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Andrea & Jason
“We’ve been leading separate financial lives for 20 years!”
By splitting everything from their mortgage and bills to groceries and restaurant tabs, they avoided potential arguments about money. But it has led to complicated finances. Watch as this dynamic duo gets on the same page and starts having fun again.
Our experience with Project Money has been a long and hard road to travel for seven months. Before PM, the only debt we shared was our mortgage and car loan. We had no clue as to how much the other was spending or had accrued in debt (student loan, credit cards, etc.). We kept most of our finances separate in an effort to avoid typical marital arguments about money. Jason had accrued some retirement savings that could be available in an emergency, but we had no immediately accessible emergency savings. ZERO! We also had two full-time incomes.
Our belief in how well we would do with our initial PM goals was knocked for a spin when Jason’s job was cut to half-time in June, then completely laid off in September. This was the impetus for Jason and I to start our own LLCs, but the growing pains took so much time that we had little profit to show before the end of Project Money.
Yet we didn’t give up! We continued with our goal to save as much as we could even as Jason’s income significantly decreased. This was difficult because there is only so much that you can do to decrease your monthly living expenses in an effort to free up money to save. During PM, I succeeded in completely paying off my credit card and Jason’s credit card bill was rolled into a low interest, refinanced car loan. I am quite proud that despite these financial struggles, we have not accrued any credit card debt, we saved over $4000, and we decreased our debt by over $4000! That brings a smile to my face.
What didn’t happen during this PM period? Unfortunately we didn’t increase the fun in our lives. A major job loss and being really stingy with your money can be hard on your emotions as well as the wallet.
But we have hope that things will get better in 2015. 1) Jason has had a couple of job interviews and we think he may receive a job offer in the near future. 2) My LLC will start to show significant financial gains with my first major paycheck in January. 3) And despite our low numbers when compared with the savings increase and debt reduction for each PM team, I still hold hope that we can win Project Money. Fingers crossed!
Jason’s job search continues. He had a surprise interview this past week and we have our fingers crossed that they offer him the position. But when discussing the particulars of that one job, I started thinking about the hidden costs to that position.
Almost two decades ago, I read the book Your Money or Your Life by Joe Dominguez and Vicki Robin. That book led to the quick annihilation of my student loans, credit card debt, and the realization that we only needed one car in our family. Fast-forward and we are in another debt-ridden financial situation due to two graduate degrees, a car loan (still only one car!), and owning a home.
The book emphasizes the fact that “money is something we choose to trade our life energy for… You ‘pay’ for money with your time.” We only have so much time left in our lives, so how do you want to spend it? Since we often need to earn money, a significant amount of time is spent working for money. A lot of people over-simplify the calculation of how much they earn and hour. For example, if you earn $600 per week and you work 40 hours a week, you trade one hour of your life energy for $15.
But the book encourages you to look closer at the true costs of working in that position. What are the expenses that are related to that exact job? Depending on what you do and were it is located, there can be increased costs in commuting, costuming, meals, escape entertainment (special vacations or expensive playthings), etc. Upon deducting those additional expenses, you may discover that your job really only pays $8 an hour! Is it worth it?
I started thinking about these added expenses when Jason starting talking about this potential job in Middleton. We would have to buy a second car, there would be increased gas costs, plus it is in a business-like setting and he would need to purchase appropriate clothing. Now that we know our monthly expenses, our savings goals, and the potential increased costs of the new position, we have a better concept of the amount of remuneration that is needed to make this position worthwhile over the long term. If they cannot meet this amount, then it might not be the right job for him!
This month is a big milestone for us. Jason has been receiving fees for his LLC since November, but this is the first month that he has made enough money to pay for business-related expenses that are connected to our personal lives. So how does that work?
Using IRS articles about Home Office Deductions and Business Use of Your Home, I determined the following: Since Jason works from a home office, a portion of our home expenses can be paid by his business income. Using the simplified method created by the IRS, I multiply $5 by the square feet of his office. That means each month approximately $630 of his business income could be spent towards housing expenses such as mortgage, Internet, water, electricity, and insurance.
Using IRS articles about Car Expenses and Standard Mileage Rates for the business use of a car, I determined the following: The easiest way to track the use of our car for business purposes is by documenting the exact mileage (for each business) every time we use the car for business purposes. I multiply the monthly mileage by the standard rate of 56 cents to determine how much can be spent on expenses related to the car. As a result, this month Jason is able to cover our bi-annual, December car insurance bill using his business income.
The creation of an LLC allows the business income to be used pre-tax because it is related to business expenses. Now that some of our home and auto expenses are being covered by Jason’s business, we believe that we will have more money from my full-time job to put into our personal savings account! Adding to our savings account since Jason’s job loss has been extremely difficult because almost all of my full-time income goes towards paying our debts and monthly expenses. It’s such a good feeling to finally start experiencing the financial benefits from the income generated by Jason’s LLC!
Being tight with the purse strings while living on one full-time income isn’t always fun.
