Showing posts with label Budgeting. Show all posts
Showing posts with label Budgeting. Show all posts

Tuesday, January 04, 2011

Mental Tricks and Extra 2% in Your Pocket

The first paychecks of January 2011 should be arriving soon, and for those that fell behind with the news, a bill passed both houses which will put an additional 2% in your pocket. The social security withholding rate fell from 6.2% to 4.2%. Medicare withholding rates remain the same (1.45%), as do the employer's portion of withholding (7.65% total).

I was able to confirm that those of us who are not subject to withholding, but rather pay the Self-Employment Tax through Schedule SE will also see our rates fall 2%, from 15.3% to 13.3% (effective rate of 14.1% to 12.3%).

It is unfortunate that the taxpayers still have no real certainty, but the taxpayer should have more money in their pocket in 2011, up to $2136 per wage earner (Social Security Tax is paid on the first $106,800 of wages).

I believe that it is extremely important for individuals and families to understand the basics of tax. There is a lot of discussion out there if taxpayers will notice the extra money. Some experts believe that taxpayers will notice their paycheck is higher, but won't know why. And, not realizing that their "pay raise" is temporary, there is a real danger of spending the funds, or worse yet, making commitments that won't be so affordable come 2012.

Because the money is temporary, I think it is really important for individuals and families not to increase their consumption. I work with a variety of clients and the common thread I find amongst spenders/debtors is that new found money is already mentally spent before liabilities and savings are considered. Finally, I can get that new data plan! This 2% windfall will be a nice treat, but also has the potential to hurt the undisciplined or unaware.

Changing subjects slightly, a friend (hello to you!) sent me an article that starts with a mention of an MIT inventor that is attempting to create a prototype of a wallet that will become increasingly hard to open as one approaches the limits or exceeds their monthly budget. Cute! I love the idea.

The article goes on to discuss mental tricks people use to help "close the gap between good intentions and human nature."

I'd love to hear from my readers what mental tricks they use to control spending. The article mentions many of the usual mental tricks such as setting broad goals in terms of saving not budgeting (I think this becomes easier as a person realizes goals and starts to really see money and equity grow), making separate accounts and subaccounts (I love the setup at ING's online bank for this--highly recommended), paying yourself first through automatic withdrawals into savings, buying savings bonds through an employer and/or taking advantage of 401(k) accounts (all of the above is good advice).

I have a few mental tricks of my own in addition to those above. When we refinance our home loan around 18 months ago, we continued to make a similar mortgage payment. Besides paying off the mortgage quicker, this trick makes it easier to absorb future property tax increases. Another trick we have is not including interest income in the spending budget. We basically ignore that income until year end when we decide if we need to keep the income in the emergency fund or if we can put that money into a different type of investment vehicle.

Readers, please share any mental tricks you have and I will try to share in a future post. The more interesting the better! And if you don't mind sharing, what do you plan to do, or not to do, with that 2% savings in Social Security tax.

P.S. I have some posting ideas coming up, but I've hit another busy season here and due to the tax law changes, I have a bit of extra work cut out for this week. :)

Monday, November 08, 2010

Budgeting Primer: With the Savings, You Can Pay for the Next (Used) Car in Cash

There is a new blog on the blog, and one I'm watching with interested. Struggling Who is attempting to make the case for the so-called "strugglers" after another blogger made quite a splash making a case for the "Chumps."

Quite frankly, I have no interest in class warfare, even though it seems to be the hot topic of the week. What I do have an interest is seeing people prosper! Struggling Who comments, in regards to tuition discounts, states the schools tell us [those on discount] what to pay and what is left is for extra. Personally, I'd like to see the "extra" used to get ahead. Unfortunately, it seems that the "extra" is all too often used to fund increased consumption.

To make a case for the Strugglers, Struggling Who posts Yoni's budget. He doesn't want readers to pick it apart line by line, but it is really hard to ignore a budget of $6,900 that includes too much house ($2,761 mortgage payment, 40% of take home pay, granted that is after salary cuts), too much car ($625 in monthly payments bringing payments to 50% of take home pay) and too much food ($1,050 for food, including Shabbat).

I have consistently found that the difference between those who prosper and those who struggle has less to do with income, and more to do with spending habits. It breaks my heart to see families that could be comfortable or even prospering, struggling because they didn't get ahead when they could have. Let me demonstrate by using Yoni's own budget.

Yoni spends $1050 on food per month for a household of 5, including 2 school aged children and a pre-schooler (my assessment from the description). Anyway you cut it, $1050 is a lot of money to spend on food. Let's say that Yoni decides to really attack this line item of the budget and through a combination of different eating and shopping habits, lower the food line item to a still generous $650.

For the next 3 years, the $400 difference is locked into a savings account called "car." In three years, Yoni will have $14,400, a rather generous amount, which he can now turn around and spend on a quality (used) van, eliminating another massive line item, the $625 in lease and car payments (presumably the car payments will be complete, or almost complete in 3 years and the now owned car will be ready to drive into the ground).

Should Yoni continue to manage the grocery budget ($400) and eliminate the car payments ($625), there is now over $1000 extra to work with.

Now, Yoni and others like Yoni are fighting an uphill battle as school aged children are already in the picture and it still remains a mystery to me how scholarship committees come to a decision as to how tuition is charged. But, those who are starting out should take note. Controlling costs, even without high salaries, can and will result in real savings. Savings work for you. Debt works against you.

Wednesday, March 17, 2010

Where Does That Item Get Budgeted?

ProfK has a post up called Delineating the Costs of Pesach which reminded me about a topic I wanted to address. A lot of people talk about just how much Pesach costs, but I see a lot of the costs less as costs of the yom tov, and more issues of timing or distribution.

In my opinion, just because you are spending the money during the Pesach season, doesn't make the cost a Pesach cost. A few examples, in the weeks before I Pesach I will drop large amounts of money on grape juice. We use Kedem Grape Juice year round. I can get the grape juice at over 50% retail cost right now, so I will buy for many months to come. My March or April grocery budget might be a bit large, but I will buy enough to help us make it through a minimum of 6 months. The Pesach cost is only a sliver of the cost. Another cost people site is the cost of cleaning your rugs. Now most people get their rugs cleaned from time to time, but there are people who like to clean their rugs annually (like my non-Jewish neighbor who seemed to perform this task, well, right about now!). A vacuum should suffice for getting the chometz off your rugs, but if you so choose to clean the rugs prior to Pesach, I don't think it is fair to blame Pesach for the cost of the rug cleaning. You could have your rugs cleaned prior to Rosh Hashana, which is, in fact my plan because we have some more pressing yard work. Hair cuts are another example that people site. I will be paying for a haircut this coming week, but it isn't a Pesach cost. Had I cut my hair two months ago, I wouldn't bother. But if I plan to make it through the omer without a large headache, I need to get a trim. Detailing the car is another example. Some people like their car upholstery fresh, but this too could be done earlier and a simple vacuum job would suffice pre-Pesach.

So long as a family has ample reserves to cover a month of inflated costs, I see no reason not to send a closet full of clothing to the cleaners, hire a rug cleaning service and someone to detail the car, and take the whole family to the salon/barber shop. Going into Pesach there is a certain momentum. But, just because you are spending the money between Purim and Pesach doesn't make it a Pesach cost.

As for distribution of costs, the family that joins their parents/children/siblings for Seder should be saving a good deal of groceries, whereas the hosts will often end up spending a good deal more. I do think it is perfectly reasonable for families that find hosting to be an expenditure that is too much to bite off to ask their family members to join them to share in some of the expense, be it bringing their own wine and matzah or putting their name on a chore chart so that extra cleaning help need not be hired.

Friday, January 15, 2010

Budget Advice: The House is the Problem

There is a mother asking for budget advice and is receiving advice that will not serve her well. Here is the scenario: the husband took a huge budget cut (in after tax dollars, that salary cut would pay my entire minimum mortgage payment and taxes). They committed to a huge mortgage based on past earnings. They have worked on their budget and have made cuts. They both work. After the cuts, they have a $200 monthly shortfall and she is wondering what to do about the $500 tuition which will be more than double in the following year. She is wondering what type of discount to ask for.

Those participating in the thread so far are concentrating on the tuition. But the tuition isn't the real problem. The house is the problem! Even if they were to sent to public school, their monthly surplus would only be $300 a month, or $3,600 a year. Some dental work, car trouble, and an increase in property tax could easily put them right back into the hole.

We all have attachments and the biggest attachment is probably an attachment to our homes, but sometimes you have to let go of the big ticket items like the home or a pricey car lease. Without details, I have no idea if this family can sell their home (so many people over leveraged themselves and are married to a home which crowds out other needs), but sometimes you have to part with the expense that is causing the most problem.

