The SoapBoxers

Personal Responsibility

My husband and I just found out our rent is going up…again. A two bedroom apartment is now going to cost us over $1,000 a month. Yes, to rent. I look at myself and where I am in my life (30 years old, three kids) and think, “Why don’t I have a house yet?” and then I’m reminded I got a bit of a late start in my married life.

You see, one month after my husband and I got married, he got his deployment orders to Iraq. We already had a toddler (we did things a bit “out of order”) and were in our mid twenties. With his service in the Army, we didn’t really want to buy at that time because he had been talking about going active duty (he was in the reserves). So the year he was in Iraq, that accounts for one more year of my mid-late twenties.

EVERYONE was buying houses then. Even those who didn’t qualify. I had been saving money for a decent down payment, even though I knew we would qualify for a VA loan. And yes, I could have bought a house while he was overseas, but I didn’t think that would be fair to him.

Plus, I had a bit of mortgage experience under my belt. The balloon and adjustable rate mortgages everyone was getting was something I knew I couldn’t do. Sure, we could afford $800 a month now, but in a few years when the payments go up to $2000? No.

Some of my friends got in to some really, really nice houses. REALLY nice. Meanwhile, we continued to rent. Some of my friends are still in some really, really nice houses. And some of my friends aren’t paying their mortgage…because they can’t afford it. All too often I hear, “it takes a year for them to foreclose on us, so what’s the point.” So they’re living in their really really nice house, driving a car that the house payments could go in to (again, really, really nice) and not having to clip coupons.

My husband and I, on the other hand, are having to rent. Our rent is going up and the crazy thing about it all, if we don’t pay our rent for one month, we’re homeless. Is that fair?

We decided to focus on the mistakes we made in our early 20’s (read: credit cards) and are two months from having them ALL paid off. We no longer have a car loan as we finished paying it off last year. Yes, our little Corolla is a little cramped in the back with three car seats across and my mini-van was built before I even had a permit (1993) but we own them. They’re bought and paid for. No car debt.

On my way to a school board meeting (to discuss the barn), I drove past a house that was for sale and fell in love. We walked through it yesterday and were amazed. It. Was. PERFECT. 4 bedrooms, 1.5 baths, a big backyard and the tree in the back even had a tree house!!

So we’ve started the pre-approval process and we’re learning quick that our “smart” decision to close our credit card accounts and pay them off, wasn’t so smart. We don’t have any debt (except for student loans) and that’s an issue? No debt, in my mind, is a good thing.

I feel like I’ve been punished for making decisions that I thought were right. Obviously if we can and do make a rent payment over 900 (and going up) a month, we can afford a house payment of the same. It is frustrating learning that my decision to know what I could and couldn’t afford, and being responsible is now coming back to bite me in the—well, you know.

The system is skewed. People should be rewarded for personal responsibility, not punished. I’m not saying this whole effort has made me lose that lesson, either. Come hell or high water, I’m still going to hold myself personally responsible for my decisions. Which is another reason why we had a toddler at our wedding. We chose to have pre-marital sex, conceived a child and had him. It wasn’t his fault. It was our choice. And he’s going to kindergarten next year.

I just hope that he can attend the kindergarten that is in our backyard (yes, the dream house back yard faces the playground to an elementary school).

And I’m teaching my children the same lessons. You MUST be responsible for your actions, your choices and yourself. In my mind, that’s good parenting. No matter what the mortgage system says.

Over the years, I have come to the realization that a lot of people are not familiar with the process of balancing a checkbook.  This is a life skill that can save you a lot of headaches, so today we’ll step through the process.

When your bank statement arrives, you see that the bank balance of your account is $318.42, compared to the balance of $308.52 in your check register.

The following facts apply:

– For simplicity, we’ll assume that this is a brand new account

– The bank charged you $4.52 in service fees

– Per your check register, there are 3 checks during the month

• Check 1001 for $142.13 (groceries)
• Check 1002 for $16.12 (greeting cards)
• Check 1003 for $714.88 (whoa – went overboard at the outlet mall)

– You also withdrew $100 in cash from the ATM

– You had two deposits during the month

• $1413.12 from your day job
• $800.34 from your night job

The first thing you do is deduct the bank service fee.  You enter this in your check register, resulting in a balance of $303.88

Next, we check the bank statement to see which checks, deposits, and ATM transactions have cleared the bank.  These are checks 1001, 1002, and the deposit for $1413.12.  Mark these off in your check register – there is typically a column specifically for this purpose.

