Money talk: how owning a house can bring in passive income

When I first moved to Napa, I thought I may just rent indefinitely. After owning a home for more than 16 years, I wanted a break from maintenance and upkeep. That feeling didn’t last very long, though.

I think I finally hit my limit of waiting for someone else to approve maintenance requests during Memorial Day weekend of 2016, not quite a year and a half from when I started renting. That was the weekend when the main drain line clogged, and the only bathroom in the house became unusable. I had a couple of friends visiting that weekend, and we weren’t able to take a shower or use the only toilet in the house until an emergency plumber responded. I had been reporting issues that pointed to imminent failure of the drain line for over two weeks, but the landlord was dragging his feet on approving a company to come out and address the issue. I’m sure he was regretting it when he got the bill for that emergency call on a holiday weekend.

After an experience like this, I realized that I wanted to be the one to make the choice of when and what type of repairs should be made. Yes, it could be a hassle to find good people to do the work, but I preferred that to being stuck in a situation where I was forced to find a place to squat in the yard to pee.

There are many articles and blog posts one can find about the “rent vs buy” debate that outline the pros and cons of each. This isn’t one of them. I’m just sharing one of the reasons I find that owning works for me: I can choose to bring in extra income by renting a bedroom in my house. Renters are legally bound by the terms of a lease, which usually do not allow sub-letting the unit or portions of the unit without landlord approval. As an owner, I don’t have this restriction.

I first started renting rooms in my home when I lived in Chicago. I had a fairly large house that was perfect for this arrangement. I had my own bedroom and bathroom on the main level of the house, and I rented out the two bedrooms with a bathroom on the second floor. The kitchen area was shared, and while I made it clear that my housemates could use living and dining room, too, they rarely did.

I used the equity from my Chicago home sale as a down payment on my house in Napa. Property values are much higher here, and the house I purchased is smaller than the one in Chicago. I went from owning a house with four bedrooms and three bathrooms to one that has only two bedrooms and one bathroom. I use the larger of the two bedrooms and rent out the smaller bedroom. The kitchen, bathroom, living room, and dining area are all shared space.

Potential renters are plentiful. During the harvest season or “crush,” there are frequently people hired on a short-term basis to work in the labs and support the winemakers. Additionally, many of the wineries hire interns throughout the year to work in the tasting rooms or with back office functions like marketing, sales, and events. The local hospital employs many “travelers” to fill nursing and technical positions, too. Vacancy rates for rentals is very low, and like all of the Bay Area, housing is expensive, so sharing housing is quite common here.

The local community housing organization actually has a free program to promote home sharing by matching applicants with owners. I thought about using this program to locate a new house-mate, but I wanted to have the option of having a month or two “off,” so I decided to rent my room through Airbnb.

As long as I have my listing set for a minimum rental of 30 days, I don’t trigger any issues with the city. The demographic I am targeting — people who are in Napa for short-term work assignments or internships — are also looking at online sources such as Airbnb or Craigslist to find housing, so the service works well for me. I have full control of who I accept through Airbnb, and I require that they be “verified” by Airbnb (verification of government issued IDs) before I consider their request. I also usually have some back and forth messaging with the guest first to confirm their reasons for booking. While I could make more money by renting directly through Craigslist, I prefer the extra protection provided by Airbnb and their verification process.

This may be obvious, but I rent the room furnished. I already had a modular shelving/desk unit and chair for the room, and the closet has an organizer with built-ins. I had to buy a bed, bedding, some linens, and hangers for the closet. I saved the receipts for all of these up front costs for tax purposes.

The extra income I get from renting my room is taxable income. But while I do collect income for the room, I also have expenses, such as extra costs for utilities (water, gas, electric, and internet), supplies (paper and cleaning products), maintenance, and fees to Airbnb. Keeping track of these expenses and itemizing them on my annual tax form works in my favor. For individuals with income less than $150,000 a year, the IRS allows these expenses to offset the income under their rules for “passive activity losses.” Those making less than $125,000, get the full benefit of passive income loss rules, which are gradually reduced up to the upper limit of $150,000. However, for those making more than $150,000 it’s still worthwhile to keep careful records and report expenses every year as any losses are applied when one sells the property.

