Things I Thought I'd Write About

 I was going through a notebook that I've been keeping for the past couple of years that has a page in it where I jotted notes about things to write blog posts about. Obviously there is a lot I didn't get around to! But here's the list so you'll have at least some cryptic idea about things that struck me as being interesting from a money perspective:

Babbitt (the book)

The Manticore p 21-22 (a rather fascinating book, with some interesting observations about wealth)

p.154 Murder Must Advertise (another book! I don't remember what the money connection was, exactly)

Elizabeth White Faking Normal (I haven't read the book but saw something on TV about her, I think. A 55 year old woman talks about how she hid her financial problems.)

HDFC coops

"Hard Work"

Social Security projections

XX Finance advice (this related to a friend of mine who invested an inheritance with a financial advisor who had been recommended by some other friends. They put the money in a ton of different funds and did a lot of trading, and then the market went down. XX freaked out and ended up pulling out all her money and taking a loss. She then used the money to pay off her mortgage instead. The whole thing was just a series of mistakes in my view. XX couldn't handle the idea of risk and waiting for longer term results. The advisors were not investing her money efficiently, I don't think. I kept telling XX she could just put her money in Vanguard funds and do better but she was more comfortable playing it safe, even though her mortgage interest rate wasn't that high and she didn't have much of a savings cushion left after paying it off.)

Musicians, $600 (a friend of ours performed in a club, a big career step for him. But he had to pay backup musicians. The club was slow in paying his share of the ticket proceeds, the musicians wanted their cash, and he ended up borrowing $600 from Sweetie to close the gap. Sweetie never got the $600 back, though the friend more than made up for it in other ways later. But it just got me thinking about how many musicians seem to live on a thin edge financially. And that was way before the pandemic.)

Fred Bass $25 mil estate (this was the owner of the Strand bookstore in NYC, who amassed quite a bit of wealth. More recently his daughter caught some flak over her appeal for people to buy books from them during the pandemic, which some people took as a wealthy woman crying poverty.)

Wild (again, the book.)

Baby shower (someone I know spent an insane amount on a fancy baby shower party)

Near misses (__layoffs, __ layoffs, could have changed my luck) (I've worked a few places where other people got laid off and I somehow didn't, at a point where my finances weren't really solid enough to handle it. There but for the grace... etc.)

Investment results

Optimism vs pessimism/distrust

Healthcare, mom's $3k meds, medicare (yikes. now I can't even remember what those $3k meds were!)

Gala (a swanky fundraiser I went to, where the ratio of expense to benefit was probably questionable)

Mom's apartment move

Virus!

That's the whole list. At some point I'll elaborate more on some of those later items, perhaps! Or maybe I'll just keep accumulating notes and sketchy comments! 

My Quarterly Blog Update: What's Up with Mom

That seems to be about the frequency I'm posting with lately! I really appreciate the comments from longtime readers and am glad to know you are still checking in! And it is good to hear from you about how you are doing in your own pursuits of financial stability and independence.

T'Pol, thanks for asking after my Mom. She is actually doing quite well. I invested the money in her two trusts (one revocable trust that is all hers, and one irrevocable trust, where she only gets the income but can't touch the principal) in Vanguard funds and they have been doing well enough to generate over $13,000 of income for my mom in 2018. She has been living on what she still gets from my father's pension, and her social security payments. In 2016 and 2017, she asked me for $5000 from the trust income to pay for other expenses. One year, that included my grandmother's funeral. The other year, she was moving to a new apartment. In 2018, she ended up asking me for two $5000 checks, as she had some expensive dental work. I was a little worried at first that she needed that much more-- it came at a point where she was fantasizing about moving to a larger and much more expensive apartment, and I sent her a slightly stern email querying the amount to make sure she wasn't somehow going behind my back to rent the new apartment. This was in December, and I explained to her that things were generally going well with the trusts but that the markets had just plunged and that we should be careful. I had another conversation with her where I reminded her how stressed out she had been when she was drowning in credit card debt, and that we had things under control now.
I worry that my mom doesn't understand the concept of building up a cushion for emergencies. I'm legally required to report to her on the trusts every year, and I've come up with a nice little template where I paste in a lot of charts and numbers from Vanguard showing what the assets are, how they did, and how much is being paid to her. (I do this by transferring the income from the irrevocable trust into the checking account for the revocable trust, which I also control. When my mom needs money, I write a check from the revocable trust made out to her personally.) My mom always just seems to glaze over on the overall details of the investments and just wants to know "How much did we make? How much more do we have than when we started?" Right now, the value of the trust accounts is over $130,000 more than when we started in 2015 (with about $450,000), and I worry that a number like $130,000 just makes my mom think "woo-hoo, we won the lottery!" So I keep reminding her that the funds go up and down, and that the money has to stretch itself out over quite a few more years, and that the more money we have invested, the more income we make, etc etc.
Some of that sinks in, some doesn't. Even though she is basically spending all her income except for a few thousand dollars of the trust income some years, she was on the verge of signing herself up for an apartment that would have cost her about $900 more a month! She said "oh, I'll just cut back on my budget somewhere," but she doesn't have any big areas she can realistically cut.

So overall, I would say things are pretty good, and we haven't had any fights about money, which is the best thing of all. But I'm always wary of what could go wrong! We are lucky to have the resources we do have, and as long as we are careful with them, everything will be fine.

And I do have more stories to tell, and hope to get around to posting again soon!

Catching up on 2016

A few notes as I do my year-end accounting for 2016. 

The first thing I dug into was the trusts I manage for my mom. Their return was about 9% last year and I was about to pay Mom about $8,000 in dividends. I feel pretty good about this, especially after a shaky start in the first few months I was managing her money when the market was down and I was afraid she wouldn’t understand that it wasn’t my fault! I am also a bit less nervous about my mom’s finances since my grandparents both died in 2016 and she does not have to contribute to their nursing home costs anymore, which was a big expense.

