June 29, 2015
The following blog post is part of The Road to Financial Wellness Blog Tour. Over a period of 30 days, the Phroogal team will go to 30 locations to raise awareness about financial empowerment. Today they will be in San Francisco! Our goal is to help people learn about money by starting the conversation. We understand that local conversations can help bring about national awareness.
Fifteen years ago, I had $78 stashed into my (actual) piggy bank, a $1000 scholarship for college expenses, and an optimistic plan for my life: college, post-grad education, and a career.
Reality paid us a visit and in quick succession:
My parents lost their businesses after years of toiling 18-hour days, 365 days a year.
My grandmother moved in with us for end of life care.
My mom was diagnosed with a chronically debilitating disease (terminally, as it turns out).
My sibling, always irresponsible, started on his lifelong co-dependent relationship with debt.
And I turned 18.
Today, I’m happily married to the best partner I could ask for, have a wonderful dog and hilarious baby, and am nurturing a solid nest egg for our future.
I can hear “Well BULLY FOR YOU”. Hold on a second. I’m not gloating, and there’s a point to all this.
What Happened?
This wasn’t the plan. Any of this. I had a very clear vision of buying homes, getting doctorates, and there was nothing in there about getting married or having kids.
As my family fell apart, I coped by planning to take care of them, get them on their feet, then move on with the regularly scheduled program. Five years, tops. Five years turned into six, then seven, then eight. Around year 10, it sank in. This was it. There was no magic solution. Another $5,000 wasn’t going to cure Mom, or my brother, or get Dad a job.
I had to dig in for the long term and make the best of it.
This was my journey out of debt
I’m not sharing this to say “If I can do it, anyone can!” Though I would like to believe it, that’s too simplistic. While it’s true that if *I* can learn a new skill, almost anyone could probably also learn a helpful new skill but that doesn’t mean that my road is your road is the other person’s road.
I am saying that, given the inclination and a few resources, we can usually make the improbable happen.
These are some of the key lessons I learned, maybe sharing these will help someone avoid learning the hard way.
Debt is awful.
The tens of thousands of dollars in debts incurred over years of running their small businesses, some on credit cards and some in personal loans, meant that my parents were shackled to huge monthly payments forever and ever amen. Paying the minimum every month made them the credit card company’s dream. Sure, keep on paying 1% of the principal plus 27% of pure profit, make their day.
I used my as yet unblemished credit history to shuffle high (think, 27%) interest debts over to 0% interest credit lines, $5,000 at a time, to actually start paying down principal. Rinse and repeat several times.
With each credit card down, I tucked away a little bit more cash, so that the next time an emergency happened (and it would, many times), I wasn’t just jumping back into the black hole of credit card debt.
To this day, the only recurring debt that doesn’t give me the screaming heebie-jeebies is mortgage debt and that’s only because we have to live somewhere.
Making money usually means work.
It wasn’t always fun and it definitely wasn’t pretty. But the end result of working my tuchus off was surviving college without any debt, emerging with some savings, and even better yet, seriously reducing that debt.
Scarlett O’Hara had a point
I never (ever ever ever) wanted to go back to that so I maximized savings and income. Overtime was my best friend. So were coupons, credit card bonuses, and credit card rewards. Points programs for surveys? Points programs for email clicks? I was all over them. Every penny.
Negotiating raises and promotions was awkward and nerve-wracking but I dove in, flailing like drunken monkey. It stayed awkward but I kept trying.
Being poor sucks but it doesn’t make you a bad person
There was a certain amount of luck involved. There’s been a bit of help from people that I couldn’t ever repay. This is true of most people, even if they don’t know or acknowledge it.
But throughout it all, I was ashamed. I was ashamed that I hadn’t pulled off the Rescue. I was ashamed that my family I’d been so proud of for so long was unable, or unwilling, to do what was needed to fix our problems.
It didn’t matter that going from being a schoolkid to a student supporting a whole family in a single step was probably too large a leap. It didn’t matter that I had been traveling an almost parallel course of chronically declining health, with very few answers, even as I struggled to prop my family up.
It felt like our economic status was a reflection on me and if I didn’t want to be judged, no one could know our struggle or that we were poor. It’s strange living in a country viewed by many as the land of opportunity, particularly as the first generation of immigrants born here. You’re in the unique position of having been given a gift of life in one of the best possible places (a first world country rather than second or third) and you’ve got to make the best of that gift.
It’s not wrong, but it’s not entirely right, either. I should make the best of winning the genetic lottery, yes, but the problems we faced, just because I had taken on the responsibilities, they weren’t my fault. It wasn’t my failure. That’s probably been the hardest lesson to learn.