Sometimes it can be uncomfortable. For example, this past week my coworkers asked me to go out with them for lunch at Culvers. “Thanks, but my lunch is in the fridge!” Casey wouldn’t take no for an answer and insisted on buying my lunch. It was sweet of her and I had fun going out with them, but deep down it made me feel like a charity case, which did not feel good. I’m way too independent and it can be uncomfortable to accept other people’s good will.
Sometimes it can lead to arguments. Remember Necessities Only November? Well apparently I did not have Jason’s complete buy in. Last week I came home to discover that he bought two new (actually used from St. Vinnie’s) hand towels for our bathroom for $1. Only $1 right? Not normally a big deal, but we already have three hand towels so this was not a necessity. He doesn’t see how a dollar here and there adds up and leads to us to having less money for bigger expenditures that are on the horizon – like the $350 we will need for our December car insurance bill. “It’s just a dollar Andrea!” Jason sees the trees, while I am focused on the forest.
Sometimes it can feel unrelenting. After five months, Jason still hasn’t had an interview. He continues to pursue new contracts for his consulting business, but cultivating a clientele takes time. As for my consulting business, I discovered that there will be an extended period of time before I receive payment. For example, I worked a significant amount during the month of November, but I won’t receive payment for that time until mid-January.
But enough complaining about the bad and the ugly. What’s the good? First, one of Jason’s contracts may get extended! Second, I received another client, so my part-time income will more than double!! And the biggest news of all: Jason has his first interview on December 18th!!!
Throughout Project Money, I calculate our expenses twice a month (1-15 and 16-30/31) and compare the costs to the previous month. Now that we have passed the midway point of Necessities Only November, I’m curious about how our numbers compare to when we first started Project Money in June.
Groceries: 24% decrease Unfortunately most of this decrease is due to shopping for non-organic products at places like Trader Joe’s and Woodman’s. I’m still conflicted about whether these savings are worth the potential health and environmental costs.
Restaurants: 50% decrease The perfectionist in me is not so happy about this result, especially since eating at a restaurant is far from a necessity. But I need to recognize that a 50% decrease is a decent result for a couple that used to eat out multiple times every week.
Coffee Shop and Snacks: 77% decrease This is a significant decrease for our household. I rarely buy that tempting Mello Yellow at work and Jason only occasionally goes to a coffee shop to get a break from being stuck in the house all the time.
Credit Card Payments: 93% decrease Jason and I no longer have monthly credit card debt. In the past, when we ran out of cash, we would turn to the credit card. Now we rarely use credit cards, but when we do, we pay it off immediately to avoid paying interest. We also emphasize using a credit card (Discover) that gives us cash back for using the card.
Clothing & Shoes: 100% decrease Since starting Project Money, the only money we have spent in this area is $5 for a garage sale jacket for Jason and $3 on a use pair of St. Vinnie’s pajama bottoms that Jason got for my birthday in October (my previous pair were ragged and holey!). This decrease in spending has been effortless for us once we recognized that we already have plenty of functional clothing and shoes.
June 15th total expenses: $2648.40 November 15th total expenses: $1862.68 Total decrease in expenses: $785.72 or 30%. Not bad when you consider that this includes our monthly mortgage payment!
The cold is here and free entertainment is becoming limited. So we have returned to an old winter activity that we used to do a lot in the past and had forgotten about: hanging out at a bookstore. We spent four enjoyable, completely free hours reading books and magazines on a Sunday afternoon.
Some people may feel too tempted to spend money, but we’ve figured out two ways to inoculate ourselves. First, we bring our own insulated cups of coffee. Second, if there is a book we might like to read and it would be difficult to finish during one afternoon, make a note of it and get it from the library. Over the years we have realized that there are very few books that we need to own. In fact, we have quite a lot of books in our house that we haven’t touched in decades. Which brings me to a book that I picked up today and completely read before leaving the bookstore: the life-changing magic of tidying up: the Japanese art of decluttering and organizing by marie kondo.
Reading books about organizing stuff has always intrigued me. I fantasize about owning a minimal amount of things and living in one of those tiny houses. Digging down to the necessities in life! Jason and I go through our stuff a few times a year – we call it purging. Unfortunately I have never been completely satisfied by the results. But this book has some different ideas that I’m going to try:
One category at a time. Rather than go room to room, choose a category like books. Go throughout the house and gather up ALL the books and put them on the floor.
Touch and examine EVERYTHING. Does it spark joy? If you hesitate, then it probably doesn’t have that spark.
Discard everything in that category that you don’t want BEFORE organizing and putting it away!
Reduce until you reach the point where something clicks and you feel satisfied. That point is different for everyone.
If you are having trouble getting rid of something, ask yourself: Is this because of an attachment to the past or fear for the future?
Finally, designate a final resting place for each thing.
Inspired, I came home and tore through all of my books in the house (Jason got inspired too). This resulted in 100 books that we will give to friends or attempt to sell on Amazon, a used bookstore, or drop off the leftovers at St. Vincent de Paul’s. Hopefully this will result in a small chunk of money that we can put in savings!