My own personal investment accounts are a bit more aggressive and using the way E*Trade calculates returns, I actually beat the S&P 500 in 2016— 11.4% returns in one account, 10.73% in the other, vs. 9.53% for S&P 500.

I earned more money this year as a result of my new job, and decent investment returns. My total income including salary, bonus, investment income and other odds and ends such as employer contributions to 401k was over $214,000, vs about $188,000 for 2015. I also spent more on various things— food, wine, clothes and a few other small pleasures, but also taxes, as those increased when my income went up. But my total spending only went up by about $6,500, so my net savings for the year ended up being almost $85,000, vs about $65k last year.

I am thinking more and more about how to retire early, or at least downshift to a less stressful job. I like making more money, but it has come with a TON of stress and I’m not sure it’s worth it. Maybe I’ll eventually feel more comfortable in this position, but for these first few months, I’ve been struggling and really not feeling confident that it will ever get better. I’d love to quit, but I’m not ready to admit failure, and I keep telling myself that the longer I stick it out, the earlier I can retire! 

My net worth was about $1.17 million at the end of 2016. I’m on the right track for my retirement goals, but not so much so that I can totally relax. I’ve played around with a lot of scenarios in a retirement calculator— the good news is that it does seem like I’d be able to retire at least a few years early, even if I go back to making somewhat less. If I was willing to move to a different part of the US with a lower cost of living and make some big changes to my lifestyle, I could probably retire tomorrow if I felt like it. But I’m not willing to do that just yet, and who knows what the next few years will bring, in terms of my own career, my family, and the political and economic uncertainty in our country.

2016 was a pretty shitty year. It was bad enough that David Bowie, Prince, and Sharon Jones died, not to mention various other iconic celebrities. I lost some dear friends and beloved family members, which of course was more important to me, and I lost a lot of faith in American democracy in seeing Donald Trump elected President. In most other ways, I am happy, pretty healthy, and generally feel incredibly lucky that I have the life I do. When I started this blog, I still thought of myself as “young”— now I’m middle-aged! It’s weird to feel like I’m shifting into a new attitude towards the future, at exactly the point when the future looks bleak in some ways. But I still keep thinking “onward and upward!” Wishing you all, dear loyal readers, the very very best and a happy New Year!

How to Teach Kids to Save When Interest Rates are Low

I was thinking about how I started learning to save money when I was a kid. At some point, my parents opened a savings account in my name, and I had a nice little bank book. No ATMs back then-- you had to bring your bank book to the teller, who would record your transactions in it. When I got money as a gift, or from my first babysitting jobs, some of it went into that savings account. 

I understood how savings accounts worked: you put money in the bank and the bank paid you interest. I was a kid in the late 1970s/ early 1980s when interest rates were high-- as far as I can remember, my savings account earned about 8%, and knowing that I could be paid 8 cents a year for every dollar in my account was actually meaningful to me-- I was earning money just for letting it sit there!

8% savings account interest seems outlandish today, and I wondered if my memory was correct. I think I am right-- the prime rate back then was between 10% and 21.5%! Today it is only 3.25%, where it has been since 2008. The average interest rate on a savings account today is only a fraction of a percentage point.  You might see a teaser rate of 1% or so, touted as if it's the best thing ever, but it will only be for a limited time, and only for opening a new account. 

So how do you get a kid to see the value of saving if you have to tell them that they will only get a fraction of a penny for every dollar they put away? You could try to teach them about investing in the stock market instead, and I do believe there is value in that, but it is a lot more complicated, and involves so much more risk. 

I would love to hear from readers with kids abut how they've handled this with their own families!

More on Being a Trustee

Ok, so we left off with the big package of legal documents arriving for me to sign.
First, there was the irrevocable trust document. This spelled out that my mother was putting $350,000 in this trust and waiving all rights and title to the principal forever. It names me as trustee, and talks about various ways I’m allowed to make decisions about investing the money. It says I have to distribute net income quarterly to my mother, and provide a full accounting of the trust’s transactions annually. There’s also a lot of stuff about how a the trustee can be changed later if necessary, and what happens if I die, etc. It names my sister and me as the beneficiaries and that the principal will be paid to us equally after my mother’s death.
Then there’s the revocable trust. This money still belongs to my mother during her lifetime, but I am the trustee managing it. My sister and I are the beneficiaries after she dies. This trust is just to simplify things and avoid probate when my mother dies. But it’s also a very good thing to have a trustee in control so that my mother can’t just spend all the money without consulting someone else. This may become awkward in the future if my mother wants to spend money and I don’t think she should.
The final documents in the package were my mother’s last will and testament, and a durable power of attorney authorizing me to act as her agent. The will will cover any property of hers that is not held in the name of the revocable trust. If those assets are less than $25,000, then it goes through a “simple probate” process that is easier than for a larger estate. So we’re supposed to keep my mother’s assets under her own name at less than $25,000 but of course she had last minute cold feet about putting the full amount she’d intended into the revocable trust, so she actually has more like $40,000 in her own account— or at least she did when this all happened. Who knows how much of it she’s spent by now! I keep reminding her that the revocable trust funds can be paid out to her any time but she still doesn’t want to transfer her extra cash. I asked a couple of times then decided to let it go for a while as she seemed to be starting to think I was being morbid about it!
The final item in the package was two checks from my mother’s account, one for $350,000 made out to the irrevocable trust (“The [Madame X’s Mom] Irrevocable Trust of 2015”) and one for $100,000 made out to the revocable trust “The [Madame X’s Mom] Trust of 2015.”