When I was bringin in a lower salary in Chicago, I had passive losses most years. I was getting money throughout the year from my renters so I had cash flow, but a portion (about 40%) of the maintenance costs — landscaping upkeep, and repairs to the house — was a business expense. I didn’t end up having to pay taxes on any of that income due to the fact that I had a loss every year. Now I have a high enough income that I can’t claim any passive losses on my annual income tax return, but I still keep records because if the tax laws aren’t changed and I sell the house, I can perhaps use those losses to offset any taxes on any gains I earn.

My income in 2017 from renting out my spare bedroom has offset the expense of caring for my elderly dog and given me extra breathing space in the budget every month. I had hoped to use the extra money to pay down the mortgage faster, and eventually I may be able to do that.

I’ve also met some great people. I’ve had five people stay with me over the course of the year, and only one left me less than happy with the experience. Last year’s harvest intern was a tad immature and messy. I quickly got tired of living with a sloppy boy, who seemed genuinely clueless about his bad habits such as running the hot water in the shower to “warm it up” for so long that there was water beading in the walls. He did respond when I directly talked to him about correcting his behavior, at least.

The intangible benefits of having someone else living in the house are that I tend to keep the house neater and cleaner. I’m not generally a person who lets dishes pile up, but when I’m on my own I’m more likely to put off dusting and vacuuming. I also have some additional opportunities for socializing by occasionally sharing a meal or taking a walk with a guest.

Ideally I’d like to have the house to myself and build what is called an Accessory Dwelling Unit in my large backyard. I’ve also thought about putting an addition on the house to expand the back bedroom into a suite with its own bathroom, or perhaps add an entirely new master suite, giving the house three full bedrooms and two bathrooms. While there is plenty of room in the backyard for any of these ideas, I simply lack the capital and don’t yet have enough equity in the house to even think about using it to get a loan.

Sharing one’s home with strangers isn’t for everyone, but I often recommend it to people who live alone and have extra space. It is a great strategy for bringing in extra cash, and can provide an extra level of socializing and security.

If anyone has ideas on how to raise capital for major home improvements, I’d love to hear about it in the comments.

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Money talk: bank fees and property taxes

Way back in 2009 I started reading personal finance blogs. I had just gone through a divorce and was anxious about my ability to pay a mortgage and all the bills by myself. It was through the comments of some of those blogs that I first “met” people who I regularly converse with via their blogs and Twitter (like Revanche of A Gai Shan Life and nicoleandmaggie of Grumpy Rumblings.)

I dabbled with writing about my own experiences with money, budgeting, etc, but I never tried to remake this, my personal blog, as a “personal finance” blog. Money — how to manage it, increase my income, and minimize mistakes — has been weighing on my mind a lot lately, though. I’m not sure if I’ll start writing more about money topics yet, but today I want to write about some of the money topics that have been occupying my thoughts.

As noted in my last post, this has been an expensive year for me. I expect some of that money to make its way back to me, but it looks like the bulk of it won’t get into my accounts until January at the earliest. Yesterday I received the additional refund check from the State of California and deposited it in my checking account; dare I hope to receive the federal refund check before end of year? Only time will tell.

Usually I put deposits like this into one of my savings accounts (yes, I have several and I could certainly write about them another time), but I learned the hard way last month that I hadn’t been padding out my checking account enough for unexpected little hits, so I’m trying to rectify that. What happened? Well, due to my habit of keeping a minimum of funds in my checking account and poor planning, I triggered an “excessive transactions fee” in my main savings account. Ugh. That was $10 I really didn’t want to lose.

Here’s how it happened: one of my savings accounts is my “general fund.” I have my paycheck direct deposit go into this account. About once a month I tally up my variable bills — PG&E, and the various cash back credit cards I use — and transfer funds from my “general fund” to my checking account to pay those bills. I also transfer a little bit extra so I can withdraw cash now and then for some things. There is a separate recurring transfer every month from this “general fund” to checking to cover my automated mortgage payment. And I have a recurring transfer from the “general fund” to another savings account that I use to save for annual expenses, like my property taxes and LTC insurance premium. So, if you’re following along, that means that I regularly have at least 3 transfers a month from this “general fund” account.