Effective budgeting includes being able to pinpoint the problem. If the problem won't be eliminated by cutting out other big ticket items, as appears to be the case here, you have to concentrate on the real cause of the problem no matter how uncomfortable.

Also see previous related post where tuition clearly wasn't the issue.

Tuesday, September 08, 2009

Let's Take Some Important Notes:
How NOT to run a Business or 501(c)3

Hat Tip: Thinking. Thank you!

The principal of Bais Yaakov of Boro Park allowed himself to be interviewed regarding the potential closure of this very large school. I do believe the school is slated to open, but there is little doubt that whatever emergency funds were collected will only provide a temporary bandaid. I don't think the interview was a good move from a PR standpoint, and I imagine that many of the board members who are in charge of fundraising are tearing their hair out.

I am posting the link because I think there is a lot to take away from the interview. Those of us who serve on shul boards, school boards, mikvah boards, and any other high cost operation's board should read carefully, take note, and be ready to explain to their fellow board members why business as usually simply does NOT make sense. And, of course, when you actually do go to vote, you need to be willing to oppose the majority even if it means that bad looks come your way and you gain a reputation as a naysayer, pessimist, and/or bad guy.

Here are the key lessons. The italicized print in orange are quotes from the article.

1. An organization's job is not to employ people, but to ensure that the organization is a "going concern" so it can continue to serve the needs of the kehillah down the line. "But until this year - even though enrollment went down by some 400 students - we did not reduce any classes, as we thought that smaller classes could mean more individual attention for the children."

2. You can't take care of the needs of the kehillah or the needs of an individuals until you have ensured that your needs are taken care of. "Any menahel who had difficulty with a child would say, 'Please go to Bais Yaakov of Boro Park. Rabbi [E] will find a program for you where you can excel.' This all contributed to the financial crisis we now are in."

3. Staffing costs are the MOST important costs to control. Over staffing spells death to a budget. "Total staff in Bais Yaakov is slightly over 400 [for 2100 students]. The majority are teachers, but you also have professionals, social workers, para-professionals, librarians, and assistant teachers." Note that the staff to student ratio at BYOBP is 1:5.25. This is extremely low. Even when there were 2500 students the ratio was low at 1:6.25. Granted, much of the staff is likely part time, and there is no central administration so the school maintains its own janitorial staff and business office, but I can't get over the low, low ratio, nor can I relate to that ratio given that I never attended a class with less than 20 students growing up.

4. Cash is king and revenue is key. Don't build on promises, nor is it wise to take on additional staff without revenue to cover such staff because letting go of staff is simply a nightmare. "Also, we built a new building, for which we got a lot of pledges from people, but we didn’t get the expected donations from them ." And "We put up a state-of-the-art building in one year, but were then saddled with huge debts."

5. Plan as if the seven bad years are coming (because they always do come). "For the first time we are making some cuts. Some of the programs we have been giving, we can’t give anymore. We’ll have to do some cutting on the computer program. The resource room will be primarily cut out, except for those students subsidized by the government. We are starting to consolidate some classes. Until now we have tried to have smaller classes, trying to provide more individualized attention. We’re going to have to change that, until we get out of this crisis. "

Wednesday, July 22, 2009

Everything Seems Fine On the Outside

Hat Tip: A reader who is free to self-identify

A reader pointed out an op-ed on the Lubavitch CrownHeights Info blog. The author is the CEO of Global Jewish Assistance & Relief Network and a credit repair company. He has discovered what I have been long been talking about: the house might look great, but the foundation is crumbling. In his words: "Most frum couples have been living on borrowed money to make ends meet, but the financial noose is tightening day by day."

As a service, he created an Excel spreadsheet with more categories and sub-categories than you can shake a stick out. The level of detail is a bit excruciating for me, but certainly will be quite helpful to those who have expenses all over the board.

A family that has high expenses that all over the board, is already in debt or nearing falling into debt, has no liquid savings to speak of, and doesn't have an idea of where in the world their money is going would be well served by an extremely detailed budget. When you are spending beyond your means, separating out the bakery expenses from the detergent from the nosh from the groceries is a good way to get a grip on the budget.

A few notes on the Excel Budget:

  • I noticed that the budget did not include any lines for income. When I help someone make a budget I always start with income. Be the budget personal, non-profit, or business, I don't like discussing expenses without looking at income first (happens a lot with non-profits and fundraising becomes a plug figure).
  • One thing I have noticed on nearly every "frum" budget I've seen is that the chagim are separated from the budget. This is something I do not do, and I think that once a budget is under control and sense has taken over, it is best to let the expenses of chagim be absorbed into general budget categories. I have a certain yearly figure in mind for what we should spend on consumer goods and food, and I make yom tov fit inside that budget. Scouring a budget is necessary for getting a budget under control. Once under control, I think it is best to limit expenses and force it all to fit within. Sometimes extra line items trick a person into thinking that the "making Pesach" is like putting on a roof.
  • Another area on the excel budget is "personal simcha funds" including births, bar mitzvas, and weddings. Sadly there is no area listed for savings (i.e. retirement, emergency savings, the next car, the next roof, 529 plans). No surprise that I believe the simchas funds should take a back seat to this type of saving.
  • Life insurance is thankfully one of the listed expenses. I think disability insurance should make that list too. For many, a personal liability umbrella insurance policy is a good idea. Anyone who can't pay for these should likely reconsider their summer home insurance.
All and all, it is great to see someone put together a budget to help families in trouble pinpoint all of their expenses. My head would spin if I had so many categories!

Monday, July 13, 2009

Book Review: The Total Money Makeover

I have to thank my wonderful readers for introducing me to Dave Ramsey, author of the best selling book The Total Money Makeover. Meeting Dave Ramsey by listening to his radio show and reading his books (I have read a number of them) was sort of like meeting my financial twin. Who would ever imagine that my financial twin would be more fiscally conservative, Protestant, male, and bald? This promises to be a short review because someone has put a hold on this book and I cannot renew it and I'd rather someone who might need this book get their hands on it because I've been practicing "Grandma's Finance" for a long time.

This book is, in Dave Ramsey's own words "NOT sophisticated or complicated." It is not academic, nor is it a finance manual, nor does it present ideas that are earth shattering. Rather it is a presentation of a plan that will help individuals and families tackle their finances head on by getting out of debt and building wealth. Simple as that.

You might ask, what makes this book different from the many other books that outline the same concepts? I would answer that this book is both entertaining and inspiring, plus it has a great, easy to read format where ideas are set off for clarity. Unlike yours truly (that would be me), who has always been unsophisticated and risk adverse, Dave Ramsey has a story, or as he writes, "I have been there, done that. I have a PhD in D-U-M-B. So I know what it is like to be scared and scarred. I know what it is like to have my marriage hanging by a thread because of financial stress. I know what it is like to have my hopes and dreams crushed by my own stupid decisions."

As I mentioned above, Dave Ramsey is a Protestant, and a quite serious one at that. Some of the inspiration in his book does come from the Bible. Some might be afraid of his books because he is a serious Christian. I am not afraid of reading lines from Psalms (Tehillim) or Proverbs (Mishlei) because these passages only reinforce a commonsense Torah approach to personal finance, one of simplicity guided by a consistent philosophy. And if anything was quoted from the Christian Bible, it certainly isn't anything that our great sages have not said. If you listen to his radio show, I think you can appreciate his religious background more. One thing he I have never heard him advise is holding off children as a way to solve a financial problem. He considers building a family of great importance, which is not something I sense from other financial authors. His ministry is named "Financial Peace" the goals go far beyond sensible finance and into building strong marriages and families.

The real inspiration in this book I believes comes from the stories interspersed throughout the book of individuals and families that have "changed their family tree" by turning their lives around. Seeing how other people have succeeded is empowering! Additionally, Dave Ramsey has some great quotes and a good sense of humor. The following are some saying to hang your hat on:


"Winning at money is 80 percent behavior and 20 percent head knowledge."
"Ninety percent of solving a problem is realizing there is one."
"It is human nature to want it and want it now; it is also a sign of immaturity."
"We buy things we don't need with money we don't have in order to impress people we don't like."
"The secrets of the rich don't exist, because the principles aren't a secret."
"We have met the enemy and he is us."
"Don't even consider keeping up with the Joneses. THEY'RE BROKE."
"Radical change. . . is required for a money breakthrough."
"Christmas is not an emergency." (I.e. You know it is coming, so plan ahead.)
"Live like no one else today so you can live like no one else tomorrow."


The first part of the book tackles some debt myths, namely that debt is a tool used to create prosperity. As Dave [Ramsey] writes: "Debt adds considerable risk, most often doesn't bring prosperity, and isn't used by wealthy people nearly as much as we are led to believe." Another book that I recommend, which Dave references is "The Millionaire Next Door." I was raised in by unsophisticated parents who taught me to save for the next big purchase. I remember sitting through finance class dumbfounded by the idea that people would actually take out loans against their homes to invest in the stock market. I managed to run all the calculations asked of me, but in real life I've seen these calculations destroy marriages.