The irrevocable trust has its own tax ID number, which the lawyer also sent to me a few days later. Once I had that, I went to the bank to set up checking accounts for each trust. It took about an hour and a half to do all the set-up paperwork at the bank— they had to fax the documents to their legal department to make sure everything was in order, in addition to all the usual account paperwork.  But once that irrevocable trust check was deposited, it started the clock ticking for Medicaid’s 5-year look-back period, in the event that my mother ever needs to apply for it.

After the checks cleared and I’d received new checkbooks in the name of each trust, I opened a Vanguard account for each trust. I picked a variety of mutual funds, including some that have the goal of maximizing dividend income. I did put some of the money in funds that seek growth and have higher levels of risk, but I steered away from the riskiest ones, and also put some money into lower-risk bond funds. I do want to make the principal grow, but I also want to make sure the investments generate some income for my mom. I am a little worried about how the first few months will go— it’s unfortunate that the stock market has taken some plunges exactly after I invested this money, so my returns are somewhat negative so far. I personally am a pretty calm investor— I always try to look at the long term and not panic during down times, but I’m worried about how this will appear to my mom and anyone else whom she might tell. If I say “ok, mom, I took $450,000 of your money and invested it, and all I have to show is a $5,000 loss after 6 months,” she may just think I don’t know what I’m doing, regardless of whether I point out that the entire market is down, and that any other financial advisor would have been likely to have similar results. I am kind of wishing I’d weighted the portfolio even more towards the bond funds vs. the others, given that the stock market was at historic highs when I was putting all this money in. Perhaps that is what a professional advisor would have counseled… but perhaps not, and I have to keep reminding myself, and my mom if necessary, that we’re still ahead by a percentage point or two just by not having to pay someone else’s fees to manage the money.

There will be more to talk about in the coming months, as I figure out whether and when to distribute income to my mother, how to deal with tax issues for the trust, and other questions. I’ll keep you posted!

My Mother's Estate Planning: In Madame X She Trusts!

This past week, I've had to learn a few things about trusts. I'm now officially a trustee!

The whole trust issue first came up after my dad had surgery for brain cancer. We'd managed to get him to a lawyer to quickly draw up a will for the first time on an emergency basis just before his surgery. A couple of months later, he and my mom went back to a lawyer to revise the estate planning, along with my sister, and me on a conference call. The lawyer advised them to put most of their assets in a revocable trust and he drew up some documents to that effect. What I later found out, though, was that they had never actually retitled any of their accounts in the name of the trust, so it was essentially a useless exercise.

For those who don't understand what I mean, here's an version of an explanation I found online somewhere that helped me explain it. Think of a trust as an empty box. Your lawyer draws up documents that create that box. But then you have to put things in the box-- by transferring the deed to your house, or by changing the name on your bank accounts, or opening new bank accounts in the name of the trust and transferring money into those accounts.

After my dad died, my mother went back to the lawyer, and I think they set up another trust, this time just in her name. And again, no assets were ever put in the trust! I was kind of hands-off about my mother's dwindling finances at that point, as I just found it too upsetting.

So the latest trip back to the lawyer was after my mother sold her house. She had proceeds from the sale of a little over $500,000, from which some capital gains would be due, since they'd originally bought it for something like $25,000. (This calculation of capital gains exemptions on real estate would be an interesting thing to delve into in another post someday!)

At this point, that money is all my mother has. She has spent all the other money that my father left. But she had gotten it into her head that my father intended for my sister and me to inherit the house, or at least some of the money from its sale. I personally never heard him say anything of the kind-- he always seemed quite aware that he'd barely be able to stay afloat while living in that house, yet he didn't want to move, and somehow I don't think he ever really thought of us as a family where inheritances would be a very relevant issue! And knowing my mother's financial habits, I certainly didn't expect there would ever be much left to inherit once she was gone.

My sister, however, seemed to think an inheritance would be a rather nice thing to have, and I can't really blame her. She thought our dad would have liked to leave something to his grandchildren. And more pressingly, she and her husband always seem to have a little more debt than they'd like. I know they paid off some credit card debt when they refinanced their house. But somehow they still have two mortgages. And then they bought a boat! They want their kids to have a really fun family life that would be very different from how my sister and I grew up, under a cloud of worry that we couldn't afford to do anything. Unfortunately, she and her husband sometimes seem to be under a cloud of worry about debt! My sister does some occasional part-time work but is has mostly been a stay at home mom for years, so they're living on one income.

So my mom decides she wants to give us about $350,000 out of the house proceeds, to be split evenly. Her lawyer said the best way to do that was to put it in an irrevocable trust so she'd have the income from it while she's alive and the principal would go to us after her death. This idea worried me, because if my mother needed to go into a nursing home, there would be a 5-year lookback period before she could qualify for medicare, and my sister and I would have to come up with whatever her income didn't cover. I personally could afford to do that if I had to, especially if I knew I'd be reimbursed for $175,000 of expenses after my mother died. But my sister would not be able to afford it.

So I thought my mom should just keep her money to pay for her own needs, although I did worry that she would just spend it all on ridiculous things-- she seems to be one of these people who see money as a hot potato to be gotten rid of when you have it! If my mom frittered away all her cash, then I'd be stuck paying for her nursing home anyway. It's not that I don't want to care for my mother, but it makes me incredibly angry that I shouldn't have to-- if my mom and dad had both made wiser financial decisions years ago, they could have lived very comfortably and taken care of all their needs without endangering my own ability to fund my retirement. If I end up being broke when I'm older, it will be my niece and nephew feeling guilty and burdened about taking care of me, and I don't want to lay that on them.

My sister's idea for protecting my mom's money was that she should just give it to us as a gift, with the understanding that it would be there for her if she needed it. I was willing to go with that except that I thought it would look really dodgy, as if we were taking advantage of our mother. And again, I could afford to just invest that money and not use it. My sister was thinking she'd use it to pay off their second mortgage, "to help them get on a more stable footing," and that if my mother needed her money, they'd just take out a home equity loan to give it back to her. I value my relationship with my sister-- I don't want to be judgmental with her, knowing that kids are a big expense I don't have, but I thought that whole plan was a REALLY BAD IDEA!