The most painful conversation of my life was the one I had with my dad was the day before my wedding. I finally confessed that I felt unbearably responsible for Mom’s last years, for my brother’s inability to do life like a fully cognizant human being, for being unable to fix everything and everyone. The guilt I carried was worse than the heavy lifting of the work itself and I finally had to lay it down.
Taking our next steps
These days, it feels like I’m living the high life. Sure, compared to my regional neighbors (ahem, Silicon Valley), we’re pretty far down the economic food chain, but for me? We’re doing well. We can always do better and I’ll keep working at it because there is still so much I want to do. I love to help people with their finances, but on a larger scale, there’s still so many people out there that need help.
The better life gets, the more we can give back. Years ago, others who were doing well took the time to lend me a hand, to support or encourage me in some way that was small to them, but huge to me. This is a life cycle I’m proud to be a part of.
June 22, 2015
Today, I’m very pleased to answer a reader’s question about credit cards. Feeny asks:
My husband and I unfortunately ruined our credit (before we met) in our early 20’s. We are working on being debt free but as we all know it takes time.
We are expecting our first child in about 2 months. I keep getting told that we need a credit card in case of emergencies. Right now we don’t have anything.
My question is two fold: would you recommend a credit card “in case of emergencies” and if so, what is a low credit/no credit card you recommend?
I asked for some more detail about their debt repayment plan so that I could give a slightly more informed answer.
We are repaying what we can without living in poverty. Putting cash money in savings means more to me than paying back debts, although some days I can’t decide if that’s a good or bad thing!
Without numbers, I can only give some philosophical guidance but I think that’s still useful.
You do need something in case of emergencies and that something will vary depending on your circumstances and your habits. A credit card is an easy thing to recommend if you’re just looking at the situation superficially.
My reason: If you don’t have the cash on hand to pay for that emergency, then what exactly does a credit card change? It floats your emergency costs for about 20 days, give or take, after which the CC company then starts charging you interest up the wazoo. And there are plenty of people for whom that interest would take a relatively manageable surprise expense into a long term shackle around your ankle.
Now, if you have another backup plan for the emergency, like some saved cash that you just have to transfer back from an online only bank, or a family member who can bail you out temporarily while you get the cash together from your usual income because the emergency is just a bit bigger than for the cash you have in hand, then credit card? Sure!
Credit cards are a useful tool, I use them all the time to my benefit, but it only works if you know how to be responsible with them AND you have the means to be responsible with them. Knowing what you should do doesn’t help you when you don’t have the cash to pay the balance in full before they start charging you extra, right? Then you have Emergency Cost + Interest (which is calculated daily, just to further benefit the credit card company), which compounds every month.
What would I recommend, then?
I am actually in favor of putting cash away into savings even while you’re paying down debt, as long as you can keep the interest rates on your existing debt under control. No matter how slowly you build this cash savings, having it is a buffer against another unexpected expense putting you into a debt spiral. This was part one of my two-pronged approach to taking down the huge six-figure debt for my parents: putting a stop to more debt while paying down the existing debt. It’s not easy but it worked very well for me.
If you know that you can comfortably and responsibly put a credit card on ice, essentially only taking it out for actual emergencies that you can later cover with that savings, then yes, I would recommend doing that. It’s a tool, after all, and there’s no reason not to have multiple tools in your toolbox.
What cards would I recommend?
Specifics I look for: No annual fee. Good rewards. Moderate interest rate in case you have to carry a balance even temporarily. The interest rate will depend on your credit score, so I won’t list those here. They tend
For customer service, American Express is hands-down my favorite so I’ll share what I’ve carried for over a decade but you don’t necessarily want to use a travel-specific card unless you have to travel a lot anyway, in which case you may as well benefit. Chase and Citi have both been good over the years.
American Express Hilton Honors:
No Annual Fee
Complimentary Silver status, Rewards are Hilton Honors points
Citi Double Cash:
No Annual Fee
1% cash back at purchase and another 1% back when you pay the balance.
Citi Simplicity:
No Late Fees, No Penalty Rate and No Annual Fee
Current offer: 0% Intro APR on purchases and balance transfers for 21 months – sort of an argument to wait a little bit to get the card, I guess.
Chase Freedom:
No Annual Fee
1 Ultimate Rewards points per dollar spent
0% Intro APR for 15 months
Bonus:
These are the rewards programs I like for this stage of life (debt reduction) should you decide to use the credit card regularly and paying the balance in full every month.