Dave also recommends against loaning to friends and relatives (see more notes on that below), cosigning loans (guess who is on the hook should your relative default?!), and payday loans. He debunks the myth that "ninety days [is the] same as cash" and that a person will always have a car payment (nope, "the average millionaire drives a two-year-old car with no payments") .

He doesn't like car leases (which he refers to as fleeces), new cars, 30-year mortgages, whole life insurance/cash value insurance, credit cards (most people spend more and few pay them off each and every month), debt consolidation (because it only treats the symptom) and debt-management companies (too much fraud and a great way to trash your credit in addition to treating the symptom via a 3rd party no less), buying gold, get rich quick schemes, gambling, mobile homes (OK, I doubt any of my readers have a mobile home, but you never know), prepaying funeral and college expenses (you can do better by investing, additionally see my notes below), home equity lines of credit, student loans, and bankruptcy (it might be necessary in some situations, but it isn't painless procedures where "you merrily trot off into your future to start fresh").

What does he recommend? Using cash, frugal living, getting on a written monthly budget, saving for retirement ("Ed McMahon isn't coming". . . certainly not without Techiyat HaMetim), being adequately insured and drawing up a will (auto, home, life, disability, health, long-term care for those over 60), having an emergency fund, paying off the 15-year mortgage, putting away for your children's college education, and having FUN with your money (not before you have some solid footing however).

Before delving into his plan, Dave Ramsey outlines some hurdles which cause people to resist changing their financial lives, namely:


#1: Ignorance or lack of know-how. Somehow when it comes to money, people get defensive. Dave writes: "Ignorance is not lack of intelligence; it is lack of know-how."
#2: "Keeping up with the Joneses: The Joneses Can't Do Math" and they are likely broke.

There is a story in this section that I think is worth sharing. Although the story involves Christmas, it could be about making a simcha or forgoing social expectations from what you serve or wear on yom tov, to what you do with your kids in the summer, to what you wear on your head:


"Radical change in the quest for approval, which has involved purchasing stuff with money we don't have, is required for a money breakthrough. Sara's breakthrough came with family. Her family was upper-middle-crust and had always given Christmas gifts to every member. With twenty nieces and nephews and six sets of adults to buy for, just on her side, the budget was ridiculous. Sara's announcement at Thanksgiving that this year Christmas giving was going to be done with the drawing of names, because she and Bob couldn't afford it, was earth-shattering. Some of you are grinning as if this is no big deal. It was a huge deal in Sara's family! Gift giving was a tradition! Her mother and two of her sisters-in-law were furious. Very little thanks were given that Thanksgiving, but Sara stood her ground and said, "No more.""

The Plan

Now that I've completed the (rather lengthy) introduction I will quickly outline the plan that Dave Ramsey recommends for getting out of debt and building long-term wealth which he calls Baby Steps. I am presenting the Baby Steps in brief. Plenty of questions are asked and answered in this section. If this plan is of interest, read the book!

1. Save $1,000 Fast: To inspire confidence you need to get started and focus your efforts. He recommends getting your hands on $1000, the baby emergency fund because "it is going to rain." Whatever it takes to get $1,000 of cash in your hands, do it. Have a garage sale, return stuff, work some extra shifts, cut coupons, etc. Once you've got it, hide it and keep it liquid.

[Shocking States: 49% of Americans could cover less than one month's expenses if they lost their income].

2. The Debt Snowball: Debt is the enemy and the goal is to eliminate all debt with the exception of the mortgage. Dave recommends lining up all the debts owed by amount and start paying them off from smallest to largest, while making minimum payments on all larger loans. I do have a quibble with this (see below), but he bases his method on inspiring confidence in one's abilities rather than on interest calculations which he calls "behavior modification over math." He has worked with many people and has observed that small victories lead to larger victories. The way to get the snowball rolling, of course, entails radical action and a lot of beans and rice.

3. Finish the Emergency Fund: Kick Murphy Out. "Murphy" is a play on Murphy's law. Dave writes, "an emergency fund can turn crises into inconveniences." Dave recommends a three to six month emergency fund of money needed to pay expenses if you lose your income. He mentions that women are more security oriented and that this step will improve many a marriage.

4. Maximize Retirement Investing. Here Dave recommends 15% of income be saved for retirement. First you put away in a 401(k) what your employer will match, followed by the remainder in a ROTH IRA if you quality. He has a nice (but simplistic) chart which clearly demonstrates just how much easier it is to put away small amounts when you are younger.

5. College Funding. I'm going to keep this section really brief. Dave hates student loans, as do I, and recommends figuring out how to do without. Note that saving for college follows saving for retirement. And Dave likes ESA's (Coverdells) over 529s because of the flexibility of investing.

6. Pay Off the Home Mortgage. Here he points out that the tax savings from a mortgage don't justify paying the interest and that leveraging your home isn't the way to make money. We all like to reduce our taxes, but it doesn't make sense to pay more interest in order to pay fewer taxes (a point finance and accounting professors will make which, unlike leveraging your home, is financially sound for those who want to follow Grandma's Money Rules).

7. Build wealth and have FUN. Once you have set up a strong foundation and have built some wealth through investing, there is no reason not to have some fun. It could be a new toy, being super-duper charitable, or a combination while making wealth a blessing, not a curse. Dave notes that wealth comes with responsibility and warns against "affluenza."

All in all, I HIGHLY RECOMMEND this book as a motivator for getting out of debt or just developing a philosphy toward personal finance. I would not use it as an investment manual (see note below). Many readers write me with questions and I am so thankful to my readers for introducing me to this book because I think it presents a simple and healthy view on how to approach finances including the spiritual.

I do have more Dave Ramsey posts coming up, so stay tuned.
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Like I said, I love this book, but I do have a few quibbles, which in the scheme of things aren't anything major which is why I am noting them in small print:
1. I don't like carrying cash, so I have a hard time jumping on that train. That said, I do not recommend taking out a credit card until you have established consistent and frugal spending habits. And I would also say that anyone who has reached the end of the month and found themselves unable to pay their card off in full should immediately start using cash and checks. The same goes for anyone seeing their savings falling in a quarterly period.
2. I think the 15 year mortgage is fantastic, but I can't seem to jump on that train either. A 15-year mortgage would be quite a squeeze for most young people buying into my neighborhood, even if they really have it together. I do recommend budgeting extra each month, but I think the emergency fund wins out over the 15 year mortgage.
3. Dave Ramsey rules against loaning money to friends and relatives as it creates a master/servant relationship and ultimately destroys relationships. (He does not opposed gifting under certain circumstances). This is a tough one to reconcile with what we have been taught about the mitzvah of lending. However, now that I've had time to digest his thoughts and think about some real life situations I know of, I think he brings forward a good point. Certainly that halacha takes into account the changed relationships as you must be careful about not even walking by the home of the person you have lent to unecessarily so as to not badger. Personally I think there is a lot to be said for free loan societies that serve as a middle man between the giver and receiver.
4. Dave Ramsey reminds the reader that over time the stock market averages 12%. While I do believe in investing, I don't ever make my calculations based on such a high return. As such, it is hard for me (a lazy investor) to get worked up about pre-paid college plans for example. I think Dave Ramsey has solid advice, but I look to him more for solving the debt issues rather than the investing puzzle.
5. As a math person, I have a hard time buying into a debt snowball that pays off debt according to the amount due, rather than the APR. But I do understand the reason he recommend this method, but I would probably recommend a hybrid method after building some confidence.

Friday, April 24, 2009

Guest Post: Young Marriage Isn't the Problem!

Thank you to yet another eloquent guest poster!

I am a reader, but non-commenter on your blog. I read many of the 75 comments that the most recent post generated, and one thing I noticed was that everyone seemed to be attacking the concept of marrying young. As someone who married at 20 (spouse was also 20), I think your readers should hear the other side of the story.

