Tag: finance

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Reminder about taxes

Because some folks I know got hit with this one recently, here’s a reminder that when you are Married and you file your W4, the “married” checkbox makes the form assume you are the sole earner for your family, and it calculates your withholdings accordingly.

Yes, this is idiotic.

No, I don’t know why the W4 is written that way.

Here is a Personal Finance Reddit post with more information. As always, the IRS is the final arbiter on this stuff; internet people can try to explain it but always go back to irs.gov to be sure.

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Luxuries vs Necessities

Saw this video today, and thought it was worth sharing. Tl;dw : in the past, luxuries were relatively much more expensive than they are now.

This also reminds me of how, when I was a high schooler (late 90’s) making a prospective budget for when I moved out, I put down $2500/mo for food and $500/mo for rent. My mom saw it, laughed, and told me to swap those two numbers. Rent wasn’t $2500 bad at that time (my first crappy apartment was $1000/mo in 2006) but it wasn’t $500, either.

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Easy Budgets by Michelle Singletary

This column by Michelle Singletary really gets at the meat of how to make a simple budget. (It’s basically what I do.)

https://www.washingtonpost.com/business/2024/01/10/easy-budget-no-app/

  1. Write down all the money that’s coming in.
  2. Write down all the money that’s going out.
  3. Set limits on your spending.
  4. Do the math. (I use Excel/Google spreadsheets for this.)

This format might not work for everyone – I have friends who swear by You Need A Budget (YNAB), for example – but it works pretty well for me.

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Family politics: education funds

If you are the parent of a young child, and a family member offers to pay for their education, you thank them politely and then conduct your planning as though they are contributing $0.

Exception #1: if they show you the statements every year and have a coherent plan for how they will conduct themselves if the child does not conform to their expectations of behavior, how this savings account interacts with the Medicaid clawback period, etc. Then you can safely count on the dollar value you see.

Exception #2: they write you a check for you to deposit into the child’s 529 plan.

Note that you can start saving for a future child’s education before that child exists, in most states. Create a 529 investment account with yourself as both Owner and Beneficiary; then, when the child is born, transfer Beneficiary to the child. You remain the Owner.

If you are a grandparent who plans to contribute to a child’s education, you need to first research the cost of a college education in the state where your grandchild resides. I had a friend whose in-law did the thing in the first section here, and it turned out they had saved exactly $500. Her child (expected to graduate in 2031) will probably have college costs three orders of magnitude greater than that.

You do not have an obligation to cover the entirety of anyone’s education, of course. But we are grandparents of action; lies do not become us. A lot of people in my parents’ generation seemingly think that college still costs $250 a semester despite what they paid for OUR education.

If you are the parent of a high-school aged child who is looking at colleges, you need to be explicitly clear with them about what you can and cannot afford to contribute to their education. Morally speaking, you also owe them help with filling out the FAFSA. I’ve heard enough horror stories of people whose parents refused to “give the government that information” (IRS notwithstanding) and denied their children any opportunity at grants or scholarships.

I still remember a high school friend whose parents just didn’t tell her how much they could afford, allowed her to get her heart set on a private college in the northeast, and then told her they could only afford in-state and she’d have to make up the rest in loans. She was extremely sad to have to give up her first choice school, even though she absolutely made the right decision in going to an in-state public school rather than taking out loans. Her parents should have been realistic from the start. If you are a parent in this situation: swallow your pride and be honest and clear with your child.

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Caregiving work is work.

Caregiving work is work. People who stay home to take care of children or the elderly should, at the VERY LEAST, earn Social Security quarters for it. (And ideally, everyone would receive a UBI that would allow them to do things like caregiving work without having to worry about losing the roof over their heads.)

As technology advances, and society gets the ability to be more soft and thoughtful (rather than having 90% of the population doing subsistence agriculture or else we all starve), then we should be giving people MORE benefits and MORE ability to do things like unpaid caregiving work. Fuck the Gods of the Copybook Headings. We can defeat them with technology, if we put our minds to it.

But that doesn’t help the shareholders, does it?

My friend sent me this link to a government website about registering as a caregiver for a disabled adult! As noted there, you can contact your state’s Medicaid office to learn more.

