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?

 

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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.

 

Decisions, decisions

All quiet does not mean everything is calm. There was a fair bit of excitement around here the weekend of the music festival, and most of it was not the good type of excitement. I don’t want to engage in gossip or be a complainypants (nor can I promise that I won’t want to relay all the gory details at some point), so for now I’ll just note that I (once again) did not get to use my weekend music festival pass to its full capacity, there are some acquaintances that I won’t be inviting back as guests ever again, and that I was painfully reminded of how much it can suck to be a renter, all in one weekend.

For the sake of context, I’ll elaborate on the latter point just a bit. Two weekends earlier, I had noticed some issues with the drainage in the house. When the dishwasher, washing machine, and shower drained, I heard gurgling noises from the bathroom sink. Although stuff was still draining, I knew that this was Not Good. It wasn’t an emergency, however, so I waited until the regular business hours of the property management company to report it. When I contacted the maintenance department, I was told that I would be contacted after the property manager had been reached for authorization. Meanwhile, the ominous gurgling noises lessened, so I wasn’t panicking.

A series of unfortunate delays ensued which meant the drainage issues did not get addressed before Memorial Day weekend, and I found myself with house guests and a non-functioning bathroom the Sunday of Memorial Day weekend. We couldn’t use the shower, the sink, or flush the toilet, and I was forced to call the management company’s emergency line get help. I placed my first call at 11 AM that day and it took until 8:30 PM to get someone out to address the issue. In the meantime, I spent a lot of time sitting around the house and backyard waiting for notification that a plumber was on the way. By 10 PM that night I finally had a working toilet, sink, and shower, but was still quite frustrated by the experience.

If I didn’t have to go through all those layers of administration to get the drainage issue fixed, I wouldn’t have been stuck missing 95% of the music festival on Sunday and stressing over finding a place to pee. The only “benefit” of the situation: I wasn’t personally on the hook for an emergency plumbing job on Sunday of a holiday weekend.

Now that the context of “being a renter can really suck” has been elaborated, let’s look at the decision staring me in the face right now: I’ve put an offer on a house. Will this lead to an actual sale? Maybe. I’m trying to dispassionately analyze the situation, and have been talking about it with friends over the past several days.

I’ve put offers on two other houses here in Napa and lost them both. Back in Chicago, I’ve also been through the entire buy/sell cycle twice, so no part of this experience is new to me. I’ve run my numbers multiple times, received approval on a mortgage and locked a rate, opened escrow, and had a home inspection in the last 5 days. The house has two bedrooms, one bathroom, and was built in 1941. It is about 1100 sq ft and has hardwood floors, new windows, upgraded kitchen and bathroom, a single car attached garage, and a big backyard already set up for entertaining. All of the kitchen appliances (range, refrigerator, dishwasher, microwave with vent) are new and included in the price. The washer and dryer are included, but aren’t new and look a little tired.

It seems nearly perfect, but I am being cautious because of a couple of things that surfaced in the inspection.

  1. The selling agent states that the house is bolted to the foundation (meaning, it’s been “retrofitted” to mitigate damage from an earthquake.) My home inspector couldn’t verify this, mainly because of the next issue.
  2. There is knob and tube wiring in the house. The home inspector was unable to get into the crawl space under the house because there was K&T wiring located too close for his comfort. He found another way to look into the crawl space, but didn’t see evidence of the foundation being bolted, so he couldn’t confirm it had been done. He recommended that I get documentation from the homeowners about the work.

Because of that wiring, I’m going to need an inspection by a licensed electrician. I talked with my insurance company yesterday, and they’ve indicated that they will insure the house if I can get a report from the electrician that the wiring is safe. Even if the electrician thinks it is safe, I’d still need to get the electrical service replaced for my own peace of mind and to allow me to live in the house comfortably with my modern appliances. (I really want to be able to run the washing machine, make coffee, and have my computer on at the same time without losing power.) In less of a seller’s market, I should be able to use these faults as negotiating points, but I’m not sure if that will work here and now.

Putting aside those concerns, let’s exam the affordability of the house.