Here's the plan that we ended up with: the lawyer drafted an irrevocable trust with a provision that the principal could be used in the case of a dire medical emergency. $350,000 went into that trust. For the rest of my mother's cash, he set up a revocable trust, and a will to cover whatever isn't in that trust. She's supposed to keep her non-trust assets below $25,000 so it's covered by simple probate, and avoids some of the usual probate process. (Or something like that, I may not be getting the terminology right here.)

The thing with trusts is that you have to have a trustee. That person or institution his responsible for carrying out the terms of the trust and has the fiduciary duty to manage the assets appropriately. My mother's first lawyer insisted that this duty had to be carried out by a financial institution and brought someone in from a local bank to offer her services. I did not like this idea. I did not see why we should have a bank investing our money when it seemed perfectly reasonable to just do it myself with some low cost mutual funds. I did some research online and became even more convinced that the fees a trust company would charge didn't make sense for the amount of money we'd be investing. I also felt that money should be invested in a relatively conservative way to preserve capital, so we'd be trading potentially lower returns in a good year for lesser losses in a bad year-- this meant losing 1-2% in fees really didn't make sense. My mom's first lawyer retired and another partner took over. Maybe he was less old-fashioned about whether a girl could capably handle such things, but he agreed that I could handle being the trustee myself. So a big packet of legal documents arrived for me to sign: the irrevocable trust with my mom as the grantor, me as the trustee and my sister and me as benfeciaries; the revocable trust with my mom as grantor and me as trustee and my sister and me as beneficiaries; and a power of attorney allowing me to act on my mother's behalf.

This is getting to be a long post so I'll follow up soon with a part 2 detailing what else I've learned about my new duties as a trustee... stay tuned!

Her income monthly from Social Security and my father's pension is about $3000.

Homeless

When I was waiting to close on my newly-constructed condo, I jokingly called myself "homeless" for a few months because I had to stay with relatives and sublet apartments after moving out of my own rental apartment. My property was mostly in storage and I was living out of a couple of suitcases and garbage bags full of linens. "Home" for me has for many years been defined as my own apartment in NYC, where I live. But sometimes I catch myself referring to "home" in the sense of the home where I grew up. My hometown.
The older I got, the less I'd say that. My parents bought the house I grew up in when I was 9 months old. I had the same bedroom all to myself for my entire childhood. And in the many years since, when I'd come home to visit, I would almost always stay in that room. The few times when I didn't, when for some reason I slept in my parents' room, or my sister's room, always seemed a bit strange. Even when my mother renovated and redecorated and got rid of so much stuff after my dad died, that house was still "home" in some way, though the removal of so many of the books and personal items and furnishings that I'd grown up with made it seem weirdly sterile and anonymous.
But now the house has been sold, and all that is left of it is about $500,000 in my mother's bank account. I last visited about 6 weeks before she closed, and found myself wandering around the house, taking photos of odd things like certain doorknobs and some child-height coat pegs that my father had made for the back hall when we were kids. I felt less sentimental about it than I would have expected, though. The house had become a source of stress, mainly because of my mother's compulsion to overspend on it, resulting in a complete drain of the savings my father had left when he died. (To be fair, that's not the only thing my mother spent money on, as she was also putting a lot towards my grandmother's nursing home care.)
At the end, my mother felt like the house was dragging her down too. She knew she couldn't keep up with the expenses of maintaining it, let alone doing any more improvements. It played out exactly as I had told her it would, that if she spent a lot on renovations, she would have to sell the house within a few years because she'd be broke, and the cost of the renovations would not be recouped in her selling price. She could have done a few minor cosmetic things and a much less elaborate bathroom renovation and still ended up with the exact same selling price.
Anyway, it's good that the house is sold and she got a decent price for it. Now the stressful conversations between my mother and sister and me are all about what do do with the money. My mother has this idea in her head that my father wanted my sister and me to have an inheritance. She also "doesn't want Medicaid to take the money" if she goes into a nursing home. She's not that old, and her health is relatively OK. My sister and I are just worried that cash seems to slip through her fingers like water. I think what we'll end up doing is that my mom will give us some money, and we'll each save it to use on her behalf later if necessary, though my sister is also tempted to use the money to pay off a second mortgage. I think I've also talked my mother into letting me set up an investment account for her so that whatever money she keeps will earn her more than the miniscule interest of a savings account or CD. Psychologically, this may also help in terms of her thinking she can't really spend it-- we'll see! I'm thinking of a Vanguard account with a conservative blend of funds.

I felt bad that my work schedule didn't allow me to go back to the house one more time and help with the last of my mother's packing and moving. Maybe it would have cemented the reality of the situation a bit more-- as it is, I keep wondering if the next time I go up there to visit, I'll automatically drive to my mother's old house without thinking, rather than my sister's. The other thing I'll really miss is being able to walk to a beach about half a mile away. It was always a quiet refuge, a good place to escape from family stress. But as much as I feel sad about not having that family home, I feel worse for my mother, who truly is homeless now, and feels a lot of insecurity about where she'll end up. She'll stay with my sister a bit, and then go to live in my grandmother's house-- another money pit that we are hoping doesn't turn into her next renovation project! After my grandmother dies, she'll have to figure out where to go next. Another topic for another post, another day...

Mom is Selling Her House!