Occasionally there is an unexpected expense I need to cover, though, like checks I have to write for home repairs. I then have to assess how much extra I have in the checking account and transfer extra funds to cover any checks that haven’t been planned for. I also have this “general fund” account set as the overdraft protection fund for my checking account.

Last month, I had a “perfect storm” of events that tipped me over the withdrawal limit and led to the “excessive transactions fee.” Because my LTC insurance premium (which is set to be withdrawn from my “general fund” account automatically) was due, I had 4 qualifying withdrawals/transfers just to cover my planned bills that month. I also had to transfer some extra money to cover a payment to a tradesman to fix my heater, bringing me up to 5 withdrawals. Then, I ended up writing two more checks to another tradesman when the first one didn’t fix the problem. The padding in my checking account wasn’t enough to cover these additional checks, and I triggered the overdraft process, not just once, but twice by the time I thought to check my account balance. Damn.

Well, next year the LTC insurance payment will be handled a different way, so I won’t repeat that scenario again. And, I’ll put some thought into how to handle my monthly bills in a more efficient manner, too.

I’ll be ending this year with another big payout by pre-paying the second installment of my property taxes. The payment isn’t due until February 1, 2018, but with the new tax law taking effect on January 1, I will no longer be able to deduct the full amount of my property taxes + state income taxes, as they exceed the $10,000 limit. That should give me an even fatter tax refund in 2018, although it doesn’t bode well for tax refunds in 2018 and beyond.

Overall, I’m really glad that my December 29 paycheck is going to be my third paycheck this month, making it an “extra” one that isn’t part of my normal budgeting process. Here’s to hoping 2018 will be a strong financial year for me!

Are there any end of year money moves you’re making? Any other financial things I should consider before 2017 is over?

Rays of sunshine

This has been one doozy of a year. It’s been stressful, expensive, and has triggered my anxiety big time. But, I feel like at this back-end of the year I’m experiencing some good things.

Pets

Hannah dog is recuperating from her health crisis. I had to stop all of the supplements and herbs that had been helping her arthritis pain, and that is apparent. However, she is eating and drinking again and keeping it all down, her potty habits are normal again, and after several trips to the vet for fluid therapy, she no longer shows signs of elevated bilirubin in her urine. She even shows interest in play, and still gets excited when I bring out the leash. I’m relieved and thankful that my online and IRL friends were so supportive to us during a difficult time.

Money

Oh my has this been an expensive year! I had to pay for my first eye surgery out-of-pocket in full, install a system of french drains and a sump pump around my foundation, and pay a lot in vet bills this year. There were also a few more typical home repair expenses/glitches that needed to be addressed, and I bought new tires for my car. My savings account is depleted, and it was hard to watch all that money fly out of it.

But some of that money is starting to wing its way back to me. After submitting the claim for the July eye surgery to the insurance company again, they actually paid for it! The eye surgery center sent the claim, so I will have to talk to them about getting a reimbursement for the money I already paid them. (And I still got to keep the cash rewards from the credit card company!) I’m also submitting the receipts for the post-op medications, since they had initially refused to cover it. I’m hoping to get a check for that before the end of the year.

Also, I will be getting some additional money from the IRS and State of California. Way back in the spring when I was doing a final review of my tax forms, I realized that I had forgotten to include my 2016 property taxes on the forms I sent to my tax preparer. When I contacted him about needing to correct this, he suggested that we file anyway since we were close to the deadline, and then do an amended return later in the year. I tried to get the amended return prepared as early as June, but he wasn’t responding to me. It took a lot of persistent follow-up, but I finally got the amended return a few weeks ago and mailed it off. (Yes, I will be looking for a new tax person to work with; that I had to follow-up at least 6 times via email and phone to get this addressed is unacceptable.)

This month I will get three paychecks instead of two. This happens at least once, and sometimes twice a year because I’m paid every two weeks. Since my budget is based on two paychecks a month, that third one is a welcome “bonus.” I could have used it to replenish my savings account, but instead I decided to use most of it to pay my future self and withheld about 35% to my standard 401(k) as a catch up contribution. I’m making a note to adjust my withholding again in a couple of weeks, because I want that large amount to be a one-time thing. Going forward, I’ll drop that amount to the single digits.

