Is being debt-free really the be-all and end-all to financial well-being?

Maybe.  Maybe not. 

It really depends on the interest rate.   Conventional wisdom says that you should quickly pay off debts with interest rates higher than 5% above the 10 year T-note rate (which was around 2% as of yesterday afternoon).  So, pay off anything above 7% should be a priority after your emergency fund and getting any company match on 401k contributions.  That’s kind of a no-brainer.  The average return of the stock market is 7%, so absolutely take the guaranteed money saved by paying off high-interest debts quickly.

Lower rate debt is an entirely different beast.  I’m pretty debt averse.  I don’t exactly have Dave Ramsey levels of debt-hate, but I don’t love taking it on.  And if I do take it on, I want to pay it off ASAP.  And credit card debt is a HUGE no-no unless it’s a calculated purchase on a zero-percent interest and I can commit to paying it off at least three months before the interest-free period ends.

Along that line, I did take on a fair amount of debt last year.  In March, a tornado dropped a couple of trees on our house.  The insurance took care of a lot of things, but for various reasons, we decided to go ahead and pull the trigger on some renovations that we’d been wanting to do and borrowed some money to do it.  In November, my husband was in a wreck that totaled the “family car.”  It was paid off, and the insurance covered the loss.  But we ended up replacing it with the same exact vehicle, only with 60k fewer miles.  We borrowed a little bit to make up the difference.  Were these expenditures necessary?  Not really.  Did it make me happy?  Yeah, it kind of did (well, I didn’t really want to replace my car…I loved her…but maybe I’ll get a few more years out of this one with the lower miles).  Both loans are very low interest, around 1-2% (I love my credit union).  The reno loan was also a 12 year loan, so payments are super low.  I never intended for it to take that long to pay it off.  My goal was 4 years and at one point it looked like we might do it in two, but OT has recently dried up.  We’ve been throwing every extra cent we have towards those for the last 10 months and have cut four years and more than $1000 off the interest that we’ll wind up paying back.

The math says that I should be maxing out my retirement accounts before paying these off.  With the extra money we’ve been throwing at them, we still have 7 years left if we only made the actual payment each month.  We have budgeted $1500 per year of base income (i.e. non-overtime or side gig income) to extra payments.  Over seven years that would save us $826 in interest.  But, if instead we made the actual payment and put that $1500 into retirement accounts, assuming that 7% return, we’d earn nearly $2500 in interest over those 7 years.  So we’d earn about three times what we’d save. 

This is where the psychology of money comes into play.  I absolutely know that following the math is the “right” thing to do.  But I hate, hate, HATE being in debt and I keep trying to convince myself that paying off debt is the “guaranteed return.”  I don’t want to make a payment every month (actually every paycheck since it’s a bi-weekly payment).  I want the liabilities column on my net worth spreadsheet to be $0.  But at the same time I want to do the thing that’s most efficient based on the math.  All that to say that I’m having a really hard time pulling the trigger on making this change.  It’s not going to make or break retirement.  By the time I can retire, that extra money should really represent only a small portion of my portfolio. 

The Fiscal Year Cycle

I can’t be the only one who has a defined cycle of my fiscal year, right?  Right?

For me, the cycle starts in about September.  September and October are when we first start getting word on stuff like how much money do we get to shelter in TSP/IRA/HSA accounts and how much the insurance company is going to screw us this year.  If we’re lucky, we’ll know whether or not we’re getting a COLA and whether or not that’s going to cover the screwing by the insurance companies (hint, it usually doesn’t).  If we’re not lucky, we get three or four more months of fuckery by Congress while they try to pass an appropriations bill. 

November means open season.  This is the time of the year where we realize that hindsight is a bitch and we’ve been paying too much.  But, there’s still time to right the ship.  In this vein, we’ll likely be switching to a HDHP with an HSA this year.  November is also the time that I realize how much I hate mindless consumerism.  And the mall.  The mall sucks. 

Late December is the time to shake off the holiday spending hangover and start making changes to my contributions, withholdings, and allotments.  By this point, I have a number in mind that my net paycheck should hit.  From there, it’s just a matter of tweaking things until I’m in that ballpark. 