Fingers crossed that this works out, but as I write this, my mom has accepted an offer for her house. This is exciting and sad and scary. If all goes well, it will keep her from wasting all her income on maintaining a single family house. She spent thousands of dollars this past winter just on snow removal! But it does worry me a little about turning her biggest asset into cash, as cash has a way of slipping through my mother's fingers very quickly. At one point she talked about putting a lot of the proceeds in trust for me and my sister, but I am not sure if she still plans to do that. If she doesn't, I do worry that she'll start blowing a lot of cash on moving expenses, storage expenses, buying new stuff, decorating whatever new place she moves into, etc.
And it's sad to think that my childhood home won't be part of our family life anymore. It's the only home I ever knew, as I was only 9 months old when my parents bought the house. My father once said he had figured it would be a starter home, and that they'd someday move to a bigger house, but the day when he felt he could afford it never arrived.
But in some ways, the house I fondly remember is already gone. Since my father died, my mother has thrown out so many things and changed so much about the house. To me, it has barely a trace of personality or identity to it any more. It smells like floor polish, paint fumes and scented candles now, not like oriental rugs and books. It will be strange not to have a home base in my old town, though. I've always loved going back during the summer, when I could walk a half mile down to a beach where I could take an icy-cold swim, or just walk and sit and think. My mother might move back there someday, but in the near future, she'll move to my grandmother's house so she can help take care of her, and after that, she may end up wanting to live closer to my sister. My sister's house will be where I go when I say I'm going "home" to visit my family. I guess that's how it goes, this shifting over the years as you become less centered on your parents and more centered on the next generation. My niece and nephew are now their own little people, with such distinctive personalities. It hit me the other day that I only have a few more years before they vanish into the black hole of teenagerdom. I have to spend as much time as possible with them now while they are still kids, and then wait a while until they emerge into adulthood-- perhaps that is a bleak view, but I'm trying to prepare myself for a few years where they'll be uncommunicative and think I'm a big nerd rather than their fun, wacky aunt!
Here's the funny thing-- my mother copied both of the kids on her email to my sister and me about her house sale! I asked her why, especially as she was telling us not to tell anyone until the deal was done, and I thought the kids would be the most likely to blab. It turns out they watch some of those real estate TV shows, so they've been quite interested in my mother's whole process, and she trusts them not to tell.
Let's hope there is more news to tell soon!

Telling Children About How Much Money You Make

Great article in the New York Times: Why You Should Tell Your Children How Much You Make, by Ron Lieber.

" When Scott Parker wanted his six offspring to know more about the value of money, he decided to do something that many parents would consider radical: show them exactly what he earned. One day, he stopped by his local Wells Fargo branch in Encinitas, Calif., and asked to withdraw his entire monthly salary in cash. In singles. It took 24 hours for the tellers to round up that many bills, so he returned the next day and took away the $100 stacks in a canvas bag. His oldest son, Daniel, who was 15 at the time, remembers the moment his father walked into the house and dumped the $10,000 or so on a table. “It looked like he had robbed a bank,” he said. After a pause to let it all sink in, Mr. Parker began peeling off bills. He told them about taxes, set aside money for a tithe to their church and made a big pile for the house payment. The singles piled up for soccer and scouting and hamburger night. By the end, there wasn’t much left over. “I was trying to make as big of an impact as I could, and I definitely had their attention,” he said recently."

That might not be the exact method most people would use to get the message across, but I"m sure it was effective!

I've written a lot on this site about how my parents took pretty much the opposite approach-- my father earned the money and controlled how it was spent. He was very secretive about it-- money wasn't something that was to be discussed in specific terms about how much anyone had or made. All he ever said was that we couldn't afford this or that and that my mother should spend less on things like decorating and clothes. And yet, when the time came to spend money on things HE valued, like education and music, there was money to be spent. So while I generally knew that we were neither rich nor poor, but some in-between thing known sometimes as "middle-class" and sometimes as "very fortunate," there was a lot of doubt about finances. My mother's reaction to that was to think my father was a stingy hoarder who must surely have lots of money that he just didn't want to spend. 

Honesty and openness is a much better policy, though in my case, it came too little and too late, and ultimately even when I thought my mother had a full understanding of the finances, she still made poor choices. One might say that her own childhood influenced her-- did her parents tell her how much money they made and had? Probably not, but if they had, they would have told her that they made very little, and had little or no savings for most of her life. That will teach a child a very different lesson than if their parents have the more middle-class and up finances of the people profiled in Lieber's article.
 The article is excerpted from his new book, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. I don't have kids of my own, but I know some parents who could probably use this book!

 

Great Aunt Minnie Keeps on Giving

At a family party recently, one of my aunts took me aside to say she had something very important to give to my sister and me. This was the aunt for was the executor of Great Aunt Minnie's estate. And sure enough, there turned out to be some additional inheritance funds coming to us! My aunt had finally rolled all the coins that Minnie had kept in a jar, and after taking them to the bank, there must have been about $30. My aunt handed me a little envelope with my sister's and my name on it, and inside there were two silver dollars (the old ones with JFK in them) and 3 dollar bills. My sister and I each kept 1 coin, and I let her have 2 of the dollar bills, since neither of us had change... And, well, she's got a family to support and all...

I have the envelope in my underwear drawer at the moment-- not that there's any particular reason to keep it there, but it happened to be where Sweetie put it to get it out of the way one day. It makes me smile when I see it every morning, thinking about my wonderful great aunt, who would have turned 100 just a few days ago...

More on my inheritance from Great Aunt Minnie in his post:

http://www.myopenwallet.net/2010/08/i.html?m=1

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!

Overheard in a Restaurant

If you want to keep your money conversations private, don't sit next to me! Though in this case, the person was sitting two tables away and talking loudly enough for half the restaurant to hear.