The balance of that paycheck can then be used to pay back savings account, and also to make some charitable contributions. I try to be generous with my contributions, but this year has been tough. Right now I’m mostly giving via auto-billing to a few charities, but not nearly as much as I have in past years.

Relationships

There has been a huge positive development in my relationship with my sister. She had surgery last week, and I was helping her out in various ways. Her husband had to be out-of-town for business during this time, so I stepped in to take her to the surgery center and pick her up. I’ve stopped by the house to help with a few chores, checked on her throughout the days, and run a few errands for her, too. Her recuperation period has led her to a new understanding of what I’ve had to go through with my various surgeries. Yesterday, as I dropped off some groceries at her house she got tearful and thanked me for helping her so much. She said she didn’t think she had been very kind to me after my surgeries and she apologized. Wow. That felt really good. I was gracious in accepting her apology and thanked her for it. There’s still hope for a better relationship here.

 

Tax planning

I’m hoping to get some comments and opinions on this post. I’m trying to decide if I should file my taxes next year using a product like Turbo Tax or continue to use a tax professional. What works for you? Why do you choose to prepare your own taxes? Or, why do you choose to use a professional?

I used to handle my own tax returns until I got married. I can’t recall exactly why my ex-husband and I started to go to a CPA/tax professional during our first year of marriage, but I do recall that my mother-in-law recommended the person to us. Throughout my marriage and even after I was divorced I continued to use his services.

I always thought a tax professional was there to advise and help you figure out the intricacies of the tax code, and since I also liked the guy I didn’t see a reason to stop. Shortly after my divorce I consulted with him about my plan to rent rooms in my house because I wanted to understand the pros and cons from a tax perspective. His advice was encouraging and I was glad I had talked to him first as it guided my approach to tracking expenses related to renting rooms.

My last year in Chicago was the last year he prepared my taxes. Sadly, he died unexpectedly on April 15th of that year. It seemed oddly poignant that his last days were spent working long hours for his clients.

By that time, though, he had started working closely with some other professionals who were able to step in quickly and take over his clients. I met with one of them before I left Chicago so I could explore whether he could continue to help me after my move, and to make sure I was adequately prepared from a tax perspective for the big financial change that would happen when I sold my house and moved over 2,000 miles away. Based on that meeting, I decided to keep working with him.

When I received the tax package from him early this year, I briefly considered doing my own taxes. I had an investment loss in 2015, however, and I wasn’t confident about how to handle it, so I decided it would be best to continue working with him. For the 2016 tax year I’ll be back on familiar ground with mortgage and property tax deductions, as well as following the same steps as in 2015 for the investment loss.

From a preparation perspective, I doubt there would be much difference between working with a CPA/tax professional and preparing the tax forms myself. I’m responsible for providing the data and for keeping receipts and documentation. Filling out the worksheets I’m provided every year and pulling all the data together takes me several hours. Inputting it shouldn’t take much longer, so I think with a good tax program I should be able to complete the tax returns myself and not miss any credits or deductions. I’m just not 100% sure.

Last month I decided to take steps to find a local tax professional by setting up an appointment with a person highly recommended on Nextdoor.com. While I liked her and we had a good conversations, she informed me that her minimum fees were twice what I was paying the CPA back in Illinois. She gave me the names of two other local firms I could look into that would likely have lower fees, but when I looked them up online and saw their range of services I started questioning my need for working with a professional at all.

So, should I go it alone for the 2016 tax year? Or should I continue working with a professional? What do you do and why?

 

Increasing my income

My solo phase in my house comes to an end next week. As planned when I bought the house, I’ll be sharing my two bedroom/one bathroom house with a roommate so I can generate some extra cash flow every month.

Getting a roommate wasn’t difficult at all. There are many people in need of affordable housing in this area and I just needed to decide what kind of roommate/renter I wanted: short-term or long-term. I decided to go with a short-term renter, as it would allow me to have some solo periods if I wanted them. If I had wanted a long-term roommate, I likely would have contacted the local housing match coordinator for help. This free program run by the county does screening and matching between people with rooms to rent and people needing housing. Although I didn’t end up using this service, it sounds like a great resource and I’d recommend that anyone thinking about renting out a room look for similar programs in their area.