We married the summer between junior and senior years of college, and we had been going to school full time up until that point, never having really worked at anything other than summer jobs. We lay in the fuzzy gray area known as right-wing Modern Orthodox and left-wing Yeshivish, so this was perfectly normal and acceptable in our circles. When we got engaged, we sat down with both sets of parents to discuss money. It was agreed that we were to have a modest wedding, with silk flowers, a small band (and not one of the more sought-after ones), a family friend for photography, and very simple food. I could detail the rest, but you get the idea- no extra expenditures there, no debt, paid for by both sets of parents who were thrilled to be marrying off their eldest (we are both the oldest). As for how we were to live for the first year, until graduation, both sets of parents agreed to give us the amount that they would be paying for the dorm and meal plan (money that would be paid anyway had we not gotten married, as they were paying for college). This money basically covered rent and food (which, again, is exactly what it would have covered had it been going to school instead of to us). We signed up for health insurance through the college, and the rest of the money for whatever other expenses, came from us taking part-time jobs. This is how we lived that first year, and it was hard, but since we wanted to get married at that time, that was what we had to do. And we understood that this arrangement meant that we had to live in an uncomfortably small apartment, buy cheaper food (we ate mostly milchigs, produce, and chicken that year, and we were just fine), and overall hold off on things that fell into the "wants" column in our budget (wonderful parents that we have sat down and taught us how to make a budget). I went on to graduate school while spouse went on to work full-time for a year before applying to business school. I worked part-time, and the money we made allowed our parents to scale back their help (although they still generously helped us), and we made do, even thoguh at this point, we had already had our first child (which, incidentally, was already able to "fit" into our budget, as my mother gave us the stroller, high chair, and crib that had only just been retired from use by my then-4-year-old brother). I finished grad school, got a full-time job, and spouse worked through business school. We had invested the money we had recieved in wedding gifts (which was not an insignificant amount) and b"h we are solid financially. We have never gone over budget, and we have just bought our fist house, we no longer receive financial help from our parents (only moral support!) and our family is growing ka"h. We are teaching our kids the values and practices that our parents have taught us.

So please do not blame early marriage- the blame lies with parents who do not prepare their children, and children who are immature and getting married because of expectations rather than readiness. There is no need to demand that people marry older, or work for years, or finish grad school- the real demand should be that a society that expects early marriage and young families should prepare their children for such.

We are b"h very happily and lovingly married, our children are happy and healthy, and Hashem has blessed us with a solid parnassah, despite these tough times. We would do it again 1000 times. -- Someone who married young

Thursday, April 23, 2009

Another Reason to Pay for a Wedding in Cash

So long as we are discussing funding wedding with debt in Israel (and I do realize that Israel runs under a different set of economic rules, which I cynically could add puts Chassidish collectors at the doorsteps of every American Orthodox community, a miracle that the weight of the system hasn't caused financial collapse yet), I might as well add that going into debt to make a wedding is also considered "normal" right here in our own American backyard.

I have a handful of friends in the mortgage and real estate industry who tell me that nearly every (Orthodox) family borrows money, usually through their own home equity, to "make" a wedding. The presumption here is America is also that weddings are debt financed, not paid for in cash.

After all, as one agent told me: "Weddings cost a lot of money. How can a family afford to pay for a wedding in cash?" The debate on how to fund a wedding underscores an important difference in the approach to money. Those who function in their own cash economy with few exceptions (a home mortgage, initial funding for an income producing activity), don't tell themselves how much a wedding should cost to make the decision of how much to borrow. Rather they ask themselves what amount of cash reserves are prudent to spend and then base their wedding budget around that amount of cash.

Recently I ran into an acquaintance who divorced after a short marriage. When she had married, her mother, a friend of mine, had borrowed a significant sum of money to pay for the affair. I can't imagine the feeling of continuing to pay, month after month, year after year, for a wedding for which the marriage no longer exists. What a sad, sad situation. Best pay cash and just be done with it. . . . . .even if the marriage lasts forever.

Tuesday, March 24, 2009

Rav Hershel Schachter: Halachic Issues of the Tuition Crisis

I'm going to resist the temptation to make any actual comments on the shiur for the moment and just present my notes. My commentor Avi has his notes in the comments of a previous post. Thank you Avi! As Avi pointed out, the shiur was about Halachic implications, not how to solve the tuition crisis.

My notes without comment below:
Rav Schachter asks, why is there a crisis now, and we didn’t notice before?

He sites these reasons:
1. Melamdim paid better
2. Sizes of classes are much smaller, more teachers
3. Families are larger which means more tuition.


He believe that it is unreasonable to cut back on salaries (if you want better quality teachers, you need to reimburse them and talented young men will leave the field). Same goes for giving free tuition for even large number of children. He believes that this is part of the package to retain staff and that schools are competitive and if a school cuts this part of the package, a melamed can go to another school. He says that there is no sechel behind calling for larger classes and mentions that secular boards of education have finding that smaller classes are better educationally. He also mentions the importance of having more children, saying we haven't even replaced what we lost in WWII.

Rav Schachter believes that many parents currently in our schools are borderline committed and that we need to hold onto the students who are being scared away by tuitions as these students will be lost. He says that those who need a tuition break need to ask for one. Should not feel embarrassed. If you don't have the money, you don't have the money.

He mentions that a Rambam that obligates the father obligated to pay for education and if the father can't pay obligates the paternal grandfather. He notes that some schools in Lakewood write this on the bottom of the bill.

He asks should the wife be obligated to work to pay more tuition? He mentions that his wife always worked (they have 9 children!), but can appreciate a wife who wants to be a fulltime mother and says the tuition committee shouldn’t force wife to work.

He asks if children who work should be obligated to help pay their own tuition? No. He believes it will squash their incentive to make money and that is unreasonable.

What about vacations in Eretz Yisrael, pesach hotels, and expensive camps which hurt the parents ability to pay. He relates that he never went to camp (later he mentions he also went to public school) and that each summer was spent with a different aunt and uncle. He says if you can’t afford it, so you don’t spend, tuition comes first. [Compare the response to the Rav features in the Jewish Observer regarding tuition vs. camp].

What about cell phones, IPods, other narishkeit provided to children. Cut out these expenses and ask parents to pay.


What if the grandparents are paying for a Pesach Vacation, e.g.? Parents should refuse. Tell parents to give money as a donation to the Yeshiva.

Luxurious home? Not unreasonable to insist parents sell home and move to a smaller home. Why should Yeshiva be the first to loose?

Mentions a need for mentoring as many parents don’t know how to manage assets. He states we need to show people how to spend money properly. [OK, one comment. You have come to the right place :)].

The next part of the talk is about priorities in giving. The essence is that ayni ircha in your own city takes precedence and the precedence there is those to which you have a shaychus to, i.e. your own shuls, your own mikva, your own schools, your own poor.

He mentions that while the needs to aynaiim in Eretz Yisrael might be greater, e.g. need for shoes versus need for food, that when it comes to the Jewish schooling situation there is a danger parents might start pulling kids out and our needs are great and we need to take care of those who are close. Mentions that three-quarters of giving should remain local.

What about a Yeshiva that attracts students from outside your city, do you give scholarships to students outside? Here the important question is whether or not the outside students are forming a critical mass. If the students need help, they are ircha. If not, see to it you are supporting the local students.

What happens if someone has a neder to support organizations afar, not realizing they need to support the local students? They can take release the neder as there are overriding needs.

What about grandparents? Obligation to support local institutions, even if grandchildren are going to other schools. Your city first.

What about special needs? He mentions that it is unreasonable to expect a parent to take on a whole job just to support just one child and mentioned a special needs program that just raised tuition 30%. He states that we can’t force these children into public schools or they will loose their shmiras hamitzva and that although this is a very small percent of population, support is obligatory on the whole community.

Regarding Ma’aser Kesafim he mentions that although tuition is not ma'aser up to the amount of educating your own child, that one need not worry too much about ma'aser kesafim as the generally accepted opinion is that maaser kesafim is a minhag tov. He also mentions that pelnty of long married people have never given ma'aser kesafim and that those without can give shlishit ha’shekel according to what he can afford, i.e. a smaller amount. He also mentioned that one with a "normal parnasah" who can part with ma’aser kesafim should while those who can’t, can’t.
Shul membership is tzedakah as you can daven without membership, yes. Mikvah is a service fee and is not.

Are all needs of yeshiva are considered tzedakah? Yes, all the functions are important to help Yeshiva compete.

Should Yeshivas give a breakdown of expenses? He thinks it would calm parents down if this information was available and mentions there is little waste and that that spending is NOT why there is a tuition crisis.

What Rav Schachter believes the community needs to do:
Cut down on luxurious bar mitzvas and weddings. If you have money to "burn," make a smaller affair and give money to schools because they and choking.

Long term goal: Lower tuition. He state that the way to do this is to get more donations and that schools need to be run on donations and very minimal tuition. He states that assimilation and intermarriage can only be taken care of through more Jewish education.

From the Q and A session:
First question is something about charter schools. The Rabbi opposes public schools, but seems to leave the question of charter schools in the hands on a local Rabbinate.

Rabbi is asked why public school and an after school Torah program can't work? The Rav mentions he went to public school and was taught by his father. They lived too far from school and he couldn't go by trolley. He mentions that the generation was extremely committed and believes that today most people they will intermarry and totally assimilate. Goyim are much more welcoming today and the whole community will collapse.

Another person asks what is you have reached your limit (financially, I believe): Should you have more children and send others to public schools? He mentions that it is not right to keep having children if you can’t afford it and cracked a joke about idiots who make no living and have 17 children.