  • Down payment and estimated closing costs should leave me with eight months of emergency fund (EF) living expenses in the bank. Savings for things like vacation or a car replacement will be wiped out, though.
  • The monthly mortgage payment should be just under $200 more than I’m paying in rent for a smaller 2/1. That mortgage payment does not include insurance or taxes, however. (I was a bit surprised that I was even offered an option to get a mortgage that doesn’t require escrow of those expenses, but I’m happy to deal with both taxes and insurance on my own.)
  • A budget which includes line items for taxes, maintenance (at 1% of purchase price), increased insurance expenses (even pricey earthquake insurance), and increased utilities leaves me with roughly $70-$100 “extra” each month. The budget line items for “wants” (like $$ music festival tickets) is not covered, though, nor is savings for things like vacations and car replacement. This budget does include generous lines for things such as eating out and groceries where I’ve been challenged with cutting back in the past. So it is by no means “bare bones.”
  • Property taxes are a straight 1.25% of the purchase price. I have enough money in savings to pay one full year of property taxes, but it would drop my EF to just over six months of living expenses. Luckily, I won’t have to pay anything until November 1, but I’m not sure how much will be due then. (In Cook County/Chicago, tax bills were issued twice a year, too, but the first payment was higher than the second.)
  • If I have to pay out of my own pocket to upgrade the electrical system or deal with any unforeseen repairs, then I’ll be dipping into the EF even more.

There are some positive financial events on the horizon for me this year, though. Between now and the end of the year, I’ll be getting two additional paychecks (being paid bi-weekly has its perks!), so those funds can go straight into savings, home maintenance, or be used for discretionary expenses like home furnishings. In September I should see some sort of salary increase and possibly a bonus. I never count on bonuses (although I usually get something), but I’m hoping to get at least a small salary increase that would bump my take home pay by about $100 a month.

This morning I found myself pulling out my tax files for the past two years and creating a worksheet to validate my assumptions about tax implications of a house and mortgage. In 2014, I was still a homeowner and had paid property taxes and mortgage interest, which are deductible expenses. In 2015, I was a renter and had no deductions. My deductions for mortgage interest and property taxes would be quite substantial for the next few years. To me, the main value in these deductions would be to get an annual refund of cash that I can then put aside or use for property maintenance. That worked well for my much larger 1951-built house in Chicago, and I don’t see why it wouldn’t work here in California.

If I took on a housemate, I could also start using the house as a way to generate more monthly cash flow to help me tackle home maintenance/repair expenses, add to the “wants” portion of my budget, or put in savings. It’s not my ideal to have an unrelated housemate with whom I share a bathroom, but in my present state of mind I feel that it’s a compromise I could make. Around here, it’s pretty easy to rent a spare bedroom for $700 to $900 a month, even with a shared bathroom. The other benefit of having a housemate is that there is a built-in housesitter, and the potential to negotiate pet care more easily when I’m away on business trips (or personal trips, if I can scrape together vacation money again.)

Other options for generating cash flow/savings are taking on a seasonal intern in the wine industry or a traveling nurse/medical professional as housemates for only a few months a year, or looking into Airbnb. (The latter would require me to get a license from the City of Napa and would require some work on my part to turn over the room, though.)

By next Tuesday all the inspections (roof, pest, and electrical) will be completed and I’ll have to make a decision about whether I should go forward or walk away. Home ownership can be stressful, but I do miss being a homeowner. I’m grateful that I found a great place to “land” in the Bay Area, but I don’t feel like I’m thriving in my current living arrangement, just surviving.

What would you do in my place? I’m taking all the advice I can get at this point, so please do leave a comment!

Odds and Ends: Hello Summer! edition

Yeah, I know summer doesn’t actually start until next month, but this coming weekend is the long Memorial Day weekend, and that’s the unofficial start to summer. This weekend is also BottleRock weekend here in Napa, and I’m very happy that a) unlike last year, I have no urgent work projects that prevent me from fully using the weekend pass I bought several months ago, and; b) my health has recovered enough that I can enjoy wine or beer and should be able to find something to eat there (as long as it isn’t too spicy and it’s very high fiber). 🙂

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Speaking of health, I have an appointment with a surgeon on June 1 to talk about surgery to address my recurrent bouts of diverticulitis. I met with a new primary care doctor last week and he seconded the doc that diagnosed this most recent occurrence by saying surgery is something I should seriously consider. I’m not excited about another abdominal surgery this year, but I want my life back. I want to be able to travel for work or pleasure. I want to be able to develop a consistent diet instead of vacillating back and forth between high fiber and low fiber. I want to not have to deal with pain and “bathroom issues” several times a year. I want to not be put on heavy, nasty antibiotics several times a year, too. If I need to have another surgery to have a better than average chance of avoiding all these issues, then I’m game to try.