Next, add the outstanding deposit to your bank balance ($318.42 + $800.34 = $1118.76).  Hey, cool, you’re rich.

Whoa – not so fast.  Next, deduct the outstanding check (check 1003) and the outstanding ATM deposit.  $1118.72 – $714.88 – $100 = $303.88.  Great – that matches the balance in your check register – you’re done until next month.

What do you do if the numbers don’t match?

• Check your math.  In particular, it is quite easy to make a mistake in the check register
• Verify that the checks cleared for the amount you have recorded in your check register.  You may have written them down wrong, or your sloppy writing may have caused the bank to improperly process a check (not that this has ever happened to me)
• Make sure you you have excluded all cleared checks and deposits from the process, while also making sure that you have included all outstanding transactions.
• Did you forget to record a debit card transaction, automatic payment, or ATM transaction?  If so, record these in your check register and compare the new balance to the number your got during the reconciliation process (the process and adding and deducting outstanding transactions to the bank balance – $303.88 in our example).
• Make sure you recorded the bank service fee in your check register
• If you can’t figure it out, take a break and try later.  If you still can’t figure it out, ask a friend for help.

Next month, things change a bit.  When you start the reconciliation process, you will include the transactions that had not cleared this month (check 1003, the $100 ATM transaction, and the deposit of $800.34), as well as any new transactions.  Check off any cleared transactions in the check register, deduct the amount of the bank service fee from the check register, add outstanding deposits to the bank balance, substract outstanding checks from the bank balance and compare again.

Any questions?  I’ll be happy to go into more detail.

It seems that we live in a world with very different strata of financial awareness.  On the one side, the savvy investors of today have all the information they could possibly need at the tip of their stylus, and they know how to use it.  On the other side, there are a lot of people who do not use some of the most fundamental tools at our disposal.  I really wish that high school would focus a bit more time on financial awareness, considering how important a life skill it is.  Here are a few tips that I’d like to share with today’s youths (and anyone else who might need them).

Balance the checkbook

I know a lot of people never balance their checkbook, preferring to leave a “buffer” amount in checking to cover any mistakes that may occur.  Some people don’t even bother to make an attempt to keep track of transactions.  How often does someone in front of you pay with a debit card and not take the receipt?  Maybe the person has a great memory and remembers that McDonalds was $6.14 … but it’s more likely that the transaction is never getting logged.

Balance the checkbook every month, to the penny.  You’ll avoid overdrafts and you’ll sleep a little better knowing that your finances are in order.

If you have have never done this, if would take a bit of practice.  However, the process is pretty straightforward, and you should be able to master it pretty quickly.  Basically, it is a 3 step process.

1. Write down the balance on your last bank statement
2. Add any deposits that have been made (or processed) since the date of that statement
3. Subtract any checks (or debit card transactions) that had not yet been processed by the bank on the data of the statement

Voila – you should have the balance that appears in your checkbook.  It might take some practice, and you might spend time tracking down occasional mistakes (especially if you have sloppy handwriting like me) but if you keep on top of it, it will quickly become second nature.  If you use software such as Quicken, it’s even easier.

Understand the tax system

I’m not suggesting that  everyone become a tax expert.  However, it would be nice if more people had a grasp of fundamental concepts such as income, deductions and credits.  Start with the easiest form – the 1040EZ.  Interestingly enough, the IRS actually published instructions for all of the tax forms.  You might be surprised at how thorough the instructions are.  Push aside tax phobia and read the instructions.

Understand unit prices

Until recently, it was a safe bet that the largest package of an item resulted in the lowest price per unit.  However, I have noticed some instances lately where this is not the case.  If you’re not good at mental math, bring along a calculator to help you determine if the 12, 18, 24, or 30 pack of Charmin is the best deal.  If you think that a caculator would kill the cool persona you have been grooming for years, pull out your cell phone and use the built in calculator – you can pretend that you’re texting someone.

Other topics

These are just the tip of the iceberg.  Once you get this far, charge onward.  Learn about mortgages (What are points?  How much more will I pay for a 15 year mortgage vs. a 30 year?  How are property taxes calculated), retirement plans (Roth vs. 401(k)), and the stock market (How much risk should I have at my age?  What is an indexed fun?).  Money is an important component of today’s society – those who work to improve their knowledge of personal finance have a leg up on those who do not.