Another person asks what will become of yeshivot in Israel if 75% remains in town? The Rav replies that our own communities take precedence and says something about something about yeshivas in Israel with marble floors.

Another person asks what percent of the money that stays within the community, what percentage should go to schools and what to other needs? He says to ask this question of the local Rabbis who know the local situation.

Another person asks about schools that tell children their parents are not meetin the obligations? The Rabbi mentions his own children's schools did not do such and that parents should try to pay back when they can.

What about enacting takanot? The Rav mentions there have always been takanot throughout Jewish history and we should have some and that the chassidish still do make takanot.

The Rav is asked if schools should make physical expansions? He defers to local Rabbonomim to determine necessity.

When asked if Limudei Kodesh can be taught in the afternoon if it will save money, he says to do what works.

I believe the next questioner asked about whether or not parents with money put away should take a loss to pull money out for payment? He says a parent doesn't need to take a penalty and can pay later rather than take a penalty on a CD.

What about a communal tax? We are going to have no choice. We are going to have to lower tuition by relying on donations from wealthier Jews.

Those are my notes. Take the comments in any direction you want to. I'll come back to a few issues later, if time allows.

Thursday, February 05, 2009

Right on Topic: Patronizing Frum Businesses

This week's Yated has a letter from a wife who would like to support Orthodox owned businesses, but is tired of the business practices. As much as people yell and scream about our halachic obligation to patronize Jewish owned businesses, even if it costs a bit more (and all too often, the price differential will quickly relieve the consumer of any such obligation), I still maintain that these businesses need to become more competitive and diversify their clientele. As families find their budget increasingly squeezed, if you don't run a competitive business, you will see less business.

THE PRICE IS RIGHT
Dear Editor,

There was talk a while ago in the Readers Write column of purchasing products mainly in heimishe owned businesses and the like. I tried to commit myself to doing this, yet I was a bit troubled by a phenomenon that kept recurring in some (maybe even many) heimishe supermarkets or stores. This includes some of the upstate supermarkets as well.

Where are the prices? Where are the signs displaying that one product is cheaper than the next or individual price tags on the packages?

How can a mother or anyone go shopping if she cannot compare one product to the next in terms of price?

Some stores say, “We have an in-store scanner,” or, “Ask the cashier.” So every time I want to compare the price of a product I have to run to the scanner or cashier?! Who has the time for that?

I walked into a food store recently and began shopping, but I couldn’t decide what to buy - because there were no prices shown! I was approached by the owner who asked me, “Can I help you? What are you looking for?” I answered, “I am looking for prices.” The storeowner looked at me and didn’t know what to say. I just left and shopped elsewhere.

I am a cash-paying customer, and there are many like me who would like to continue patronizing Jewish groceries and stores. However, if this keeps up, we will have to patronize the stores (heimish or otherwise) that have prices on or near their products in order to save money in these trying times.

Name Withheld

Business owners who are looking to improve their lot need to study the market they are in. Besides the suggestion above about clearly marking prices, here are a few more:
  • Improve customer service. Here is a personal example: I recently called a certain out of the way kosher grocery that carries a product that is very competitively priced to find out if it was in the refrigerator case, as I have made the drive before only to find out they are out of stock. The lady answering the phone told me if I wanted to find out, I would need to come in the store. Never mind that her phone is about 20 steps away from where the product sits. I ended up taking my business to a regular grocery store that offers some great coupons for large orders which brings me to just about the same price on this product and while I'm there I can get everything else, as well as use my (double) coupons.
  • Put your advertisements up on your website or on a community list serve before your sale starts. You may have specials, but if I don't find out about it until your sale is finished, I'm not going to shop in your store. I make a list for the week and decide where I am going. You need to draw me into your store by letting me know what you are offering. I don't have time or patience to drop in your store to find out what you have on special.
  • And, I'm still waiting for the drive-by window. I don't care to bring my kids into cramped kosher markets. Shopping in the regular market is a pleasure with the wide aisles and fireman carts that hold the attention of my kids. Walking into most kosher stores makes my blood pressure rise.

Tuesday, January 20, 2009

Getting Started on the Right Foot:
Develop a Sense of Control and Choosing Your Friends

I have written about developing a "Can Do" attitude before and I think it is particularly important when it comes to handing personal finances. The comment has been made that (excluding the very wealthy) a frum Jew will not be able to live debt free and/or build up savings. If one adopts such an attitude, and many have, he/she takes a position of powerlessness. Sitting in the backseat, the attitude becomes, "what can I do?" Once one has accepted lack of savings, debt, living beyond their mean as "normal," they become resigned to their situation.

I prefer an attitude of control over finances. The paradigm might look something like this:


  • I put in appropriate effort towards earning a living (getting a proper education, not letting my ego interfere with earning a living, maintaining integrity, continuing to develop new skills, new contacts, seeking increased opportunities, etc.)
  • Hashem blesses my efforts by granting the support I need.
  • I exercise control over my budget by making choices according to the means I have been given (not worrying too much about what "they system" requires of me or what "the Goldberg's" are doing).
I've worked with a handful of people on budgets and there is a different approach between those who are tend to demonstrate a greater sense of control and those who lack a sense of control. The person who is resigned and lacks a sense of control will start the budgeting process by telling you about all the expenses they have to meet. The person who seeks greater control tends to start the budgeting process by looking at sources of income first. Perhaps they seek greater income, but their current plans revolve around what they have, not what they must have. Most of us probably fall somewhere between "resigned" and "in control." A look at some of the comments in money saving idea posts will clearly demonstrate this human characteristic.

The book I reviewed via another finance blogger's book review is a good example of a completely resigned attitude. In the book Strapped: Why American's 20-and 30-Somethings Can't Get Ahead, individuals and couples make shortsighted and expensive choices in terms of education, employment, relationships, weddings, childcare, and more, and then wonder why they just can't get ahead. Fortunately there is another book out there that isn't offering up the victim mentality on a silver platter. I too have not read this book yet, but would like to precisely because it promotes what I believe is a healthy "can do" attitude. Personal finance blogger Trent (A Simple Dollar) writes a very positive review of the book "Scratch Beginnings: Me, $25, and the Search for the American Dream." This book has 14 chapters where the author shows that creativity, persistence, motivation to change, delayed gratification, and frugality, will result in getting ahead. Trent writes "the primary lesson [in Chapter 10] is playing the game with the hand you’re dealt. If you spend all your time complaining and griping about the situation you’re handed, you’re going to simply miss out on tons of chances to succeed."

Now would be a good point to insert a word about the friends you choose. Middle class society in general, and frum society in particular, tells us that a whole litany of things are a necessity. Of course, some things are highly desirable or even a necessity, but that doesn't eliminate the fact that there are alternatives and choices in life. Friends ("circles" and social groups) are a powerful influence in our lives, after all we are social creatures.

A person who wants to be able to more comfortably make choices that will allow him/her to live within their means would be wise to seek friendship with those who do live a more frugal lifestyle. The family that spends $30,000 a year on food isn't likely to let you know when pasta is on sale 2/$1 at the grocery store. The family that goes broke after taking their children on daily chol ha'moed trips and plying the kids with gifts and nosh isn't likely to invite your kids over for backyard games, nor accept your invitation for a trip to the park. The mother who has full time household help, isn't likely to agree to a babysitting exchange so you and she an get some much needed work one.

A college student seeking a less expensive living situation isn't going to find the girls whose credit card bills are paid off by mom and dad every month, no matter what the balance with no questions asked, a likely candidate to share extremely small living quarters. A single bochur whose friends all take their dates on $100 first dates (I read Lakewood has a dating fund so everyone can be "equal"), isn't likely to have the guts to take his shidduch date for a cup of coffee. But if he makes friends with some guys who do this, it becomes a more palatable option. A girl who is getting married and lives in a world where all her friends are receiving a laundry list of jewlery and other luxury items, isn't likely to make the suggestion that the chatan forego pearl earrings in the yichud room, unless she has made friends that have done without. A family in a social circle where all the kids go away to sleepaway camp, is a lot less likely to consider day camp or piecing together some activities as a possible alternative.

I'd say it is important for like minded parents to actively form connections with like-minded parents. As it is said, "there is strength in numbers." It is really difficult to speak out about school policy, be it an issue with cleanliness, a religious issue, bullying, the cost of an activity/trip, or some other issue. It is a lot easier to affect change when more than one squeaky wheel is willing to speak out.

Of course, one can have friends of all stripes (and it is certainly helpful to have a wide variety of friends when it comes to networking), and I feel fortunate to have many friends of many different income levels and spending styles. But, when you are trying to keep your lifestyle under control, it is important to have company.

Tuesday, January 13, 2009

Getting Started on the Right Foot:
Too Much Too Soon

A reader wrote me an email asking if I can provide some advice to those getting their start on how to build a solid financial future. I figured I would go back to a post I worked on, but never got around to posting, many months ago and use it to start a new series.

