Budget Archives - Page 9 of 11 - The Happy Homeowner

ABCs of the FSA (and How to Make it Work for You)

Posted on November 15, 2011 by Jen

As the end of the year rolls closer, I’m going to begin a healthcare series that details some of the most common health expenses and ways to reduce them. Up first, the Flexible Spending Account (FSA).

In case any of you have felt the pinch due to the new FSA rules instituted this year, here are few ways you can still make yours work just as well as it has in the past:

Antibiotics:

In the past, you were free to use your FSA money to purchase non-prescription drugs at any pharmacy, Wal-Mart, or Target of your choice. Baby is sick? Bring on the Children’s Motrin! Have a headache? Buy some Tylenol and submit the receipt for a full reimbursement! Enter 2011, the year of no more non-prescription coverage. However, as any savvy PF Blogger or reader has hopefully already discovered, there are ways around this–if you have your health care provider write you a prescription for the medication you need, you can still submit it through your FSA (just make sure to provide either a copy of the Rx or a receipt that lists the Rx code on it). The beauty of this supposed loophole? The pharma companies still want you to buy their drugs, so many have made OTC drugs available from BEHIND the counter. Just don’t try to cheat this process as penalties for non-qualifying expenses are steep–if you’re caught using your FSA for non-qualifying expenses, the total amount of these purchases will be added to your gross income and will be taxed an ADDITIONAL 20%! Honesty is the best policy with this, folks–if you can’t get an Rx for it, don’t try to use your FSA to pay for it.

Bankable limits:

Be aware that while your employer may have continued to let you contribute a fat $3-4K to this year’s FSA, the story is much different in 2013. Starting January 1, 2013, all FSA contributions will be capped at $2,500. Moral of this story? If you have any big-ticket health expenses on your horizon, it would be in your best interest to schedule these procedures in 2012. Also, you may want to experiment with contributing less to see what this new mandate will do to your bottom (and how you should be budgeting to account for any potential impact).

Children:

In the past, FSA reimbursements could only be applied to medical care for children who were claimed as dependents on their parent or guardian’s tax returns. 2011 saw a wonderful expansion of this definition and current mandates now allow for any child who is under the age of 27 to be covered through their parent’s FSA. The silver lining in this change is the fact that your children, even if they don’t live at home, can still be covered by your FSA! Just remember that you can’t use the FSA money to pay for medical premiums, even if they are for your children.

What other FSA tips & tricks do you know of? How do you creatively use your FSA contributions to maximize your healthcare dollar?

How I Saved My Down Payment Fund

Posted on November 4, 2011 by Jen

After reviewing my previous posts, I’ve noticed a theme throughout most that indicates a good deal of forward-moving progress in my financial journey. Now while I’d like to say that has always been the norm, it definitely has not been.I’ve had my share of financial messes, I’ve been pretty close to ruin before, and I’m still climbing my way out of a bit of student loan debt. The difference between then & now is that I’m a homeowner (and of course that I’ve overhauled my saving/spending habits).

If you were to read my My Story or credit card debt payoff pages without any other context, you should very well wonder how in the world such a mess was able to buy her own condo in Boston while unmarried (and without financial assistance from others!). Here are some of the ways I changed my ways to fulfill my dream of becoming a homeowner by the age of 30:

I took my head out of the sand

I forced myself to tally up my debts, made a plan for how to pay them off, and forged full-steam ahead with said plan.

I analyzed my professional position

Although I had a good job in a very beautiful location, I realized that I had come to a career crossroads: I wasn’t fulfilled with my work, I craved an intellectual challenge, and I wanted to explore other fields before I settled into any permanent career path.

I decided to apply for Grad school, and I got into a top school

What does this have to do with buying a house you ask? Plenty as it dictated where I’d be living and how I needed to re-focus my financial efforts to account for the insanely high cost of living in Boston.

I realized that I couldn’t do it all

There was no way that I could pay off my credit card debt, go to grad school, and pay expensive rent on a part-time salary. It was time to get creative.

I focused my job search on part-time positions that provided living expenses

I happened to stumble upon a Craigslist ad for residential counselors at a group home for adults with mental illness. Since I was pursuing a Masters degree in Psychology, it was a perfect fit. The position was only 15-20 hours/week, but in exchange I got my own room in a beautiful house–for free!

I did a bit of research to validate the information in the ad (no scams for this lady, please), sent my resume, and had an interview the following week. The interview process had 3 pieces but I sailed through them and began working immediately upon moving.