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A dichotomy in financial advice

Something that crystallized recently, for me, is that financial advice from friends seems to come in two basic shapes:

  • “Should you really be spending money on that right now?”
  • “Have you put a line item in your budget for that?”

I used to be more the first; but now, I’m striving to aim for the second. It’s less judgemental and more accepting of the fact that not all of us have the same financial priorities, and that’s okay.

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Short opinion : landlords

Being a landlord is not “passive income” and the people who treat it that way are bad people.

Being a landlord is a job. You have to maintain the property your tenants live in. That is your responsibility for your part time job that you took on when you bought or inherited this property.

You can pay a property management company to do the landlord job for you, if you want. That’s definitely your prerogative, and it’s a good solution, especially for the people who just want to rent inherited property out until they’re ready to retire into it, or whatever.

But landlord is a job.

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Cost of living increases and housing

When I got my first job and moved into my own apartment, in 2006, I rented a “one bedroom with den” for $1000. It was about 1000 square feet.

At the time, I was making about $45,000 a year. By the 30% rule, my monthly max for housing costs should have been $1125, so I was doing okay there. (And it definitely helped that I had no student loan debt or car payment. I have a lot of class privilege.)

For grins, I went back and looked at that same apartment complex today. At first, I was impressed: the one-bedrooms are still being rented for $1000! But then I looked closer. The $1000 unit is 450 square feet. There is no “one bedroom with den” option.

Turns out, that’s now listed as the “two bedroom deluxe” unit, and it rents for $1750. (The “den” did have a window, so I don’t know why it wasn’t listed as a Bedroom in 2006. I don’t know what year the complex made this change.)

For comparison, someone at my same entry-level job today would be making $60,000. By the 30% rule, their maximum on rent should be $1500. So they probably shouldn’t live in the “deluxe 2 bedroom” apartment, but they’d still be okay in the 1-bedroom; and they’d be able to spend the “extra” $500 (girl math!) on, I don’t know, student loans or something.

I honestly think more places should be renting out efficiency apartments like that. It’s one part of a solution that’s going to have to be many-faceted (because one single solution can’t fix everything).

For reference, with the Maryland minimum wage of $15, the annual salary would be $31,200, so about half of what this Entry Level person today would be making. So to live in a 450 square foot one-bedroom efficiency, where I live, you’d need to have a roommate. Two people could swing it for the two-bedroom, if they were thrifty, but it would be tight. They could get a roommate for the second bedroom, which would make it a bit easier; 3 adults in 1000 square feet is not the most fun thing, but it’s workable.

In my ideal world, a single person earning minimum wage would be able to rent the aforementioned 450-foot efficiency apartment for 0.3 of their monthly gross wage, period. This should be our societal standard for “can someone afford to live on the baseline level, y/n?”

Anyway. Small soapbox over. Just ran those numbers today and thought it was interesting. (And if you’re local and you want to know the name of the complex, let me know. I’m not posting it here though because they’re not paying me and I didn’t love them THAT much.)

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Negative amortization should be illegal

That’s it, that’s the post. Negative amortization should be illegal.

If an account is in a position (like with student loan deferments or forbearance or what have you) where someone needs to make a lowered payment, and is approved for that lowered payment, then the interest accrual should be paused for that period.

I wonder if any bills are being proposed that do this?

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On clothing and consumerism

This tweet resonated pretty hard with me today.

https://twitter.com/sesmith/status/1622296174777729026?s=20&t=Qg-VB8q-Qoj–W1k8G-H0w

I hadn’t ever thought of it in these exact words, but this is basically how I frame my decisions about what to buy.

The phrasing I’ve used in the past is: Yes, I can afford this; but I shouldn’t afford it. (I think I may have heard my parents say that once but I’m not positive.) This attitude has served me well as I transition to a lower household income than what I had before: I’m putting off a lot of household furniture purchases and so forth, because I don’t want to find myself in a position where I am spending money on credit card interest. (That does not spark joy.) Some interest is unavoidable; emergencies happen, mistakes happen, etc. But anything I can do to minimize that helps me feel more comfortable and secure in my life now.

And the positive ethical implications of lower overall consumption are just the icing on the cake.