Chase Ultimate Rewards: My favorite thing about this cash back program is that it’s true cash back. Redeem your points for a direct deposit into your bank account and defray whatever bills you have. Rinse and repeat. This was one of my little debt repayment strategies: Every dollar had to work twice for me: once in paying for whatever I bought, the second time in generating cash back.
Citi Thank You points: Not a favorite but I still like it. Redeem TY points for gift cards, either to use as gifts or to cut down on what you have to pay out of pocket for regular purchases.
Those are my thoughts, what would you recommend to Feeny?
May 11, 2015
“A tiger can’t change his stripes” strikes me as a terrible metaphor. No, he can’t, not without a bucket of hair dye and opposable thumbs but what does that have to do with whether not he can be trained or taught to hunt differently? Or, say, whether a person change their habits?
Anyway. That came up because I have a secret. Or I had a secret. I shared it with PiC and now it’s your turn.
Several years ago, I made a large loan, with a very long payback date. Large to the tune of five figures. Not high five figures, I didn’t have that kind of buying power. But five figures that I scraped and scraped (and scraped some more) to save at a time that every penny was cherished. That savings, and the loan, represented my hope that things would get better someday.
Because the loan mixed family and money – which I’ve since learned almost always equals disaster – and because making mistakes like making loans on unfounded faith irritates me, I buried it. Refused to even think about it. That’s not like me, but since the money was gone, ostriching was to preserve my sanity. And embarrassment. You understand.
PiC never knew I’d made this loan, it was made long before our marriage and my policy of “la la la that never happened” kept it safely buried.
Over Easter weekend, it occurred to me that the loan is officially due this summer. It’s time to either get it back or truly mentally cut it loose. This particular monkey’s had a free ride long enough on my back!
About three stilted and awkward conversations later, it’s been suggested that I might actually see my money back mid-summer. This is me not holding my breath… sort of. (Just in case, cross your fingers?)
Then it was time to tell PiC.
I would have told him anyway but, regardless, it felt weird. “Hi honey, I either gave away or am getting back a LOT of money!” He took the news like he takes most of my money maunderings: with a nod and a shrug.
I mused aloud: assuming it really is repaid, what am I going to do with that money?
He piped up: I can think of a few ways to spend allllllll that cash!
*pause*
Me: [skepticism face] [I know he’s trying to get my goat]
Him: Dammit, no, I couldn’t! I’d want to put it on the credit card for the rewards! What have you done to me?!
Me: HAH! HAH! I knew I trained you better than that!
I kid, but at the same time, I’m immensely proud of how PiC has taken in all the money talk that’s come his way in the past decade.
He’s really easygoing in his money habits which means that in our relationship, I’m the “doer” as he calls it. When I’m dissatisfied with a service or when someone tries to overcharge me, I’m not confrontational but you know I’m going to write a letter or make a call and get my darned satisfaction!
In recent days, he’s done me proud, I tell ya!
A) He called out the car rental folks for causing a serious delay for us. They borked pickup, sending someone out to get us more than an hour after they were expected, didn’t have the reserved vehicle at the location I’d specifically called to confirm, and didn’t have a clean vehicle at the second location. Hugely inconvenient. He got a day knocked off the rental bill.
B) After I explained the long term consequences of an “only happened once” interest charge on a credit card, he called the company and had the interest charge removed and the now-triggered ongoing charges waived.
What does this have to do with tigers and their stripes?
Not a lot. Just that, with time and patience, maybe some of the familial relationship can be repaired. Maybe not.
Either way, PiC’s a great example of someone learning to be better with money even when it’s not strictly for survival.
And if we get that money back, it’ll go a long way to shoring up our cash flow, and just maybe my faith in people.
April 27, 2015
How about I just don’t spend $150+ and save $150+?
Walking to the counter, arms loaded down with pump bottles, I turned and stopped in front of PiC. “We’re buying nearly $80 worth of hand soap. HAND SOAP.”
It was 50-70% off, but still. Hand soap.
A Bath and Body Works holiday sale nearly sucker-punched our wallets. After 30 minutes of sniffing and picking bottles we were walking over to the counter when reality sunk in. The soap smelled great, of course, that’s how they got us in the first place but thankfully my brain turned on. I can pay $5 for a gallon of soap that smells just fine! It’s a testament to the pull of the new scents that I was actually sad putting the bottles back on the shelf.
I’m a sucker for products that smell good, and I’m not the only one. There’s a whole science behind manipulating your senses between scent and organization to get you to stay longer and spend more.