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Dad asked me for my email address a few weeks ago when I was in Chicagoland and had breakfast with him and stepmother. Somehow he had lost it. Now I regularly get spammed by my dad with stupid chain emails. I never open them, as I can tell just from the subject lines that I don’t want to read them. :-/

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I had an eye exam a few weeks ago and got new frames and a new prescription. Things are still not very clear in my right eye when I’m reading, but it’s OK. I’m sticking with reading ebooks over paper books since I can adjust the type as needed.

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My dog is now 13 years old and it’s upsetting to me that she is starting to show her age in some ways. Last fall she started occasionally vomiting and having diarrhea for seemingly no reason. She woke me up one morning when I heard her vomiting on the bathroom tile floor, and I was scared when I saw there was blood in it. No one seems to know exactly why she has these problems pop up here and there, but I’ve been taking her back and forth to the vet regularly to get her ALT levels measured. This is a blood test they use to measure liver health (not function, per se, but as a marker for potential disease or damage to the liver). Since the values have been abnormal for months she had an ultrasound of her liver yesterday. She has some nodules, but the vet said not to get too worried about it right now. We’ll do another ultrasound in 6 weeks. She also got a bladder infection last fall that took a couple months (and two antibiotics, one very costly) to shake.

She’s on a bunch of supplements now: Vitamin E, fish oil, Cosequin for joint health, probiotics, and a cranberry supplement to ward off another bladder infection. Needless to say, my budget for pet care over the past year has been seriously out of whack. I’m not complaining about being able to afford good care for my dog (I can), just that it’s difficult to budget accurately how much her care is going to cost since there are all these tests and vet visits. I love her fiercely, so I’m not going to scrimp on her care.

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My food budget continues to be a challenge for me. It doesn’t help that I have to restock my pantry with each new bout of diverticulitis. When I’m in the midst of an “attack” I have to be on liquids only for a day or two. While I usually keep broth on hand, I don’t consume fruit juice or gelatin on a regular basis, so I have to buy that. Then I have to buy and consume regular (as opposed to whole grain) pasta and noodles, white rice, white bread, white crackers, canned vegetables and fruit, and ground meat for a few weeks. When I’m able to eat normally again, I go back to eating whole grain products, beans, spices, and crunchy/high fiber veggies like broccoli and cauliflower.

Truthfully, even without the pantry challenges the biggest bite into my food budget is dining out. When I’m well, I eat out at least twice a week and my preferred vendors aren’t cheap, fast food. That means each week I’m spending at least $30 – $40 on dining out. I’m just going to have to bow to reality and adjust my budget to account for this since I’m not willing to give it up right now. I’m not broke or skating close to the edge every month, so there’s no reason to deprive myself. I merely want to get a handle on what my “average” expenses are and make a budget that reflects it.

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April and May were very good money months for me. First of all, April was one of those months where I got three paychecks. Since I’m paid every two weeks, there are always two months out of the year where I get three paychecks: one of these “bonus months” always happens in the spring, and the other in the fall. My monthly budget accounts for only two paychecks per month, so the extra paycheck is always a nice bonus that gets tucked into savings.

I also had a big federal tax refund this year. I know it’s best to engineer your withholding so this doesn’t happen, but this was truly out of my hands. My employer has set up several “legal entities” for risk mitigation purposes, and due to some changes in my team structure that took month 6 months to work out, I was sequentially employed by three different legal entities last year. Each one started my withholding for social security from scratch (as they were legally obligated to do) so I had way too much withheld in this area last year. Between that and an investment loss, I raked in a refund that was greater than the ones I routinely got as a homeowner with a mortgage and business expenses related to my room rentals. Again, this refund was deposited immediately in my savings account.

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Despite having a healthy amount of money to use as a house down payment, I’m still priced out of affording a little house in my preferred neighborhood here in wine country. I’d have to put down much more than 20% to get a monthly payment I could afford without introducing making big changes to my budget (such as cuts to pet care and dining out, for starters). I still keep looking at properties as they pop up, though, so I can remain educated about the market. If I really, really needed to buy something, I could do so in a non-preferred neighborhood or town, but I have no deep need to do so at this time. I’m getting better at cultivating patience in this area. And I’m working on ways to increase my monthly income. But that’s something I should write up in another post.