I paid myself “rent” to Save My Downpayment Fund

The beauty of my new job was that it provided real-world experience for what I was learning about in school AND it provided virtually 100% of my living expenses. Rent, utilities, furnishings–even food was included. The job was not easy, but it was immensely rewarding and within 2 months, I was promoted to Director of the home. This brought with it a real salary in addition to my living benefits, plus I was also working full-time at a local hospital (yes, I was insanely busy).

Once I had a handle on my budget, I began to pay myself “rent.” I researched the local area, found some hard data to support how much I should have been paying, and sent that much to my credit cards every month (no less than $1,300). Once I was done paying off my consumer debt ($14K in less than a year…yeah, baby!), I began saving that much for my future foray into home ownership.

I stayed creative even after graduating

Once graduation came & went, so too did the job at the residential home. However, not lost was my zest for rent-free living. I was determined to keep up the progress I had worked so hard for, so I again sought out part-time positions that paid the rent.

For the next 2.5 years, I worked at a local college in the Residential Life department. I had to live on campus with a bunch of wild undergrads, but I now had my own apartment, free utilities, free parking for my now paid-off car, and a campus meal plan! I continued to pay myself “rent” for the going rate of a 2BD/2BA apartment in Boston.

I rewarded myself

For every $10K I saved, I celebrated by spending just a bit–a trip to Australia, new work clothes, etc. Nothing too fancy, nothing too expensive and everything had to fit in the monthly budget or it wasn’t purchased. These rewards, big and small, helped me keep my motivation high and momentum forward.

I saved for the “extras,” too

I’ve heard so many stories of first-time home buyers who fail to save enough when it comes to buying their home. I was determined to still have a healthy bottom line AFTER closing, so I saved as much as I possibly could in the 1.5 years before purchasing my place.

I saved for the down payment, closing costs, moving expenses, furniture, decor, small renovations–I even ear-marked $200 for a re-stock of my new refrigerator and pantry.

I stayed realistic

All along, I knew my story wasn’t typical. I knew that my hard work would eventually pay off, but I also knew that it wasn’t a sustainable life to work full-time on top of full-time grad school and 2-4 part-time jobs. I paid attention to when I began to feel burnt out (often towards the end of this particular chapter), and I re-adjusted as a means to maintain my sanity.

Oh, and I partied like a rock star once I had those keys in my hand after closing. I’ll let you make your own interpretation of what that may have looked like (and please do leave a comment telling me about what you’re imagining right now…haha!).

How did you save for your down payment? If you’re not a homeowner, are you planning to be? If so, what’s your savings plan?

Living Well on Any Salary

Posted on October 24, 2011 by Jen

Money I’ve been reading various blogs that have noted the Yahoo! Finance article series about living well when making various amounts ($11K, $20K, and $40K). These bloggers also took turns answering the questions in the articles. I’ve enjoyed reading these posts, and I figured I would list my answers as well:

Do you avoid a lot of the expenses that many of your peers spend money on, such as technology and meals out?
My phone is an absolute dinosaur and my laptop was free through work, so it’s safe to say that I do pretty well when it comes to not spending much on technology. However, I know that it’s only a matter of time before my phone completely dies on me (hello, hitting the letter “A” when texting and having 13 As fly across the screen!), so I’m currently budgeting for an iPhone sometime soon. Meals out are always a struggle for me because my friends are true foodies with expensive tastes, but I have come a long way in being able to say ‘no, thank you’ without feeling pressured. I have a great balance right now with cooking at home for most dinners, and I always bring my breakfast and lunch to work instead of going out.

What’s your typical meal?
I consider myself lucky because I naturally favor healthy foods. My typical (and nearly daily) lunch is a big salad or some sort of black bean, tomato, lettuce, salsa, and veggie mix that I roll up in whole-wheat tortillas. I eat a ton of veggies, beans, and chicken, so my grocery bills aren’t too crazy. I also love to experiment with spices and odd flavor combinations, so I can pretty creatively come up with cheap meals. So far, the oddest lunch to date was a bowl of cottage cheese mixed with black beans, tomato chunks, and dijon mustard–sounds gross but was amazing!

What about clothes?
I used to spend freely (and blindly) on wardrobe updates, but I am definitely way better than I used to be! I don’t really shop that much anymore unless I truly need something, and I always hunt through the clearance section and use coupons whenever possible. I recently spent $105 on over $550 worth of clothes for some much-needed wardrobe enhancements. This will be the last time I shop for clothing for months aside from purchasing some black flats that I need for work. I also successfully complete periodic clothing spending bans when I’m feeling particularly spendy.