A financial planner interviewed in an advice column directed at recent college graduates warned them not to take on "too much too soon." If there was ever a better way of summing up how easy it is to erode a potentially financially healthy future it would be it would be by over committing funds far too early in the game. Next time you are ready to purchase a "big ticket" item or commit to a recurring expense, ask yourself "Is this too much too soon?"

The following is my own list of 5 "too much too soon" traps that I see young people, especially young couples fall into:

1. Too Much House

Whether you are renting or owning, it is a good idea to start small and increase slowly. Last year I got a call from a father of a chatan who was looking for a place to rent in our community. Someone gave the chatan's father my name believing I "in the know" about such things. The couple was only planning to stay only one year while the chatan learned, and then they planned to go to Israel where he would continue to learn. The kallah had yet to work a fulltime job in her life, wasn't willing to work more than 40 hours a week (even though 50 plus hour workweeks are standard in her field of choice), did not have a job lined up (and her field of choice is not big in this area), nor did she have any contacts (I provided her with some contacts). This couple would consider no less than a two bedroom apartment! Definitely a case of "Too Much Too Soon."

Another friend of mine decided apartment living was too hard they must have a home immediately. They were owners, but the wife was insistent that they sell now, although they could have walked away with a tax free gain if they had only waited another half a year or so. Soon after they moved I ran into her and found out they were renting out rooms in their home in the basement. I asked her if they liked the arrangement or if it was hard to maintain privacy with such an arrangement. She said to me, "we don't have any choice. It is the only way to pay the mortgage." Oy vey.

Ariella recalls an email that appeared on her community's listserve. A lady is looking for suggestions on how to get her property taxes lowered before closing because buying this house has thrown them "over budget." Goodluck there. Taxes rarely go down. Nor do utilities (larger homes are more expensive to heat and cool). And, oh, by the way, stuff breaks. Be prepared.


2. Too Much Car (Too New Car)

This is probably the easiest trap for young people to fall into. A good friend of mine was telling me how difficult it is for them to make ends meet and how much stress it causes them. They live busy lives and haven't quite found regular employment or jobs they enjoy. I have to say that I was quite surprised when a few months later, they drove up in a brand new car. It wasn't a fancy car, but it was brand spanking new, with that new car smell. And, yes, it was purchased on credit. They could have bought the same model car three to five years older for half the price. Another friend of ours had to reluctantly part with a really fancy SUV he purchased on credit for a loss because the gas was running something like $400 a month. He simply could no longer afford to drive it. Ouch!

The bigger the car, the more gas. The newer the car (and the younger the driver--especially those of the male gender), the more expensive it is to insure. My advice: save up and buy a reliable used car. They are cheaper to insure. If you can't pay cash, you can rid yourself of whatever debt you carry on the carry as quickly as possible.

3. Too Much Furniture

It took us a year into our marriage to buy couches and a table that sat more than 2 comfortably and four less comfortably. At the time, a kollel couple was headed off to Israel where the husband would continue his learning and the wife mentioned to me that they were trying to sell their furniture (they were married one year at the time). My husband was not yet convinced we needed a couch, but I thought it would be nice to have a comfortable place to sit down since I was already 5 months pregnant. I figured this would be a win-win situation. I could buy some lightly used furniture at a price my husband thought reasonable. . . . .that is, until I actually paid them a visit. This couple had bought upscale furniture at an upscale price. They had paid over over $10,000 for the dining room and living room set and were looking for at least $7000.

I don't know if they ever liquidated their furniture at their price, or if they ended up paying for storage until they returned to America. But I have no doubt that if they had spent a more reasonable amount on a new dining room and living room set, they would not have endured the loss they took by buying too much upscale furniture.

4. Too Much Baby Stuff

Even the budget conscious can fall into this trap easily. The first baby is such a miracle and a joy. The marketers know what they are doing when it comes to selling you baby stuff. It seems like you need everything and they can easily convince you that you need the item labelled for babies, even if you have a perfectly find cup, plastic plate, or stool laying around. Most baby equipment is only good for a short period of time. If you insist on actually buying a swing, bouncer, carrier, etc, etc, etc, it is time to get acquainted with a nice consignment shop where clean, lightly used equipment can be purchased.

A post wouldn't be complete without a word on strollers. I'm sure the lobby in your shul looks like an upscale baby store's stroller display (I know that mine does). I do believe in buying a quality stroller. But, cost, quality, and function aren't always in a direct relationship and plenty of mothers who have bought a "status" stroller have found the darn thing doesn't really meet their needs. If your stroller purchase wipes out your savings, you are definitely spending too much.

5. Too Many Services

Cleaning help, haircuts, sheitel wash and sets, dry cleaning, and telecommunications can easily suck a budget dry. For the services you can't avoid, it makes sense to seek out a reputable, but less expensive service. When we first married, I dropped my husband's suits from the wedding and pre-wedding at the local dry cleaner that I saw people from the community going in and out of. The bill was big enough I felt like we just paid for half a suit. Soon after I learned that for those times we do need a dry cleaner, that there are cleaners that charge less than $2 a piece.

I've taken some heat for mentioning that cleaning help sucks a budget dry. People who go the cleaning lady route don't want to turn back. My advice: avoid starting down the cleaning help path and learn to divide and conquer.

Monday, January 05, 2009

Budgeting Tool #4: Year by Year Budget Summary

This is a continuation to my original Budgeting Series Posts. I probably should switch to a more sophisticated software, but my excel spreadsheets continue to work for our purposes. See
Budgeting Tool #1: Monthly Budget Tracking and Summary
Budgeting Tool #2: Cash Flow Analysis
Budgeting Tool #3: Asset and Liability Tracker

My fourth, and newest budgeting tool is a spreadsheet where I line up every year's budget by category. I have inserted a column in between each year with a formula that calculates the percentage difference in incomes from year to year.

Often, when a person lays out a budget, he/she looks at the previous year's incomes and expenses to predict the coming year. This year I decided to lay out all of our budgets from 2005 to 2008 (I'd have budgets going back further, but we lost a hard drive in 2004) side by side.

When I lined up our budgets a month ago so I could start to get a handle on 2008, I noticed some patterns to help plan the coming budget. One pattern I noticed is that every other year we seem to have a number of car expenses. In a good car year, such as 2008, our maintenance expenses have basically been limited to oil changes, wipers, and perhaps a flat tire. But in 2007 and 2005 we had some major cash outlays.

No sooner than I placed funds into the budget for major car repairs for 2009, as per the emerging pattern, did my mechanic tell me following our December oil change, that I need to bring the car back in January for a brake job. Glad I was prepared.

In good news: I was very worried about increasing food and gas prices and was convinced that despite my efforts in cost effective grocery shopping, that we would be hit by high food prices. We were hit by high gas prices, even though we didn't make our normal summer driving trip. However, we spent LESS (2.7% less to be exact) on groceries and household products (hygiene products, diapers, cleaning products) in 2008 than in 2007. We made all yom tovs (in the past we went away for Pesach), we hosted my parents for about 3 weeks during the year, and my ate "real" food all year long.

My favorite coupon, as must have, are those offered by drug and grocery stores offering a cash gift card ranging from $10-$30 for a new and/or transferred prescription. This is the "must have" coupon. CVS Extra Bucks and Rite Aid rebates have made a huge difference in our budget also (I count the check rebates against the food/household product budget). See CVS 101 and Rite Aid 101. I have yet to pay for mouthwash, toothpaste, toothbrushes, shampoo, conditioner, or even lotion this year after coupons and rebates. I often leave with more money/extra bucks than I started with.

Bonus Food Costs Post: When Brisket Runs over $16 a pound deals with controlling yom tov expenses.

Many people, including financial planners, are convinced coupons don't make a difference. But those of us who "specialize" in coupons and read our receipts know this is not the case. I regularly save between 25-60% on groceries between circulars and coupons. At CVS I do even better. My Fall spending was listed at just over $60 for around $550 in merchandise, which includes diapers. Now granted, if I wasn't getting muh of this stuff for free, I would choose a different brand, but coupons do make a difference.

Happy new calendar and tax year.

Sunday, November 30, 2008

Guest Post: Financial Sense for Chareidim: Mesila Gives The Tools

Thank you to Aaron Katsman, a Mesila volunteer, who outlines the nature of the work of Mesila, an organization that helps Chareidim to get out of debt, live within a budget, and become financially stable. Certainly the highest level of tzedakah. The great news is that Mesila is coming to the United States, first to Lakewood. Highlights are mind. Guest post below:

Being in the midst of a global economic crisis has brought home the point that individuals must take a more responsible approach to their finances. Unfortunately many households are already on the brink of financial collapse and lack the necessary tools to get their financial situation in order. I'm not only talking about economic collapse, but in many cases the strain this causes on their marriage is unbearable. Broken finances=broken families. What makes matters worse is A- the need for people to 'keep up with the Joneses' and B- the unbelievable ease with with anyone can access money. Both of these factors, as well as many others, have contributed to economic hardship and a culture of debt among many in today's society. While organizations like Debtors Anonymous have done a great job, many feel that due to special circumstances, Orthodox Jews need their own organizations to work with their own constituents. Mother In Israel had a great post, that appeared on Orthonomics, about Paamonim. I'd like to mention another group that does a lot of work in the Chareidi population.