Once I had decided to go for shorter term roommates/renters, I knew I’d have to furnish the room. I had an extra shelving/desk unit and chair that I had used in my bedroom in the rental, but I didn’t have an extra bed. I’ve had so many other expenses with a new house that buying a bed wasn’t something I had wanted to deal with right away. I had been thinking about putting off the final arrangements until after my surgery, but what looked like a great opportunity appeared through a Nextdoor posting. So I took care of that final detail one weekend by visiting a local mattress company and having them deliver and set it up the bed the next day. This potential roommate (who would only need the room during the week) didn’t pan out, but I was ready now.

While I looked at Craigslist for “market research,” I hesitated to list my spare room there. Nextdoor would have also been an option, but I didn’t list there, either. I chose not to list on them because I didn’t want to have to filter through a bunch of scams or people with sad stories, but I did regularly look at them for people seeking housing, just in case. For my own listing, though, I decided to target a group of people who I knew would be stably employed, yet not likely to stay long-term: travel nurses.

One of my friends had been a travel nurse years ago, but I learned more about how it works from an acquaintance I made at a Meetup shortly after I moved here. I learned that the local hospital used a lot of travel nurses. Contracted medical professionals like travel nurses get a housing stipend, and they can decide to use it all or pocket any extra to supplement their contracted income. The placement agencies will usually find nurses housing in furnished apartments that exhausts their housing stipend. In this area that housing is not in Napa, but a community just to the south. The commute during rush hour is slow, and the location is near a boring strip mall. While my room didn’t offer the privacy of an apartment, I could offer a traveling nurse a short commute (10 minutes maximum to the hospital), a lower monthly cost than the standard housing (therefore increasing their income), and proximity to nice restaurants and leisure activities. I found a Facebook group for traveling nurses and listed my room there with a few photos.

Then I had an opportunity fall into my lap. One of the women in my knitting group mentioned that an intern at her company needed to find a place to stay. The housing he had lined up fell through, and he had been living in an expensive hotel. I suggested she put us in touch and that’s how I acquired my first short-term roommate. The timing wasn’t ideal since he’d be here during my surgery and while my sister was staying with me, but we worked it out. While I offered to let him stay with me through the end of his internship in December, he was focused on finding a place of his own and only stayed with me two weeks. When he moved out at the end of September he sent me an electronic payment for the rent, and left me with a very nice bottle of wine.

Now that I knew this arrangement could work, I redoubled my efforts. I kept checking the travel nurse Facebook group and saw that people most frequently mentioned finding their housing through Craigslist or Airbnb. I was still reluctant to list through Craigslist, but I had had positive experiences using Airbnb as both guest and a host, and lots of positive ratings as both. I took photos of the room and the common areas of the house, built a listing on Airbnb specifying a minimum 30 night rental, and posted a link to it on the travel nurse group.

Within in couple days the inquiries started rolling in. I had six in one week: travel nurses, a business professional on a short-term contract, and a couple interns in the wine or restaurant business. Most people wanted to see the house and room. I was open to showing them the place, but told each one that I had multiple inquiries and wouldn’t hold the room for them. Over the weekend I showed the place to a young man who will be interning at a restaurant up the Valley. His mother and sister accompanied him and we had a nice, short visit while they viewed the house and room. A few hours later I got the confirmed booking request and accepted it.

So, starting next week I’ll have my roomie in place through the end of February, and I’ll also get the bonus of income AND lots more tax deductions for my “rental property.” 🙂

Revisiting the budget

I track my spending in Mint as much as possible and check it several times a month to see if my spending is in line with the budget I’ve set. It rarely is, but I don’t worry about it much as long as I’m not spending more than my income for several months in a row and see a consistent uptick in my bank accounts.

A few times a year I try to adjust the budget categories in Mint so I’m not seeing too much red when I sneak a peek at my dashboard. In the past three months I’ve had some big changes — buying a house, and a change in salary — that require me to adjust my budget lines, so let’s dive in.