Some scents transport me to very specific moments in time:
Softsoap: high school, childhood best friends, horseback riding, the red-brown dirt of the riding stables where I learned to “be a rider, not a passenger”, hand scrubbing my one pair of riding pants and line drying them every week.
Garnier Fructis: high school and college, couponing, youth
Incense: temple, death, grieving, parent loss, tradition, childhood Lunar New Year celebrations, grouchy old grandma, ancestors I only know through faded black and whites and stories passed down from generation to generation
Bath and Body Works brown vanilla sugar: college best friend during college, picking apples at the grocery store, Southern California sun, driving my new car to work/school/work
BBW plumeria (long discontinued but there are a few scents reminiscent of this): junior high school phys.ed., black shorts and white tees, an old friend I haven’t seen since New York, braces, REALLY terrible looking long hair, weighing less than 70 lbs and being mocked about it.
Pears/apples (artificially): being carefree, young, and silly. Life before kid, jobs, degrees, or college majors.
Coffee: five years old, learning responsibility, trusting my parents implicitly and completely, discovery
Gingerbread and fresh baked cookies: Christmas, family, holidays
“New car” smell: Age 19, negotiating my first major purchase, driving a new car in torrential rain, paying off a loan early
Scents are such a powerful trigger for memory, no wonder it’s a tool to manipulate our emotions and buying habits! I’m safer shopping online from home.
What’s your shopping weakness?
March 9, 2015
I think about homelessness a lot more than your average middle-class partnered person might.
We’re living my financial high point right now, why can I still taste tomatoey canned sardines and rice porridge thinned with water to stretch? True, the flip side might be that it’s all downhill from here but it’s also true that I’ve not been a slim paycheck away from Final Warning-stamped bills, rent going overdue, and making just the interest on the credit card bills for almost a decade now. Prosperity, not poverty, should be the reflex.
We weren’t always a nickel toss from disaster but we lived in the fire swamp, a wander into the lightning sandpit wasn’t inconceivable. In those days, due dates were more like suggestions. Good thing I didn’t apply that to homework or library books! My nine year old brain didn’t recognize the signs of juggling bills to avoid overdrafts, I just obediently post-dated the checks as instructed. Well trained not to ask questions, it was another 8 or 9 years before I grasped what that said about our finances.
Young adulthood was equally precarious. There’s a big gap in my memory of my college years because all I did was work, school, and take care of Mom. After hiding her diagnoses for years, she’d finally admitted she had serious health problems and when I was 17, it became my second job to look after her. (That had a lot to do with why I feel responsible for decisions made long before I was a competent adult.)
My parents faced incredible challenges immigrating to America and in some ways, there was absolutely nothing more that I could do for them.
I can’t help but feel for them. They struggled in a time where the kinds of debt reduction and financial information we now have access to simply didn’t exist. Before the internet? It truly seemed like the Information Dark Ages. If the internet and money blogs and forums were a thing when I was 13, rather than 17, I can’t help but think maybe I could have made a real difference.
But that is exactly why I am so fully aware of the consequences of failure.
Questions about homelessness and what we do about it, posed in SaverSpender’s recent post, haunt me. What more can I do?
It’s a seriously personal question as I do my level best to keep my immediate family off the streets. I am their last resort, the last one with any dignity or safety, that is. It’s neither an easy or a painless task, and I do get frustrated with failures to communicate or comply. But it still startles me when people feel it’s appropriate to respond, in the face of one frustration or another with my family, that they ought to learn their lesson, that Dad ought to be left to suffer the consequences of his actions.
Perhaps on the face of it, that is the most logical answer. But is that really so simple? Is it that cut and dried as a human being to say that another human, older and unable to get hired back into the workforce, should be taught that the lesson for irritating me is to lose basics like heat, water, and shelter? What lesson is that to to be teaching someone at this stage of life? And what kind of person does that make me if I’m willing to throw him out on the street? Not that I spend a lot of time mirror-gazing, but it would even more drastically reduce how much I could bear the sight of myself.
I’ve observed that not even my oldest friends, though incredibly conservative politically, have ever responded to my sighs over the situation that the “obvious” answer is to do anything but continue to treat my family with grace and take care of myself. Never have they suggested that I ought to abandon my family in some moral object lesson.
“There but for the grace of God go I” is always in my periphery. I’m chronically ill but cannot afford to rest on my laurels because I am their last line of defense. And my responsibility grows with each day.
I don’t know what the answer to homelessness is, other than making sure no one I care for has to endure it.
March 2, 2015
This post is part of Women’s Money Week.
SDI, FMLA, PFL, oh my!