Mesila works with families to provide them with the tools necessary to live within their means. It's not just another Gemach(Kindness organization.) Mesila tries to convey responsible, Torah-based attitudes towards finances. It's obvious that Chareidi society has different needs than other groups, ( feeding large families, Bar Mitzva's, marrying off lots of children..) and many people end up loaded down with staggering amounts of debt and spend their entire day running from Gemach to Gemach, rolling their debt.

As a volunteer for the organization,I have worked with tens of cases and can attest to the fact that their methods work. I'd like to share an example:

About two years ago I started to work with a young couple with 3 children under the age of 5. The husband was learning and the wife was a teacher earning a teachers salary. Wanting the same type of lifestyle that their parents currently enjoy, they bought a car, an apartment, and of course they could only furnish the apartment with the very best furnishings. Needless to say that their total income was about $1,000 a month, had expenses of $2,500 a month and had run up debt of $50,000. They were late on mortgage payments, municipal taxes etc.. You name it and they hadn't paid it. They were constantly under threat of being cut off from all utilities. ( Believe it or not this is actually one of the easier cases I have worked on!)

Well, we got to work. The first thing they needed to do was understand their expenses, both monthly and annually. Mesila believes that you need to separate your monthly and annual expenses from your debt. If everything s mixed up then you can't get a good understanding of the problem. Once the couple actually saw their income and expense line, they actually realized that they had a big problem. The husband immediately got a job as a security guard, and the wife started to supplement her income by tutoring. Then we worked on a budget. They would have to live within their means, and have money left over to start paying down debt.

A big issue for these couples is that they have no room to breathe. What do I mean? That even though they are making more and saving more they are constantly being chased down from people wanting to be paid back. So the couple made a list of all the individuals, and companies that they owed money to, and we starting calling them to re-work the payment plans. We also arranged for about $5,000 from a Gemach to pay back the most urgent loans; those of the local grocer, butcher and fruit store. The firms we called to re-work payments were so accommodating to the couple. I see it over and over again when it comes to charity. If people think that they are giving and they feel like the money is going into a black hole, they are less inclined to give. But if a family actually has a budget and they are doing their best to live within that framework, people are much more willing to donate. The same thing holds true for these firms. Once they heard that the couple is working with Mesila, they delayed repayment for a few months, and then made terms that the couple could handle.

I don't want to go on and on with this story but needless to say, the family is doing well. They have managed to cut their debt down to about $20,000, and are living within a monthly budget. The husband still works nights as a security guard but is in school studying to be a social worker.

Many of you will say that Chareidim should get out of the Yeshiva and get a job. First of all, Mesila believes in not judging anyone. You can do whatever you want to do with your life, just make sure that your expenses are no more than your income. Also, what you need to know is that in many families the husband works and may even work multiple jobs. The wife also brings in some extra money. They are very resourceful. It's just that if you have 10 kids, even if you net $5,000 a month you are going to be in trouble.

The need is great and they are inundated with requests to help. There aren't a lot of English speaking volunteers. There are hundreds of Israeli volunteers and they have branches all over Israel and are even trying to start a branch in Lakewood.

We could use more organizations like Mesila and Paamonim to enable people to get back on their feet economically. Any of you who think you could use your experience to help others are urged to call and volunteer.

Aaron, expect an email from me.

Tuesday, November 11, 2008

Seminary on the Butcher Block

Note: Please keep asking questions on the Tuition Crisis Shiur thread. Thanks!

Many Jewish publications have been running letters decrying the seminary year. Earlier in this year, the Yated had weeks worth of letters decrying the cost. YWN recently ran a letter that generated 181 comments and it appears the consensus is that parents are none too happy about this "required" expense. ProfK recently posted her own opinion (see here and here) that seminary (and yeshiva) year is a luxury that the Orthodox community as a whole can no longer afford and it time for it to hit the butcher block.

Personally, I can't imagine getting our own children through the 6th grade (we should be so lucky), much less paying for an additional year or two of seminary/yeshiva at the cost of $20,000 in today's dollars plus extras (I'm told Shabbat meals are one of those "extras" for girls, while boys get fed). Housing and tuition already dominate the frum budget to the point where I'm surprised so many have been able to undergo the seminary cost up to this point. So I'm quite sympathetic to the arguments against undergoing this massive cost. And make no mistake, the cost is tremendous, especially as it follows 13 years of private schooling and the coming costs of college and/or vocational training are waiting in the wings.

However, I have serious reservations with the "no seminary" movement which seems to be picking up steam. And that issue is that if some superfluous cost is going to be on the butcher block (and we have what to choose from), why in the world it is a year of post-high school Torah school that has hit the firing line, with so much appeal, first?

The arguments against seminary are not just financial, but if we are only talking dollars and cents and real cash money exists (I have seen debt recommended to fund the seminary year, but I generally take exception to debt financing), I'd say spend the money for the wedding on a year of concentrated Torah learning, and then proceed to serve cake and punch for the wedding. I'd say that putting the seminary year on the cutting board before the typical Orthodox wedding hits the butcher block just isn't right.

On a related note: I think parents do a real disservice to their children when they pay for an expensive wedding and leave their children to pick up the tab for their education. There are frum men and women carrying around tremendous amounts of student loan debt who were married off "in style." I'm sure we could spend hours discussing parents' obligations to fund higher education. I am just pointing out that it makes no sense to me to spend money on a stylish wedding at the expense of introducing more financial stress into the couple's life.

Friday, October 03, 2008

Some Frum Financial Factiods

Given that there have been no statistical studies on the financial health of the Orthodox community, we have to take whatever bits of information that we can get to try to gain some perspective on the "State of the Union." My Baltimore correspondent sent me two pieces of information published in the recent Where What When that might help give some perspective.

The first from an article "An Affordable Baltimore Wedding:"

"I did not set out to write an article concerning the issue of expensive weddings, however allow me to make a point: Since I spend a lot of time working with frum families discussing budgets and finances, I see the issues that plague us. It is my opinion that (much) more than 50 percent of families with children are in some form of financial crisis. This means that middle-aged couples are going to elderly parents for help or are borrowing money from lines of credit or credit cards. The financial pressure takes a serious toll on people."

One can only wonder what the estimated percentage would be if you included those without savings or who are raiding their savings prematurely, not just those who can't live on their salary alone.

The second comes from an advertisement and write-up regarding an event being put on by a Maryland Yeshiva to benefit the scholarship fund:

"[The scholarship fund] benefits 60 percent of its student body, currently numbering 187 girls and 86 boys. . . . . . . Last year, the Yeshiva awarded over $1.5 million dollars in scholarships."

Take out your calculator and do the math to find out the average scholarship amount is and you might be surprised. $1,500,000/((187+86)*60%)=$9,168*. At least in my own mind, this is a HUGE amount of assistance to be providing per student on scholarship.

Many have, rightfully, made the call to support local yeshiva and day schools. I've dedicated plenty of posts to this subject myself. But when you see just how much filling in is needed (and I believe most schools have a similar percentage of kids on scholarship--see a past article here where the director of Toras Emes in Los Angeles reveals only 32% of students pay full tuition), your eyes will end up bulging out. Filling in the gap in tuition as it stands currently, isn't a matter of providing a thousand dollars a student, it is a matter of providing nearly $10,000 per student (and this after grandparents are already kicking in significant amounts). Of course there are students who aren't on scholarship, but these families are definitely feeling the squeeze and could use some relief too.

I will leave my comments at that. The figures I find here and there continue to just boggle the mind.

*I looked up tuition at this school online it ranges between the mid-$15,000 to the mid-$17,000.

Sunday, September 28, 2008

When Brisket Runs Over $16 per Pound

I stopped in the kosher store recently to see if I could locate a somewhat obscure ingredient for a Syrian dish I was making, only to later find it (on sale) in a neighborhood grocery shortly after. While I was in the store I noted brisket was a whopping $16.59 per pound. The particular brisket sitting in front of me cost in total over $65 and I don't think it would have made a second showing on the second day of Yom Tov.

The shopping I did for the past Shabbat, the coming Shabbat, and Rosh Hashana right in between hasn't cost me a whole lot more than $65 (of course, I'm using many ingredients on hand like flour, eggs, and canned goods I have already picked up on sale and/or on the damaged rack).