First, the income line needed to be adjusted to reflect my recent raise. It wasn’t a lot, but it means I should see roughly another $200 in income every month. Last month I also received a much better bonus than I had expected. Once all the taxes, my 401(k) contribution, and other deductions were subtracted, I ended up with enough to pay more than half my expected property tax bill, so that makes me happy. Finally, September was one of the two months out of the year where my 26 pay periods yield three paychecks. It’s like having a little bonus twice a year, and is very welcome right now. 🙂

My expenses have changed with the purchase of a house. My mortgage payment is $200 more a month than my previous rent payment, so I had to adjust that budget expense line. The expenses that fall under “home services” and “home furnishings” have been so crazy high that it’s been hard to effectively plan for them, too. This is an adjustment period, so I’m just trying to track those anomalies and try to balance them out by under spending in other categories. I’ve been mostly successful with that strategy, including:

  • $354 under in Groceries
  • $759 under in Restaurants
  • $184 under in Gas & Fuel
  • $585 under in Utilities
  • $90 under in Gifts
  • $615 under in Massage Therapy
  • $124 under in Books

I use the roll-over method in Mint, so these figures are based on several months of under spending that carries over to the new month.

I’m super proud to have brought down my food expenses since I had been overspending in both the grocery and restaurant categories most of last year. I just had to stop treating myself and others so much. Since I telecommute most days, I don’t drive often and use little fuel. I’ve also been saving quite a bit on utilities since I canceled the premium channels in cable. The rest of my under spending is in areas that are discretionary and very flexible. I attach a budget to these categories simply to keep myself from splurging too much.

My “savings” in these areas, however, are not only offset by the increase in spending on home stuff the past few months, but some other areas, too.

  • $281 over in Entertainment
  • $988 over in Pets
  • $543 over in Clothing

I budget $40 a month for entertainment expenses and most months I only spend about $10 for my Netflix subscription. But I bought a 3-day pass to Bottlerock early this year, and that cost $331.50. I also bought the Lemonade album online, which set me back another $17.99. Those splurges are hard to work off unless I completely cut out all other entertainment expenses. I use my Netflix pretty heavily and like to go to a movie every few months, so that’s not going to happen. Instead, I think I need to figure out a more appropriate amount to set aside each month that would allow for the big ticket amusement expenses.

Clothing is another budget line for which I find hard to set a reasonable target. I buy clothing sporadically — maybe once or twice a year — but when I do buy clothes, it’s usually quality stuff for work that costs a few hundred dollars. I had tried setting up a budget line for clothing expenses every few months, but it was still not working out very well. For now I just don’t worry about it since I’m not having problems paying my bills or building savings.

Setting a budget for pet expenses has been a true challenge lately. For the past year, Hannah dog has had regular visits to the vet for bloodwork to monitor her liver health. She’s also had an ultrasound (and will likely have another before the end of the year), and has started on two new meds and a new supplement that set me back about $100 a month. I’m not going to start cutting expenses on vet bills, though, since I don’t think any of these expenses are truly over the top. Hannah is in her senior years and I don’t want to be cheap and take the risk that she’ll suffer sudden liver failure.

Actually my biggest expenses under the pet line are for pet sitting. Every time I’ve traveled this year I pay a minimum of $50 a day for pet/house-sitting, plus I pay a dog walker every week to take Hannah out on walks. The latter expense may seem superfluous since I’m home and should be able to walk my own dog, but I do this as a way of keeping my dog walker “on retainer” so that when I do have to report to the office and be away for 12+ hours I don’t have to scramble to find someone to make sure Hannah has adequate breaks. I’ve also made three trips back to Chicago this year for work or family events, and each trip has necessitated at least five days of pet/house-sitting.

As much as I like Mint, I have a difficult time using their budget feature. When I was trying to determine if I could afford the increased expenses associated with buying a house I looked at average expenses over time and not the amount I had set aside in my budget. I’m thinking that’s what I should do to try to smooth out the red lines in the budget for now.

Anyone have a better suggestion for how to use Mint’s budget feature or tips on how to smooth out the irregular expenses that cause spikes in budget categories?