What about going on dates?
I’m pretty vocal (in a polite way) about my budget with my BF, so we’ve adapted to each other’s patterns and preferences in terms of dates. We balance going out with staying in so that helps to keep things in check. Our typical dates will be dining out, hiking or other outdoor activities with friends that are free, and sometimes concerts. All of this has to fit in my miscellaneous spending budget or it doesn’t happen unless he wants to pay (he makes more than I do so sometimes things just fit better in his budget).

Do you indulge in any luxuries?
I absolutely indulge in travel. To me, it’s the most important way to enjoy your money when wanting to spend on experiences rather than material objects or food. I plan my trips and save for them before leaving, so I’ve been lucky to not trash my monthly budgets or savings in my quest to see the world. What I won’t spend my money on are things I deem frivolous such as manicures/pedicures (never have had one but I probably will for my wedding day), expensive lattes (I’ve never had coffee before), coloring my hair (not yet at least), etc. I get 2-3 haircuts each year at a salon I’ve been going to for over 5 years where the haircuts are still $35. I tip quite a bit because I absolutely love what they do with my hair and their service, but I still only spend $50 for haircut in Boston….not too shabby!

Do you have health insurance?
Yes and I would never go without it unless there were literally no options!

Do you have any savings for emergencies?
Definitely–I finally have a fully funded e-Fund of $20K. While I’ve scaled back my savings contributions in order to payoff the first part of my mortgage and student loans ASAP, I’m still saving $500/month for long-term savings.

Do you anticipate or look forward to having a higher salary one day?
I would be lying if I said I wasn’t as I am virtually always looking to earn more money. One of the reasons why I manage multiple jobs is because I want to constantly be enhancing my skills as well as making sure I’m a well-rounded applicant for whatever job/industry I wish to work in.

What about retirement–do you plan on ever saving enough to retire?
I definitely want to retire well because I hope to continue my travels. I contribute no less than $650/month to my retirement accounts, and I recently bumped up contributions to my 403b. As I mentioned in my post about money rules, I make sure these contributions are automatic and a first priority when creating my monthly budget.

What are some of your answers to these questions?

Photo credit: Loco

Do You Have Any Money Rules?

Posted on October 20, 2011 by Jen

After reading a re-cap of Yahoo Finance’s The Only 2 Financial Rules You Need to Live By article, I thought about what my money rules are.

While yesterday’s post may have seemed a bit flighty and irresponsible, there’s actually a pretty extensive list of “rules” that I follow when it comes to managing my finances:

Pay myself first

I follow a very detailed monthly budget, but I have a section of it that’s non-negotiable. Each month, my retirement contributions (Roth and 403b) come directly out of my paychecks and the only time these auto-withdrawals are altered is if I increase my contribution amount. I will exhaust my miscellaneous spending and long-term savings long before I even consider touching the monthly retirement amounts.

Track my spending down to the penny

In the Excel workbook that holds my monthly budget sheets, I also have a sheet devoted to miscellaneous spending for every 2-month period. This is where I note every single purchase I make, organized by category. These sheets are linked to the monthly budget sheets, so as I update the individual category amounts on the miscellaneous spending sheet, the total amount of miscellaneous spending is automatically updated on the month’s budget sheet as well. Tracking my spending has allowed me to gain better control over my day-to-day financials as well as to work in the idea of mindful spending.

Spend money where it matters most to me

As I’ve mentioned before, I love to travel. It is far more important to me to spend my money on experiences than it is materialistic items, although I always do bring back something unique from each trip. Travel is such a huge part of my life that I will happily take on additional jobs/work to make it a reality while still keeping up with my other financial goals. To me, a vacation with family and/or friends (or even alone!) matters far more than the latest handbag or a new gadget. The memories of my trips will bolster happy feelings for a lifetime–long after those material things wear out and/or get thrown out.

Spend less than I earn

If I want to take another trip or invest in another home improvement, I do so only when it fits into my monthly budget or overall financial plan. Under no circumstances will I allow myself to go back to the days when I spent freely and stuck my head in the sand when it came time to pay the bills!

I treat myself when appropriate

I strive to live my life in balance as much as possible, so I’m very keen on making room in my budget for indulgences. However, it’s important to note that I typically work my tail off to plan for these types of things, and I make sure to be consistent with the ebb & flow of spending and saving.

The Happy Homeowner

Living a Healthy, Balanced Life One Cent at a Time…

Category Archives: Budget