Scene: a Brooklyn eatery on a Saturday night
Characters: a young woman telling a story to 3 of her friends

Here's more or less what she said:

My mother grew up as one of 6 kids and she actually shared a bed, yeah, one bed, with her two sisters until she was like 15... she went away to college but she dropped out... she came back to New York and got a job on Wall Street and did really well... but her mother, my grandmother, always kept complaining about the money they'd spent on sending her to college and what a waste it was since she dropped out. I mean, she just couldn't let it go and literally every time they saw her she'd say all this stuff over and over again, so finally my dad got so sick of it that he just told her to calculate how much money it was, for tuition, travel, everything, and tell him how much it came to and he'd write her a check for that amount if she'd promise to shut up about it and never mention it again... my father had a very healthy attitude about money...

Once I'd heard the end of that story I didn't pay much more attention to her for awhile, until just before I was leaving the restaurant, when I heard her voice rise again with this interesting remark:

Let's just buy $400 worth of scratch-off tickets and see what happens!

I'd love to fill in the blanks in that conversation!

Happy Holidays!

My goodness, it's been a busy month. So much for my good intentions of posting at least once a week! I can't say I've had any exciting financial news to report. Here's some off-the-cuff items!

At Thanksgiving, I got one final check for a couple hundred dollars that was the final settlement of my great-aunt's estate.

I've been finding that my cash balance in Pocket Money /Quicken is often way off, by several dollars or more. I'm still pretty good about tracking every penny of my spending so this is starting to make me paranoid. Is there a bug in the program? Is someone stealing money out of my wallet? It's weird.

My year end net worth goal of $600k just isn't going to happen. I'm still saving a good portion of my earnings, but the stock market has been so up and down this year.

I've done all my holiday gift shopping and probably have spent a bit less than usual, though I haven't totaled everything up just yet. I gave small gifts to a few people in the office. I bought my niece and nephew each a sweater, two books, and some wacky wax stuff you can make little sculptures with. My sister and I will give our mom an iPhone for Xmas. I'm not giving my extended family any gifts as I won't see them this year. Sweetie and I are taking a little trip over the holidays that is basically our present to each other. Though of course there have also been veiled mentions of "a few other little things" that have my all anxious about how little those other things are compared to the other little things I bought! But I guess holiday gifts are no fun if you take ALL the surprise element out of it!

Best wishes to all of you and your families for a happy, healthy New Year!

Yard Sale Economics

Have you ever had a yard sale? I've been to many, but never actually ran one myself until just recently, when my sister and I helped my mother sell some stuff.
First of all, you get a lot of interesting people showing up, who I'd group roughly as follows:
--low income people buying household items and clothing
--frugal people looking for bargains
--hoarders who just can't walk away without taking "good stuff"
--dealers who want to re-sell items
--collectors who are looking for very specific items
--curious neighbors who always wondered what was in your house

Most of these people will want to haggle. They know that whoever's having the yardsale just wants to get rid of stuff. My sister and I didn't have time to tag everything with prices before all the early birds started showing up, so we found ourselves often just quoting totally random prices that were quite low. Sometimes I wondered if we should have started higher to give ourselves more room to negotiate, but on the other hand, I didn't want anyone to walk away from something they might otherwise have bought-- and I wanted them to buy lots of items!

I took charge of selling my father's old CDs, DVDs and books. Most of the CDs were swept up by a guy who showed up at about 7:30am, with a car already full of stuff from other yardsales. He asked if I'd take $75 for "all the CDs". We'd started off quoting $1 per CD, and I knew there must be a couple hundred CDs at least, so I said I wanted $100 considering he was getting that many, and he agreed. But then I realized I'd undersold myself when we started packing up box after box of CDs for him-- my dad was passionate about music, and he'd collected more like six hundred CDs, at least, and we hadn't even set them all out on the lawn yet! While the guy was looking at other stuff, I started telling our friends who were still bringing CDs out of the house to stop, which made me feel a little sleazy... In the end, the guy ran out of space in his car so he didn't really get "all" the CDs, but he knew he'd gotten a great deal-- I'm sure he's reselling them online somewhere for at least $5 a pop now! I was hoping some other collector or dealer would snap up the rest, but we still had a lot left over at the end of the day.

The hoarder types were funny -- several of them bought bags of random stuff that we never thought anyone would want. My sister had put out a plastic bin of weird junk that seemed so lacking in value that she just labeled it "free." A guy grabbed the whole bin and took it away, and gave us a dollar for it just to be nice!

There were times when it was hard to let things go. Ever since my dad's death, I've struggled with this-- I became a booklover from hours spent as a kid looking at all his bookshelves, and there were other odds and ends that had some sentimental value even though I knew I had no use for them and no place to put them. My sister and I both felt some anguish at moments when people seemed dismissive of the value of things that meant something to us... but there was also one guy who made me really happy. From appearances, at least, he would not have been someone who I would think would have anything in common with my dad, but he kept finding stuff he wanted. He'd buy a few things, then come back for more. You could tell he didn't really "need" any of these books and DVDs, or the old shortwave radio or the tools, but he obviously shared my father's sensibilities in some way, and he kept saying that we had some great stuff. I almost wanted to give it all to him for free, just knowing he appreciated it.

In the end, we cleared about $600, and made a lot of room in my mother's basement and garage. It's sad to think how much my parents paid for the stuff that was sold, as I'm sure it was more than ten times what we got for it, but it's more sad just to say goodbye to some of those things, and it will be harder still when I have a dealer come and buy most of the rest of my dad's books. I just have to keep remembering that it's not about the money, and not about the stuff-- it's about the memories, which will stay with me much longer.

A Household Ledger from 1936

I loved this little article I stumbled across, about a family who found their grandfather's old ledger:

Our family discovered buried treasure recently: a household ledger kept by my husband's grandfather in the 1930s and '40s.

Randy's mom found it while sifting through papers, a 100-page Standard Blank Book yellowed with age. The first line reads "January 1936." Just below that: "cash on hand, $8.21."

What caught my eye first was the handwriting — loopy, uniform, beautiful cursive. John Henry was an elementary school principal and his wife a teacher in Great Bend long before computer keyboards. Their everyday penmanship was wedding-envelope quality, unmatched.

