-- or even if they start to get ahead, they realize they'll never save enough money by the age at which they'd want to retire.
And of course none of this takes into account the curveballs life throws at you-- illness, injury, accidents, loss of a job, dependents to care for. I am so lucky to have had none of these to deal with yet, knock on wood. I am always so conscious that my life could easily have gone in a different direction...

Tuesday, October 01, 2013

How to Save Money on Appliance Repair

Last night, I saved Sweetie and me about $200 with a fairly minimal amount of effort. Sweetie has a fancy fridge-- not a super-expensive SubZero or anything like that, but a not-cheap fridge with a few extra bells and whistles. So it's been very annoying that it has "broken" a few times over the years, and Sweetie has had to call an appliance repair guy at a cost of about a couple hundred dollars each time.
The last time he visited, the doorman who let him in said the guy had spent a lot of time defrosting the freezer with a hair dryer. So this time, when the fridge started losing its cool, I looked up that model online and found various websites with people discussing the problem. It seemed very likely that the auto defrosting wasn't working and that a build-up of ice was the culprit. With an old-fashioned cheapo fridge like I used to have, this is an easy problem to spot-- you look in the freezer and you see a hardened snowbank where the coils would be. You then attack it with a hairdryer and an icepick until it melts. But with these new-fangled fridges, all that stuff is hidden away, so you have to figure out how to open up whatever's covering them. This is where diagrams and manuals on the internet really help! Within a few minutes, we had figured out how to remove a back panel in Sweetie's fridge to reveal the iced-up coils in all their glory and started blasting them with a hairdryer. A few hours after that, the freezer was nice and cold again, all cleaned out and ready for us to buy new ice cream to replace the ones that leaked out all over everything.
This is just one example. I've fixed washing machines, lighting, toilets, faucets, clogged drains and more and saved hundreds of dollars in the process. And probably bragged about it in many other posts on this blog, because I'm always so psyched when it works!

So here's my simple tips:

  • Watch and learn! If you have a home repair that you don't know how to tackle, and you do call a repairman/plumber, etc., pay attention to what they do when they get there. I've learned so much by watching what they do-- some problems tend to repeat themselves, and it's great to know that next time, I can just emulate something simple that I saw a professional do. I also grew up with people in my family who liked to do their own repairs. I took an interest in such things at an early age, and learned a lot of tips I still remember. If you have kids, teach them these skills-- it's not just a money-saving lesson, it teaches responsibility and self-reliance. Not to mention that it can be helpful to have an extra set of smaller, more agile hands, and it can be a fun bonding experience.
  • Use the internet! It's amazing how many questions you can answer with a simple online search. "Why isn't my freezer cold?" "How can I stop my toilet from running?" "How do I rewire a lamp?" These and so many more questions are discussed at length in online forums. If you know the brand of model number of your appliance, add that to your query and you may be able to find specific diagrams and videos showing you exactly what to do. Not everyone who contributes to these discussions is always right, so check a couple of sources rather than just relying on the first answer you see.
  • Be careful! If you really aren't sure what you are doing, proceed with caution. You don't want to flood your house or get electrocuted. Turn off the appliance, unplug it, turn off the circuit breaker, make sure you are prepared with the tools you'll need like pliers, or a bucket and some towels. Have a friend there to help in case anything goes wrong. Go slowly, and take notes if necessary to remember how to put things back the way you found them.

For so many minor household repairs, significant expense can be avoided with just a little common sense and a willingness to figure things out. And aside from the financial benefits, there's such a feeling of satisfaction when you can say "I fixed it myself!"

Wednesday, September 11, 2013

Polly the Normal 22 Year-Old Buys an Apartment

Here's an interesting internet brouhaha:

A 22 year old woman named Polly Mosendz writes an article for the NY Observer about how she bought a $250,000 studio apartment of her own at the age of 22, without being an"heiress or start-up sell-out".
Here's that article:
Polly Go-Lightly: Buying a New York City Apartment at the Tender Age of 22

In the comments on the article, a flame war ensues over Polly's claim that she is "normal," given that she had $50,000 available to her for the downpayment on her apartment. This turns into a big discussion of class privilege and how much of the $50k could have been money she worked for vs. being given, whether her not having student loan debt at age 22 means she's a spoiled little rich girl, and whether her whole story is even true, give that public records seem to show that she paid the asking price of $345,000 for her apartment and another person, presumably a family member, is listed as a co-owner.

The story about the story gets picked up by the Huffington Post, Gawker and Jezebel, where haters are hated for hating and general free-flowing anger and defensiveness ensues.

Here are some of my thoughts on the matter:
1) I'm glad all those haters haven't discovered my blog, as I'd probably be ripped to shreds for being an oblivious kleptocrat princess myself. I have always tried to be very aware about where I fit into the scheme of things-- locally, nationally and globally-- and appreciate and acknowledge the luck I've had in life. It is sad, I think, that the framework of the whole debate about what constitutes "class privilege" has shifted. In a tough economy, it seems even more difficult and extraordinary that a child's college costs could be picked up by parents without the child incurring huge debts and having to work all through school. On the other hand, we now have kids who are so spoiled that people who compare themselves to them feel deprived if they don't have a car, an apartment, thousands of dollars in spending money per month, multiple vacations per year, pets, the latest cellphones and laptops, designer clothes, spa visits, etc. etc. And that's all before they even leave grade school.
So I have some sympathy for both Polly and the people who have criticized her seeming lack of sensitivity. It's hard to strike the right balance and be encouraging about diligence and frugality without coming across as a self-congratulatory twerp because you also had a little help along the way.