January is the beginning of tax season!  I’m a total tax geek.  My first job in high school was as a tax preparer.  I was 18, and looked 15 on a good day.  I’m sure that it was unnerving to have a little girl doing your taxes for you.  I’ve considered going back and doing that as a side gig.  For my own taxes, I’ll start filling in what info I have by the first or second week of January based on last paystubs and whatnot.  But, it’s usually the middle of February to early March before I’ve got all the paperwork I need to actually file.  This gives me plenty of time to look over my taxes and see if there was anything that I could have done better and make those changes going forward. 

April and May is when I start fine-tuning my budget for the following year.  My budgeting method can best be described as zero-sum budgeting on steroids (or crack, according to my husband).  I try to have my budget forecasted out 12-18 months at any given time, so I start working on my upcoming budget right after tax season ends.  My first goal is always to cut 1% off of expenses for the year.  Some years I’m able to do so and some years….not so much.  Every cut in expenses is balanced by a cut in net pay.  Remember how I said that I had a number in mind when determining contributions and withholdings and shit?  This is where that number comes from. 

Once the budget is balanced and I’m satisfied with it, I run the working plan for the upcoming year.  This worksheet is part checking register, part spending plan, and part to-do list.  It generates a list that looks an awful lot like an old-fashioned checking register.  The transactions are all hypothetical at this point.  I juggle transactions around, as needed, until everything is being paid during the correct pay period.  Nothing’s late and I know if and when I’m going to have a cash flow crunch.  It allows me to keep as little excess cash in my checking account as possible.  I try to have that done by 1 June at the latest. 

That brings us to the doldrums of the fiscal year.  From June until September there’s really not a whole lot that needs to be done other than to just keep on keeping on.  For someone who loves playing with their money this part of the year is EXCRUCIATING!  There’s only so much planning one can do without concrete numbers.  Running a thousand different what-if scenarios will drive one up the wall.  This year, I’m passing the time by researching ways to cut down or eliminate single-use plastic and paper products at my house or at least pay less for the ones that I can’t convince the rest of the family to give up.

Grocery Shopping....Part 2

So, last week I explained my process for meal planning and grocery shopping and I mentioned that I was going to see if going out of my way to shop at Aldi was going to add value to my life.  Well, the results are in.

First of all, Aldi is a long way from my house.  Twenty miles to be exact.  It's also in the most congested part of the county.  This is a big reason why I haven’t embraced Aldi.  I lived in a third-tier city for nearly a decade during and right after college, but I’ve really started to hate traffic since moving back here.  I also drive a big honking SUV (but I love her and she’s paid off).  At current gas prices, it costs me ~$5 and, most importantly, at least an hour round-trip to make the trip.  If I go after work, Google Maps tells me that it’s only 4 miles out of my way to stop on my way home.  It sure feels like it’s a lot further than that, but whatever.

Armed with my “reusable” bags (i.e. the handful of plastic bags left from the last Walmart trip), my quarter, and my shopping list, I set off.  Of the 35 items on my shopping list, 13 were less expensive at Aldi than Walmart.  Ten items were either more expensive or came in packages that were larger than I needed.  The Duke's mayo (one of the few things I'm brand specific about) was the same price and there were 11 items I couldn't find or were out of stock. In some cases, this is an imperfect comparison due to package sizing.  For example, I had initially ordered three lbs of carrots (I swear my kid’s going to turn into a bunny), but Aldi only offered them in 2 lb packages.  And it was actually cheaper to buy four lbs from Aldi than 3 lbs at Walmart.  And some of it was a no-brainer, like milk and eggs.  It took nearly an hour to get everything and check out/bag my groceries.

However, my total savings was about $8.50, not including the watermelon and pancakes-on-a-stick that were not on my list.  When you add in the aforementioned impulse purchases, I came out more or less even.

So the final verdict is that I want to like Aldi.  I really, really do.  And if the grocery gods would see to it that one were built near my house, or at least on my way home from work, then I'd hit them up all the time for coffee, milk, and vegetables.  For that matter, I'll probably hit them up if I'm in the area anyway.  I like the smaller store format.  I love the less-is-more philosophy when it comes to everything from packaging to employees.  It's just not something that works for me right now.

Grocery Shopping.....Part 1

Can we talk about grocery shopping?  This has always been my go-to category when I needed to really tighten the belt.  But I've kind of reached a point where I'm not sure I can reasonably cut this budget down any more without resorting to my college diet of ramen noodles and Cheerios.  Between meal planning and buying in bulk when I can, I've pretty much got a system down where I can feed three people for $75 a week, though the boys do tend to bitch about not having "good" snacks.  Plus, I'm eating low carb, so that poses an additional complexity.  Here's how I do it:

The process usually starts with figuring out what the heck we're going to eat for the next two weeks.  I use an app called Pepperplate to organize my recipes and menus.  It even generates my shopping list.  I can also plan which meal to make on which day so I plan to make the meals with the stuff that's likely to go bad sooner earlier rather than later.  The "what's for dinner?" question is solved quickly as well.  It's pretty awesome.