It draws the eye and piques the interest, so I read on:

Rent, $12.50.

One gallon of milk, 20 cents.

Newspaper, 10 cents.

Lights and water bill, $2.35.

Flowers for Mr. Doran's funeral, 15 cents.

"To the Lord's work," $5.

As with most household budgets, the income lines are fewer and farther between, but similarly telling:

Salary for January, $95.

Sold Mrs. Copeland a chicken, 60 cents.

Two dozen eggs, 30 cents.

Helped Bill unload shingles, $1.50....

Reminds me of the notes of my Dad's that I found after he died...

Good News: Raise, Promotion, Inheritance

A little happy news! I was promoted and got a raise of a little over 6 percent. The percentage seems a bit small for a promotion, but I wasn't going to quibble over it, especially as I've yet to be asked to do anything more in exchange for my more exalted title!
It's funny, I've often felt conflicted about my career ambitions-- on one level, I do want to make more money, do fulfilling work, and feel that my efforts are publicly acknowledged by a prestigious title. But another part of me worries about hitting what I think of as "the responsibility wall." In part, this is an anxiety about exceeding my level of competence, and failing after years of succeeding. But it's also about not wanting to work too hard! I have a life outside my job, and I want to have time for activities I enjoy and not feel like work consumes all my energy. It's an issue I'll continue to mull over, but for the moment, I guess I have the best of all worlds!

It actually feels like a bit of a milestone-- I've reached a level in my career that I wasn't sure I'd ever attain. And although my total compensation including bonus has been over $100k for a few years now, this is the first time my actual salary will rise above $100k-- I'm not sure why this means anything to me, but it does!

One sad thing about my promotion is that I can't help wishing it had happened before Great-aunt Minnie died. She was the first person I would have wanted to tell, because I know how proud of me she would have been. Quite coincidentally, I also just got word via my sister that it looks like my share of the inheritance may be around $15,000, which means Minnie's total estate must have been over $180,000, even though she never owned a home. I'm even more impressed that Minnie managed to have so much money saved at the end of her life, and I feel very lucky to benefit from her wisdom and generosity in this unexpected way.

I'm an Heiress

Remember Great Aunt Minnie? She died peacefully a few weeks ago. I had a chance to see her one last time in May, and spoke to her on the phone a few days before her death. I couldn't go to her memorial service, so it still seems almost surreal that she's gone, after her being such a constant, steady figure in my family's life all these years.

So it was even more weird to find a thick envelope in my mail the other night, which turned out to be from Minnie's lawyer, because I'll inherit a share of her estate.

Minnie had no children-- she left everything to my father and his 5 sisters, to be divided equally. Since my father died before her, his share now goes to my sister and me. At first, I thought this was weird-- my father's estate was all in some kind of trust going to my mother, and I thought as his surviving spouse she'd be entitled to a share in whatever Minnie had left. This gave me an icky feeling when I saw that her name wasn't included on the papers-- it's not that I want my mother to have more money to burn in irresponsible things, but I didn't want to think she was somehow being shut out. On the other hand, I didn't want to rock the boat, so I asked my sister about it, and she reassured me that my mother was well aware that the will specified that the kids of any of the siblings who were deceased were to be the heirs, not the spouses. (Perhaps because of my family's many divorces and other relationship issues!)

So now I just have to see what happens once the estate is settled and divided up. It's very odd-- I've never been named in a will before. I mean, I was named in my Dad's, but because I was so involved in his estate planning, and it was all about my mom being provided for, I never thought of it as anything actually being left to me. And although Minnie didn't single out me or anyone in my generation, and I'm only getting anything because my dad is dead, which was certainly not a happy matter-- despite all this, I feel weirdly pleased that Minnie is passing something on to me, because I think she would be happy to give it.
After her death, one of my aunts emailed to say that all Minnie's stuff had to be out of the assisted living apartment by the end of the month, and that I should come and claim any items I might want. All I could think to ask for was a book I'd given her about a year ago that I know she had really enjoyed. Other than that, I have other mementos of her-- an old stool that was hers (and made by my great-grandfather), a cracker tin that was in her old kitchen, and a few other small items she'd given me over the years. More importantly I have audio and video recordings of parts of our conversations from the last time we saw each other. And most importantly of all, I have a lifetime of good memories.

But now, I guess I'll also have some money. Weird, weird, weird. I have no idea how much money it will be. I certainly don't expect much, given I'll only get one twelfth of her estate. Though she had a good career and was very frugal, the assisted living place was expensive and I know she worried about being able to afford it. And she was paying for extra nursing care towards the end. So it's not like this will be some great windfall. But it's nice to know I'll get some small amount, whatever it is. We shall see.

The Silly Bandz Fad

Have you heard about Silly Bandz? If you have a grade school age child, I suppose you must have. The last time I visited my niece and nephew, they were playing with these colorful little rubber bands that vaguely resemble animals and other shapes when they're laid flat. Apparently all the kids at school have gone so bonkers for these things that the teachers have had to send notes home, asking parents not to let kids bring them to school. But of course the kids do anyway, stuffing their collections into little Ziploc bags so they can show them off and trade with their friends. I thought it might just be a local trend, until a friend of mine in a different part of the country posted a plea on Facebook asking if other parents knew where she could buy Silly Bandz, as one of her kids wanted to give them to her sibling as a birthday present.