Roasts are a staple for chagim in many houses. But if you are trying to maintain some grocery budget sanity, something has got hit the butcher block. And roasts have hit my chopping block, possibly for good. I skipped pricy cuts of meat this last Pesach and once again will be skipping such cuts for Tishrei.

My secret for managing Yom Tov within the yearly grocery budget is to make sure the main dishes poultry, fish, and meat are kept to small portions and are not the sole focus of the meal. By serving a number of tempting and unique side dishes, the focus shifts from the main dishes to the side dishes and we don't consume $65 of meat in a single sitting. Another secret of mine is to serve hearty soups. For the chagim, I make a hearty chicken soup with good size chunks of chicken and lots of vegetables in it. Once everyone is done having a hearty soup, they tend to control their portions of food better than when they had a chicken broth soup for the 1st course.

Of course, on Yom Tov we should give proper kavod through delicacies (and those who have tried my flourless cake in a honey sauce are in for a treat). But, knowing we will come out of Yom Tov without too many extra pounds and a crushed budget is also a treat.

Wednesday, September 10, 2008

Book Review: Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead
by Tamara Draut


(Please also see the Guest Post on Life Insurance following this post).

I keep walking by this book on the library shelf. Tempted to pick it up and give it a quick read, I've passed on the opportunity. Fortunately finance blogger TheFinanceBuff has posted his own 6 part review and I can see that my initial guess about what the contents would be was correct. I guessed the book detail financial stories of young people showing that they can't get ahead because of external factors when much of their problem (certainly not all of it) is their own fiscal behavior. I also correctly guessed that the author would then conclude with a call for more government action, rather than a cry for personal responsibility, which is a cry we could use more of.

Seems my guess was right on the money. The Finance Buff recommends highly against this book writing, "1 star, harmful more than helpful. Getting hung up on entitlement and developing a victim mentality will not help our younger generation get ahead." Couldn't agree more. Seems this conclusion has been echoed on my blog on a weekly basis no less in regards to the frum community.

The reason I bring the review to my own pages is to outline how financial trouble starts brewing. While the stories in the book are not profiling frum Jews, the patterns are similiar. If you want to get ahead, don't do what the people in this book are doing.

The Finance Buff's reviews include the following:

Stories from Strapped: College Education

Here is the secular version of the frum story I've seen:

Renee’s parents couldn’t afford to pay for her college, so she attended community college while working full time and supporting an unemployed boyfriend. A new job created conflicts with her class schedule. She dropped out with $4,500 in student loans. Four years later she’s still paying the loan. Without a college degree, Renee works as a legal secretary earning $28,000 a year. Renee regrets not being able to earn a four-year degree.

Renee's problem is not the small student loan, although she would be better off without it. Renee's problem is that she is trying to support two people on her own low salary and because her boyfriend isn't financially contributing, she has no time to plan for the future because there are bills coming due now. If Renee was frum, she might be trying to support a husband (either in kollel or in training for parnasah post-kollel) and young children on her low salary. And in addition to having more mouths to feed, she has daycare bills to pay, tuition bills looming, a minivan that has been financed because she needs to run carpool, and she can't get onto a career path with more potential because there are simply too many balls in the air at once. Renee should be able to turn her situation around rather quickly. I'm not so sure about her frum counterpart unfortunately.

Stories from Strapped: Paycheck

The author is trying to make the case in Chapter 2 that young people can't get ahead because they lack good jobs. No doubt that the global economy and outsourcing have made it harder to compete. But the stories to prove the case do anything but.

Here is the secular story:

Susan had seven jobs in six years after she graduated from college. She quit her first job because she wanted to live close to her future husband. She left her second job because another job offered a higher salary, and she quit her third job because the hours were too long. She left her fourth job because a startup gave her substantially higher salary and commission. After the startup failed, she was unemployed for a while. Then she got into retail, her sixth job. She left the retail job for law school. Now she works for a non-profit while attending law school.

With the exception of being laid off, Susan's inability to command a better salary doesn't have to do with lack of work, but rather her inability to stick with the same employer for an extended period of time.

I met the frum version of this story more than once when I was dating. It came in the form of young men who blamed the Yeshiva system for not encouraging them to pursue higher education, yet the higher education wouldn't have helped them get off the starting block because they would up and leave their employers regularly. One man around 30 years old who I spoke with seemed very lovely. When I asked about jobs, it turned out he had 10 jobs in his 10 years job history. He wished he would make more money. But, employees who don't stick around much past the time frame it takes to train them, don't tend to get raises. Other times the story revolves around a young man who sincerely wants to learn, but also wants to work and bounces between jobs and Yeshiva, settling into neither one.

I don't find the girls to bounce as much, but that often changes with marriage. Today it is popular for young couples to take a year to learn in Eretz Yisrael. The wife, barely into her career path moves. Perhaps the most dramatic bouncing I have seen was a young couple that lived in three locations in three years, each move coming with a change in kollel. The wife had taken on sole support, but of course was switching jobs like no tomorrow. . . . and she threw in some maternity leaves for good measure. I can only imagine that despite having taken on the primary earner role, she has been placed on the "Mommy track."

Stories from Strapped: Debt

The author makes the case that young people can't get ahead because they are strapped with debt, student debt and consumer debt.

Here is the secular story:

Lori, a 33-year-old living in Manhattan, still has $40,000 in student loans debt. She earned only $16,000 a year in her first job as a social worker and community organizer in New York. Her income "inched upward" over time but it’s still not enough to pay all her bills and loan payment. So she deferred payments on her student loans.


The frum version of the story is a young modern Orthodox lady who is working as a teacher's assistant, yet must live on the Upper West Side because she believes this is the place she must be to get married, yet her salary is not at all commensurate with living in one of the most expensive locales in the US. She also has student loans that are astronomical because she had to go to college in New York in order to get married.

Starting to see a theme? Once our friend gets married, her story starts to resemble those of Elaine, David and Lisa who have used their credit cards to fund furniture, weddings, and traveling for friends weddings.

Stories from Strapped: Housing

Did I mention weddings? Here the author makes the case that Housing is Too Expensive. I'd agree that housing is a stretch, even moreso for frum families who can't live just anywhere. But, the house of cards isn't just toppling because of housing costs, it is toppling because other expensive choices are being piled onto a shaky house. And some of those stories are about putting on weddings that couldn't be paid for in cash.

I'd say the secular and the frum stories have a similar ring. Debt undertaken in the name of marriage or to get to friends weddings. The difference might be that the major portion of wedding debt in the frum world is undertaken by parents, so one could say that this is a reason America's frum 40, 50, and 60-somethings can't get ahead and/or are sinking in a sea of debt. Even the travel costs to weddings are often undertaken by the parents of bochurim, or perhaps even the parents of the chatan as we learned in this post. Nonetheless, between the costs of dating, marriage, and being mesameach your friends, plenty of money is expended.

Stories from Strapped: Child Care

In this chapter, the author makes the case "and baby makes broke." Can't argue with the author that child care is expensive; darn expensive. Unsurprisingly, the author proposes the cost of childcare be undertaken by big brother.

The secular story and the frum story have a similar ring, but in the frum story "big brother" is the childcare provider who some feel should be doing a chessed and providing cheap care. Of course, in the frum story the costs are multiplied many times over, normally by 2, sometimes by 4, and even by 5 and 6. . . . .and then comes tuition and camp (which is not considered a necessity, not a luxury as we are continually being told).

Regarding the feeling that those who provide childcare are providing a chessed, my friends are always talking about how terrible it is that (frum) childcare providers charge so much (as if they don't have families of their own to feed). My friends also complain there are just simply not enough Jewish and frum childcare providers. My friends who are have been frum childcare providers tell me they have said enough because they didn't get paid on time, that the mothers were constantly asking for discounts because they "can't afford" so much (note to any babysitters out there. . . . never, ever, ever agree to give one mother a discount because it will come back to bite you when every other mother wants the same deal because people talk), that they were constantly being pressured into providing additional hours that the provider had specifically specified she would not do, and that they felt like shmattas by the end of the experience.

Conclusion

It is by no means easy to get ahead and stay ahead in this competitive world. But none of these stories are really about people who can't get ahead at all. They are stories about people who won't get ahead because they are making very expensive choices and are loosing financial ground while those making more frugal choices are gaining financial ground.

No doubt that in the frum world we have more limited choices. But, within those choices, we can't squander the parnasah that Hashem grants us. It is wonderful to have large and larger families. It is wonderful to attend friends weddings. It is wonderful to buy nice furnishings, clothing, etc. But, choices have to be made and if you make too many expensive choices equals broke.

I agree with the author that books like this do nothing but promote a victim mentality. I do hope my blog promotes a feeling of empowerment, because empowerment is what is needed to gain some footing in a tough world.