I try to plan ten dinners for every two weeks (plus a few breakfast type things and lunches for the kiddo).  Of these ten , two of them will be meals that can be made in batches and frozen.  This week I'm making a creamy, spicy chicken thing for the crockpot.  I'll make three or four of them, eat one this week and put the rest in the freezer.

Freezer Number 1.  I've just stocked ground beef apparently

But wait, why only 10 meals?  That's 5 meals a week.  This is where the freezer meals come in.  I've built up quite the stock of freezer meals, so one night a week we plan to eat something out of the freezer stash.  One other night is what we call "Open Night."  That means that everyone, including the 6 year-old, can open the fridge, open the pantry, or (rarely) open the car door to go to the store/restaurant.  That can mean leftovers, or a freezer meal, or we can get creative with what's in the house.  A lot of times this means that the carbivores who live in my house have some kind of noodle-y creation or cheapo frozen pizza.

Next, I let Pepperplate create a shopping list for me.  I go through the house and check off anything that I already have.  This usually cuts my list in half and mostly prevents me from doing stupid shit like buying onions every time I go to the store because there was that one time I was out of onions and now it's stuck in my head that we need onions....or is that just me?  I take my shopping list (and Alexa list because I've finally trained the rest of the members of my house to put things on the list as we run out) and I plug it into an online grocery shopping portal.  I have a confession to make.  I love, love, love being able to order by groceries and then pick them up without having to go into the store.  I'm an introvert who just doesn't want to people, especially after a long day at work.  It also cuts impulse spending down to nil.

In addition to avoiding humanity, having an online order also allows me to establish a baseline price for my shit.  Because something might seem like a good deal until you realize that you'd be going out of the way to save a quarter.  It's at this point that I finally check the other stores for their weekly loss leaders.  I know this is kind of backwards from how a lot of experts say it should be done, but hear me out.  If the loss leaders are a great deal and it's something that I can store and/or use up before their expiration, I stock up.  I'll check these items against my online order and delete anything that I will be stopping for elsewhere.  If I decide it's worth it to stop for one thing, I'll also check everything else on my list.  It might not be worth it to me to stop at the little corner store that's a mile out of my way for 20 cents off lemons, but if I'm going to be stopping for $5 off ground beef, I might as well get the cheaper lemons too.

So all this is to say that, for me, it doesn't necessarily matter if chicken isn't on sale when I'm planning my meals because chicken was on sale three weeks ago and I still have a ton of it in the freezer.  I'll replenish it when it goes back on sale.  I try to keep, at minimum, a working supply of chicken, beef, and pork on hand.  Having the bulk of my groceries already ordered means that I have a good idea of how much I have to work with that week for bulk buying.  If my budget is $150 and my regular order is $117 then I know I have $33 to spend on loss leaders.  And some weeks, the loss leaders suck.  In that case, I'll either see if I'm running low on something and buy the family pack for a slightly better price or stick the surplus into a sinking fund so that if there's a smoking deal a few weeks later I can really cash in.  It pays to know your local sales cycles to know when certain things are likely to go on sale.

Now it's just a matter of ordering everything else and picking it up.  And prepping everything for storage.

BUT......................

This week I thought I'd give Aldi a real try.  It's not that I hate Aldi or think that it's icky.  On the contrary, I have liked it every time I've been in.  I really like their coffee.  But the closest one is 20 miles from my house and on a really congested intersection.  It might as well be across the world most days.  Even going after work when I'm already sorta, kinda in the area seems like it's a long way.  However, Google Maps tells me that it's really only 4 miles out of the way.  Even with my big ass SUV, that's like 50 cents worth of gas.  So, this afternoon I'm going to give it a try.  I've got my reusable bags.  Okay, it's actually a bunch of plastic bags from other stores that I'm going to reuse for this...that counts right?  I've got my quarter.  I've got my shopping list already loaded in the Walmart app so I know what my target prices are.  I'm very curious as to whether or not it will end up being worth it.  Stay tuned for part two...