I was trying to remember if there was any big fad item like this when I was in grade school-- I know there were things when I was a bit older, in junior high school: stickers, barrettes with little strawberries painted on them, a certain kind of lip gloss. But it's not surprising for kids to want status items when they're anxious pre-teens. My niece is only 6, so I was kind of surprised that younger kids like that would be so caught up in a fad. Perhaps it's less about peer pressure and status than just the wantability of the item itself-- but it's not like it's a toy that's fun to play with in and of itself-- it's just a rubber band that you wear as a bracelet, and collect and trade with your friends, which seems to make it more of a social necessity. It's nice to know that kids can still get enthusiastic about simple things that don't need batteries, but it's also a little disturbing to think that kids can start to feel like they need material things for social success at such a young age. For what it's worth, my niece had apparently been given a couple of Silly Bandz by her best friend even though she had none of her own to trade, and as far as I know, she hadn't yet been begging my sister to buy her some. But of course the minute my mother heard about them, even though she knew the teachers were outlawing them, she went out and bought my niece and nephew each a great big bag of them!

At least they're not too expensive... from prices I've seen online, Silly Bandz seem to cost less than 25 cents per band.

2010 Goals

Gosh, I've been bad about updating my net worth lately! I've missed doing my monthly updates for 3 months in a row. But that's not because I'm unhappy about my net worth progress-- it's actually been great.

The first quarter is always a good time for me in terms of cash flow-- I'm usually getting a bonus and tax refunds and discretionary 401k contributions from my employer. In addition to that, it's been a pretty good run for the stock market. All in all, my net worth has increased by $26,875 year to date, bringing me to $435,365. Since I'd never set a goal for my 2010 year-end net worth, I've decided to see if I can get to $450,000 by then. This may be a little conservative, but we'll see how things go and perhaps I'll increase it! On the flip side, it could end up being too aggressive. If the recent stock market rally doesn't sustain itself, and if I get pricing data that leads me to lower my home value again, that could easily wipe out some of my gains. We'll see.

Hitting a net worth number isn't my only goal for this year. I'm continuing to try to adjust how I manage my finances. I don't want to fuss around with my bills as much, so I'm trying to automate more payments and go paperless with more accounts. I don't want to get too hands-off, as I've forgotten to pay things or transfer money once or twice in the past, but hopefully between email alerts and monitoring my info via PocketMoney and Mint on my iPhone, I'll stay on top of everything, and save time on filing etc later.
My other goal is to take a good look at my overall portfolio and rebalance things. I probably have too much cash on hand right now earning hardly any interest, so I need to invest some more. I wish now that I'd done even more of that last year when the market was in the toilet! But as always I try to remember that timing the market is not as important as time IN the market.

Another goal will be to dive back into my mother's finances again. This has been such a source of anguish lately-- as I'd feared, she's going a bit crazy trying to re-do her whole house. I haven't been there since Christmas, when I left in tears after a total meltdown about her whole attitude and how irresponsible I think it is. So far, at least, I think most of what she's done has been minor cosmetic stuff like painting, but even if these jobs are only a few hundred dollars at a time, she's doing more and more of them. There have also been some "necessary" repairs like a new furnace and some plumbing, but I'm worried that she's starting to get a reputation among the local tradespeople as the crazy widow with money to burn, so who knows how much she's being talked into things that may be costing more than they'd need to. A lot of the time, I just have to back off-- I don't want to destroy my relationship with my mother and I just can't take the stress of thinking about it too much. But I also feel like I need to give her a reality check every so often before she's past the point of no return.

Whew! I didn't mean to end on such a downer. All in all, things are pretty good for me right now, and I'm just thankful for that. Onwards and upwards!

In With the Old, Out with the New

Now is the time of year when everyone seems focused on renewal, improvement, and new stuff. And I have a couple of new things myself, but in two particular examples, they made me think about the value of keeping old things.

First, the butter dish. A couple of months ago, I bought a new butter dish for about $9 at Beth, Bath and Beyond. I had tossed it in a corner and kind of forgotten about it, which was probably the first sign that I didn't really need a new butter dish. I had thought about replacing my old plastic butter dish because it was starting to look a little scuffed up and old... because it IS old: I bought it in 1992 or 1993, when I was moving into my first apartment, and I've kept it with me through a few moves since then. When I moved in with a partner, it came with me, and when that relationship ended, it came with me. Now that's butter dish loyalty, isn't it!
Now I'm thinking I actually might keep using it, even though I've discovered the new butter dish-- I actually use two dishes, and my old one is used for margarine. The real butter is in a glass dish I bought about two years ago, which I've actually hated since the minute I started using it because the lid doesn't fit right. I never would have thrown out my nice old butter/margarine dish for that one, and now I'm starting to think that it's still more worthy of being kept. It probably cost me about $2.99 when I bought it, and it pleases me that something so cheap has done its job for so long.

The other thing is my alarm clock. I was noticing recently that my snooze button didn't seem to be working very well any more-- I am not a morning person, so my snooze button gets used a LOT! And my clock, I'm pretty sure, goes back even further than my butter dish: I'm pretty sure it's the same one I brought to college with me as a freshman, and probably used for a few years even before that. (I won't enumerate all the various ex-lovers who were also awakened by it!)

This time, I didn't have to buy a new clock. One of my father's many quirks was that he was always trying to find the perfect digital clock, and in the last few years before he died, he seems to have purchased about 20 of them. He had them stashed in different places around the house, and their various beeps and bleeps were freaking my mother out, so she gathered them all up and was going to get rid of them until I happened to mention that I could use a new one. In an admirable burst of frugality, my mother put 3 clocks each in my and Sweetie's Christmas stockings, and told us to keep whichever ones we wanted. (This isn't to say that Mom didn't go overboard on other Christmas spending, but that's a story for another day.)

These two examples may be a long and convoluted way of saying so, but it's just nice sometimes to enjoy the things you have and appreciate the value you've gotten from them, instead of only admiring things that are new and shiny. So many people just think "oh, I've had that for a few years, it's time for a new one," whether or not the item actually needs to be replaced. If you start adding up those $9 butter dishes and $20 digital clocks and who knows what else, it can turn into significant money after a while. So in this new year, why not resolve to appreciate the old, and keep it around for a bit longer?