2) But if she has indeed lied about the price and ownership of her apartment, that is sleazy. The article does a good job of pointing out the difficulties of being a young first time home buyer and some specific stumbling blocks she faced at various steps in the process. In exposing her finances, she is doing what I've tried to do here for years, but she's doing it under her own name, which is risky. I personally have never felt I could really be truthful on this site without being anonymous, but if she felt she couldn't be truly honest about the price she paid, she should have been more vague about everything and spoken in general ranges, and just been upfront about the fact that she needed a co-signer on the mortgage, even if she was paying all the actual costs. Why devalue all the other good points she has to make by introducing factual errors?

3) Wow, people are angry. I know Gawker and Jezebel aren't exactly known for the gentle and well-reasoned discourse in the comments section, but a lot of people were really ripping into Polly's story and blowing it way out of proportion. Suddenly all these people think she is a super-wealthy brat who exemplifies everything that is wrong with the world. But I do think there are some things to admire in her article. Even if Polly did get parental help, it sounds like she has been a good steward for that money. In the Huffington Post follow-up post, she highlights that she worked from the age of 14 and was able to get merit scholarships to cover some of her education costs. She stresses that she prioritized saving money, and wanting to invest in home ownership instead of throwing away money on rent. She says her income is under $80,000-- I'm not sure how far under. So she's not exactly the poster child for evil idle one-percenters. I think her heart is in the right place even if she wasn't able to present her story with acknowledgement of all its nuances.

4) Banks can't be bothered with people who want to borrow "tiny" amounts like $200,000. Her mortgage commitment was delayed for months because the bankers were prioritizing larger loans, supposedly. I guess it makes sense from the bank's perspective... and from a larger economic perspective, maybe it's good that the lenders are busy these days?? Or have they laid off lots of people and not re-hired since the boom?

5) Only in New York. I don't think there's anyplace else where a controversy like this would unfold in quite the same way!

Wednesday, August 28, 2013

Inheritance Drama

I was just blown away by a story a friend of mine told me. Her aunt died of cancer a few months ago. The memorial service held a little while later was an interesting event that brought together a diverse group of family and friends, many of whom had never met each other before. The aunt, who I'll call Donna, was an odd character, perhaps a bit bipolar, so she went through phases where she was moody and didn't keep in touch with people, and those who cared about her were often forced to do all the reaching out themselves if they wanted o keep in touch with her. 

The cast of characters in her life included one sister named Michelle, Donna's step-children, and a good friend named Fred. When Donna's husband died, she was left fairly well-off and didn't have to work for a living, but she didn't know anything about managing her own finances, so Fred, who is an accountant, helped her with all that, and was the executor of her will. Fred had met Donna through his wife, who was a good friend of hers.  
Donna died of cancer, and in the last years of her life, her sister, with whom she hadn't been very close when they were younger, came to stay with her frequently and helped her get through her chemo treatments. Donna's step-children, who had young families of their own, drifted out of touch and didn't even know Donna was sick until it was too late to help much. In Donna's last days, Fred told my friend that he didn't think Donna's step children should be told, and though they came to her bedside immediately when they heard she was dying, he thought they didn't care about her and didn't think they should even be invited to her memorial. But in the end, they did attend, and each read a reminiscence about Donna that was obviously heartfelt and sincere. 
Donna left behind an apartment full of clutter. There were a few heirlooms that by family tradition were supposed to go to her oldest stepson. There was some anxiety that Donna might have sold them, but they were found and passed along to him. Donna's sister Michelle coordinated cleaning out the apartment, giving various personal items to some of Donna's friends (though nothing to my friend her niece, which is sad, as she'd been fond of Donna and more attentive to her during her illness than a lot of other people had been. ) Michelle had to travel back and forth to New York several times to deal with all the mess in the apartment and prepare it for being sold. But by a few months after Donna's death, it was all emptied out and ready. 

And that brings us up to now, when the shocking thing happens: my friend finds out that Donna's will had left her apartment entirely to her friend Fred, not her sister Michelle! She is still trying to find out all the details but it sounds like Michelle got pretty much nothing, and the step-children didn't either. And that apartment is worth at least a couple million dollars. 

The whole thing seems fishy. Did Fred trick Donna into changing her will? Did he try to encourage the alienation from her step-children? Why wouldn't Donna have wanted Michelle to get at least some of that money? I was also surprised that Donna's deceased husband hadn't dealt with his own estate in a way that gave Donna the right to live in the apartment during her lifetime but left it to his own children after her death, since he and Donna had no kids of their own. Who knows what the facts are behind all this, as what I am telling is just second hand hearsay. But it fascinates me nonetheless...