Despite the fact that our income has been cut in half, I’m not giving up on doing as much as I can to decrease debt and increase savings. The hardest part is that most of our money goes towards paying our bills and debts, which leaves very little to none for adding to our savings. I have been adamant that we do not touch our savings even as we continue to wait for those first paychecks from our LLC contracts.
So in an effort to increase the chances that some money for savings may be left over at the end of the month, and inspired by Katie’s No-Spend September, I have implemented a Necessities Only November.
This decision is imperative because our expenses are increasing this month. First, our CSA box ended last month and we now that our leftovers are gone, we will need to start spending money on buying vegetables. Second, with the increasing cold and darkness, I am no longer able to ride my bike to work. So I’m using our car for transportation to my full-time job and my contract work. Finally, we plan to visit family for Thanksgiving, so there will be added costs for that trip.
Thus our focus when spending money is on purchasing necessities only. For example, I have a lot of tea in my pantry, but I had been drinking coffee that Jason made almost every morning. Not anymore. Now I drink tea and only allow myself a coffee on the weekend. I’m relying on what food we have in the house, picking recipes using those items, and creating a minimal grocery list. We will mostly rely on the dried beans in our pantry as a source of cheap protein. As a result, we stayed under the $45 budget I had set for the week. Using up what we have is my main focus for this month.
In addition to not spending money, we are also trying to have fun. Unfortunately this is getting a bit more difficult now that the weather is turning colder and we are starting to feel it. But this weekend Jason and I made a great breakfast on Saturday morning, read all day, and played the board game Stratego in the evening. Jason finally won J. If I had been paying attention to the UW Memorial Union, we could have tapped into the Celtic Film Festival this weekend! So next weekend we have made plans to access the abundance of Madison’s free movies by attending a showing at the UW Cinematheque.
On Monday, we had our second live NBC news interview and discussed how to create an LLC. See the clip here.
On Tuesday and Wednesday, I attended a conference in the Wisconsin Dells. I’m fortunate that my employer will reimburse the registration fee. Last year they paid my fee, but I drove my own vehicle and rented a hotel room rather than add to the wear and tear of our only vehicle. This year I learned that my employer provides a vehicle for work-related events, so I used their hybrid vehicle and carpooled with a couple of my co-workers. This experience reminded me that people aren’t always informed of all the benefits are available when they first start a new job. It’s important to talk to coworkers and ask questions to find the hidden benefits at your place of employment.
On Friday night, Halloween, Jason insisted on taking me out for a frozen margarita at Tex Tubbs. He knew I had been craving one throughout the summer, so he saved his weekly allowance to take me out. Part of me was stressed at spending money on a non-essential, but just like Project Money’s Team Katie said on her blog last week: sometimes you need to reward yourself to encourage motivation. It’s been about a month since we sat down in a nice restaurant, so this was a fun little splurge. Just like Katie recommended, we stuck to a limit of one drink each. A nice bonus was that our friends shared their sweet potato fries and unlimited chips & salsa. Thanks Fritz & Lynn!
Finally, on Saturday night, Project Money’s Team Louise and Dave invited us over for dinner. We brought an apple crisp made from items already in my kitchen and we had a nice time hanging out for the evening. Dave was generous enough to provide Jason with tips for improving his LLC’s website, while I came away with some good clean jokes (thanks Will!) and my favorite Halloween candy (thanks Ellie, Will, & Louise!). The imaginary potato soup Celine made was delicious! I need to get her recipe…
Each of us recently created a Limited Liability Corporation (LLC) in an effort to adapt to Jason’s job loss. We looked at our areas of expertise and created LLCs to offer these skills as consultants. We chose the LLC format because there were several benefits to this type of business:
Personal assets are protected if the LLC incurs debt or is sued. And on the flip side, the business is protected if we are sued for personal reasons.
Less recordkeeping than other business types.
Taxes are paid through personal income tax forms and only the profits are taxed.
Profit only occurs if the business income is greater than business-related expenses. That means the money used to pay for business-related expenses is not taxed. Those expenses can include the business use of your home (mortgage, insurance, utilities), car, cell phone, etc.
How do you create an LLC? Easy!
Pick a name. Ok, this was actually the hardest part of creating an LLC because it needs to be an original name in your state. In addition, the name must include the term Limited Liability Corporation, LLC, or L.L.C. You can check the originality of a business name in Wisconsin here.
Apply for an Employer Identification Number (EIN) through the IRS.
Open checking and credit card accounts for the business. With Summit Credit Union, if you qualify for a credit card, you are not charged any fees for opening a business checking account. Call to make an appointment and bring a copy of the LLC’s Articles of Organization (from registering with the state) and the EIN number.
That’s basically all that is needed to create an LLC in Wisconsin. But we aren’t lawyers or tax accountants, so do your own research on this subject! A good resource for deciding what type of business structure might work for you is the U.S. Small Business Administration. Another helpful resource is the University of Wisconsin-Madison’s Small Business Development Center