If I had a windfall…

Over on the Grumpy Rumblings blog nicoleandmaggie have regular posts about money. The last two weeks there have been some particularly resonant posts. In one, readers were asked what they would do with a windfall, and in the other they were asked whether their parents struggled financially when they were growing up. I feel that these two posts can be closely related to each other. After all, most of us learn about money from our parents, even if that is only indirectly.

Growing up, money wasn’t something we had in great supply, but we weren’t poor. Both of my parents worked, but as far as I can recall my mother worked mostly part-time jobs (one memorable job was crossing-guard) until I was in high school. At that time mom got a full-time job doing phone work and data entry that she really enjoyed. My father was a foreman at a paint factory and worked the night shift most of the time. He said it was because he was paid extra for that shift, but my parent’s marriage wasn’t great and I’m sure he was glad to be away from the family stress, too.

We lived in a house in the suburbs. It wasn’t a prestigious suburb and we lived on the less desirable side of town. Sister and I were sent to private, Catholic school from Grade 1 through Grade 12, but private high school was outside my parent’s means. We went on vacations every year that usually involved camping using one of a series of campers my parent’s bought used. We didn’t get a “new” car that hadn’t been previously owned until I was 15. (And that car was hard for me to learn driving on it because it was a manual transmission!)

It wasn’t until I was in high school that I started to understand we weren’t as well off as many of my schoolmates. Wearing uniforms every day really helped equalize things in grade school, but when I was getting clothes and shoes for high school it was always at Kmart and never at the nicer stores. As soon as I was old enough to work (15 with a work permit) I got a job. After that I was expected to pay for my own clothing and fill the tank for the “beater” car my dad bought so I could get to and from work. When I was 17 my parents separated. It took three years for the divorce to become final and much more was revealed to me about my parent’s finances during that time.

I think my mother was the more frugal and cautious person who managed our money very well during most of my childhood. Dad seemed interested in money-making schemes that involved more risk, such as flipping houses. (He failed miserably at it and never paid back all the money he borrowed from me to get started in it.) Mom’s frugal habits could be over the top, but she did teach me practical habits about running a household on a budget. Overall, I don’t think I saw much struggling going on around money, but that doesn’t mean we had a lot of it, either.

Mom now has very little income and is very reliant on stepfather for her support. I’m not sure what my father and stepmother’s financial situation is, but they seem to be able to take care of themselves. We never talk about money, though. The crappy things dad did during the divorce make money talk something to avoid.

As for what to do with a windfall, well, there are only a few times I felt like I had a personal savings windfall or one I received in some other fashion. The first time I recall getting what seemed like a generous sum of money out of the blue was after my parents separated. Since I was still a minor at 17, dad had to provide some money for child support. The amount he had to fork over seemed very generous and mom gave me the green light to purchase luxuries like clothing from trendy stores. I had a blast buying funky tights, skirts, and tops to wear in my last months of high school. (Think Cyndi Lauper “Girls Just Wanna Have Fun” fashion.) As I recall, dad only paid that generous child support a couple of times and then stopped the payments a few months before I turned 18, but I still enjoyed those one or two brief splurges.

It was several years later that I received my next windfall of cash. I had completed undergrad, was working full-time, and had moved to my first apartment. My grandmother died and left a little money for sister and I in CDs that we were able to cash in when they matured. The first round of money was around $2,000. While I could have used the money to pay down student loans or start a retirement account, I instead decided to use it on a two-week vacation in Europe with some college friends. I don’t regret it one bit. The next CD that matured was around $800, I think, and I used most of it to buy a TV and VCR.

In the years that followed I never had windfalls, but I supported myself, paid my bills, and succeeded in paying off my student loans at 31. I was married by then and had found that living with a financially stable partner really helped me be more financially successful, too. My (now ex-) husband was nothing like my father; the ex was conservative with his money and was a great saver. We built up quite a bit of wealth together as DINKs, and I miss having such a high degree of financial security.

I learned good money habits from my marriage and have been able to take care of myself quite well, but I’d likely have a much higher net worth if I had never divorced. I can see how that could work the other way around, though, if my spouse had poor money skills.