PiC and I are eligible for protected leave in various forms after Little Bean’s birth, not all the same, and not all equal, so it was a bit of a maze figuring it all out.
PiC is entitled to six weeks of unpaid, job-protected leave under FMLA (Family and Medical Leave Act), and qualifies under the birth of a child. This has to be taken within one year of birth.
His employer also pays for an amazing six weeks of parental leave to be taken during the year following the child’s birth.
I was not eligible for this but, as the child-bearer, I can take 6 weeks of partially paid, job-protected leave under CA’s SDI (state disability insurance) after birth. Pregnancy is considered a disability for this purpose and considering how you feel in the last few weeks, yeah, that’s justifiable. I could (should) also have taken off 4 weeks prior to our expected due date, and would have liked to, but I wasn’t willing to go to essentially half pay a month in advance. Chalk that up to my neuroses … if there was going to be a next time, I’d probably try to plan better so I could take that time.
Half pay was a hard pill to swallow as we stare down the barrel of childcare and various costs associated with a brand new human.
Quick Facts about FMLA
- FMLA is unpaid, job-protected leave for specified family and medical reasons
- You get 12 workweeks of leave in a 12-month period
- Your employer is only required to comply if they employ 50 or more employees.
Quick Facts about SDI
- You cannot apply for SDI until you have stopped earning wages. Therefore if you don’t go on leave until the last minute, you’ll have to wrangle paperwork when it’s least convenient: squalling baby, sleep fogged brain, fiddling with a state administered website. That’s one reason to go on leave earlier if you can afford it!
California now issues payments via an EDD Debit card instead of checks. I hated this until I realized this is really good for the unbanked – if you don’t have a bank account, getting a check from EDD would be another barrier to receiving much needed income.
Following his FMLA and my SDI leaves, taken concurrently, we are both eligible to take an additional six weeks of PFL (Paid Family Leave)
Quick Facts about PFL
- You can roll directly over from an SDI claim to a PFL claim.
- Covers individuals who take time off of work to care for a seriously ill child, spouse, parent, or registered domestic partner, or to bond with a new child.
- This is also partially paid at 55% for six weeks.
Because we don’t have a great plan for childcare (that is a whole other post/conversation) once our leaves are up and we don’t have much in the way of a support network, we have to be careful to take enough leave to recover from the whole ordeal of childbirth and bringing a new baby home but not so much that we’re out of luck later on if we have to deal with health problems.
We had a good first well baby visit, for which we are eternally thankful, but you never know what tomorrow may bring.
At the same time, these first weeks and months are precious. We don’t know if we’ll do this again so we are trying to be present for this experience, the good, bad, and poopy. Paid leave makes it possible to actually do that: support each other, get to know how best to care for our new family, establish new routines, and actually recover. There’s a darn good reason sleep deprivation is a torture tactic, most of us do not truly function well on the couple hours of sleep that a newborn allows!
Ultimately, I think it just makes so much more sense to have some kind of parental leave policy that gives new parents the space they need to regroup. For us, I would feel like we can return to work with a renewed sense of purpose.
For other states, have a look at Babygate.
February 16, 2015
Effective Jan. 1, 2011, distributions from health FSAs and HRAs will be allowed to reimburse the cost of over-the-counter medicines or drugs only if they are purchased with a prescription.
This change to the FSA/HRA rules was a real downer.
I use quite a lot of OTC stuff for my chronic pain and it’s not cheap. Thermacare heating pads, for example, are great and last 8-12 hours but a pack of two or three costs anywhere from $10-26. A week of back or shoulder pain could cost $75 just to keep heat on, and it’s rare for the pain to be confined to a single area. Usually it’s one half of the body, right or left side.
To a more astute person, there is an obvious solution so I confess, I totally missed the obvious here.
OTC medications aren’t allowable unless you have a prescription for them. I read that as: if the pharmacy didn’t fill it as a prescription then it wasn’t eligible. I was wrong.
I’ve been doing this with my massages for the chronic pain, but it didn’t occur to me til recently that the same thing would work for the numerous OTC items I’ve had to buy for prenatal and pregnancy related conditions: the letter of medical necessity!
If it’s for any kind of treatment that your doctor is aware of, or if your doctor is happy to fulfill such requests, then all you’ve got to do is ask for a letter stating that these items are being used for treatment.
Make it really easy for your doctor to fill in a form letter by providing the list of OTC meds and send a copy of that letter in with your receipts.
We’ve spent a significant amount on OTC meds and supplies during this pregnancy, it was awesome claiming it back.
Go forth, my friends, and save your effective tax rate in OTC FSA costs!