How are you doing these days?

 

February budget: a work in progress

As previously noted, I made some changes to my recurring expenses and discretionary spending goals for February. It’s a new month, so I decided to pop into Mint and check my Trends report to see how I did.

The two areas that were “low hanging fruit” and easiest to adjust were around TV and food. In January, I called AT&T Uverse and changed to the lowest cost TV package they had. Last month’s bill for Internet service and TV was $76.50. (Most of that expense was for Internet service. I pay for a higher tier connection since I telecommute.) I expect the bill to be a bit higher going forward as the first bill after service change is usually a little wonky, but it will still be about 50% less than was most of last year.

My Food & Dining expenses had been quite high last year. While I enjoy cooking and preparing meals at home and do it quite a bit, I was also enjoying treating myself (and sometimes friends) at some of the wonderful restaurants here in Napa. When sister was visiting last spring, we joined a wine club, too. Alcohol can be a big expense, especially when splurging on fine wines.

Last fall I quit that wine club, so that obligation would no longer have an impact on my budget. At the end of January, I joined a different wine club, but the purchase commitment for this new club is much lower and more affordable for me. Unless I quit drinking altogether (which I don’t see happening!), I’ll always buy wine here and there and wine club membership doesn’t involve any up front costs. Wineries are good places to bring visiting guests, too, and as a wine club member my guests and I will get free tastings. Besides wine, I’ll still buy other alcohol like beer and hard liquor regularly, I just need to keep all of these purchases within the general Food & Dining budget guidelines.

As part of my cost-cutting goal, I adjusted my restaurant budget down from a very high $400 a month. As I looked at my Trends report over the past 12 months, I realized that I had set that budget up back when I was with B to account for the fact that when we dined out I regularly paid for both of us. My new target was $150 a month, which seemed perfectly reasonable for a single person who mainly eats at fast casual places no more than once a week. That would have worked, too, except I had two big dining out events last month with friends, so I blew my budget by about $100. It’s a consolation to me that my spending in January was more in line with my budgeted amount, so I think I have the right numbers in my budget, I just need to be more diligent about these “special” dining opportunities. Since my Budget line in Mint is set to rollover any leftover amount, months of higher expenses should be smoothed out by ones with lower expenses.

I manged to come in about $50 less than my $400 monthly grocery budget, so that’s a promising trend. I can eat very well on that generous grocery budget, and also have enough to make extra to share with the friends, neighbors, and my boyfriend.

Of course there are always “unexpected” expenses that pop up. In February, I paid what I hope are the last bills for medical expenses from my early December hospitalization. The only real upside of my body’s apparent melt down late last year (starting with the eye problems in September) was that by the time I had to go into surgery at the end of December I had met all my deductible amounts for the year. So that very expensive robotic laproscopic procedure ended up costing me $0 out of pocket. I’m very grateful that I have good health insurance as the EOBs were showing expenses of about $115,000 for the surgery and hospitalization, anesthesia, and doctor.

For 2016, I’ve elected to withhold the maximum amount for my pre-tax flexible medical spending. Although $2,550 may sound like a lot of money to spend on health care expenses when I have good medical insurance, I’m still paying quite a bit for medications these days for the eye. (One of my eye drops was $63 last time I refilled it, and the other was $50.) I also have co-pays for specialists I see at least every two months (ophthalmologist and gynecologist), and a potential eye surgery at some point. Any medical costs paid for with my pre-tax dollars don’t impact my monthly budget, so I hope to stretch that $2,550 to cover at least 90% of the co-payment and prescription cost I have this year.

My only real disappointment for the month of February was that I completely forgot to pay most of my bills on time! I have an automatic funds transfer and payment set up for my monthly rent, but my other bills (utilities and credit cards) are ones I like to review first before I schedule the online payment. I do this so diligently that I ignore the automatic alerts and reminders I get regularly from Mint. When I saw that I had a finance charge in my transactions, this alerted me that something was very wrong. Luckily I was able to get the finance charge and late fee waived with a phone call. I just hope that my credit history hasn’t taken a hit from this mistake.

I’m still making adjustments to my Budget lines, but I’m feel like I’m on the right track now. Simply paying attention to my spending is a big help, and I hope to see steady increases in my savings this year.