Author Archives: Laurel Gray

About Laurel Gray

Ever since reading “Cheaper by the Dozen” as a child, Laurel Gray has been interested in efficiency and frugality, while still enjoying the good things in life. Parisian by birth, Virginian by upbringing, and Costa Rican by choice, she has been living abroad for the past six years. Laurel got a perfect score on her SAT verbal and holds a B.A. in English Language and Literature from the University of Virginia. She has written for newspapers, magazines, major telecommunications companies, and various websites. She is married to a frugal pilot who reuses dental floss and is the mother of two young children who are still learning to turn off lights when they leave the room.

The Thorny Issue of Combining Finances

Posted on by  at  5:00 am
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Newlyweds by INDelight Photography

Life is full of sticky issues and none stickier than the issue of if, when, and how to combine finances with a romantic partner.

In the early days of a relationship, when everything is shiny and new, it might seem like the most logical thing in the world to combine finances with the girl or guy of your dreams. But keep in mind that the odds of the relationship panning out may not be in your favor. Divorce statistics are always hotly debated, but the CDC puts the marriage rate at 6.8 per 1,000 of total population, with the divorce rate at 3.4, based on 2009 data. You don’t have to be Zsa Zsa Gabor to realize that these are not terrific odds.

Considerations

There are many factors to weigh when deciding to combine finances, including the incomes, assets, debts, credit ratings, obligations, ages and general reliability of both parties. For example, an older couple with two stable incomes and established credit histories might benefit less from combining finances than a younger couple with one stay-at-home spouse. Likewise, couples with one spouse whose income varies greatly from month to month (such as real estate agents, freelancers, or contractors) might find that putting everything in one pot helps smooth out the financial peaks and valleys.

The decision to combine finances should never be taken lightly because the effects of such an arrangement can have long-lasting repercussions. Credit card bills racked up by a profligate spender can harpoon the financial health of a more prudent partner, sometimes long after the relationship has evaporated.

Life Stages

Recently, young friends of mine who both have stable jobs decided to purchase a house together. They were not married or engaged, and so my gut gave a little lurch when I heard the news. I was worried that if something derailed their relationship, they would be encumbered with a property they could not afford individually and the legal entanglement of a shared mortgage. Fast-forward a few months and they are now engaged and moving forward with their life plans. Was it hasty of them to commit to a house purchase before the relationship was on terra firma? Or was this simply a case of outmoded thinking on my part? Several older, non-married friends of mine share mortgages and I don’t bat an eyelash. So perhaps it was only the relative youth of this couple that caused my twinge of fear.

Another couple of my acquaintance married later in life when both had established careers and substantial assets. They worked out a pre-nuptial agreement and decided to opt for the yours-mine-and-ours financial model for expenses. Both retain their existing accounts but contribute on a monthly basis to a shared account used for joint expenses such as utilities, food bills, housing costs, vacations and the like. This arrangement is practical for many households with dual incomes. The contributions to the joint account don’t have to match dollar for dollar; each couple can arrive at a ratio that is workable depending on income and other obligations such as child support. In theory, the amount not contributed to the joint account would be used for each partner’s retirement fund, short-term savings and spending money.

Taking the Plunge

The process of combining finances can be a vexing issue and a very personal one. The most important factors are trust and openness. A frank discussion about financial goals and practices, accountability, and responsibility will help you determine the right time and manner to combine finances. If both partners share the same goals and outlook and are responsible enough to adhere to the program, then combining finances can be completely painless. If there are stark differences of opinion or bad habits to be overcome, a staged approach might be more prudent. For example, start small with a joint account that covers only the items that are truly shared such as housing, food, property taxes and insurance, and utilities. Over time, other assets can be combined once a pattern of compliance and trust is established.

For me, the process of combining finances happened organically over several years. In the beginning, I retained by own accounts and transferred chunks of money to my husband’s brokerage account periodically for our investment portfolio. I continued to max out my SEP-IRA annually. After our children were born and we moved to Costa Rica (where it was not legal for me to work due to our residency status), we simply combined all of our assets into one pot without fanfare. Luckily, my husband is a tight-wad and we share similar long-term financial goals, so I did so without hesitation.

When preparing to combine finances, start with a realistic look at your income and expenditures using an online budgeting tool like Kiplinger’s worksheet or a budget-planning app like Mint. This will help you discover areas where your actual expenditures are outpacing your projected expenditures and let you trim accordingly. Crunching the numbers will give you and your partner cold, hard facts to work with rather than vague suspicions like “he spends too much on eating out” or “she spends too much on shoes.” When you are armed with data, combining finances will be less a leap of faith and more an orderly process designed to help you achieve your financial goals as a team.

Combining finances with a loved one is an issue with no “right” answer, so if you have any insights gained from personal experience, please share them here.

Credit Cards Tougher to Get for Stay-at-Home Parents

Posted on by  at  5:00 am
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As a stay-at-home mom, I cringed when I read about a new Federal Reserve regulation that severely restricts non-working spouses’ access to credit. The new rule represents a blow to the financial independence of stay-at-home moms and dads in the U.S.

Enacted on Oct. 1, 2011, the crux of the new regulation is the distinction between household and individual income. Household income can no longer be considered when analyzing an applicant’s creditworthiness. This change may prevent many stay-at-home parents from being able to open a credit card account.

While I’m not a big fan of credit cards in general, knowing that I probably no longer qualify to open an account in an emergency is a little alarming.The new rule dictates that only the applicant’s individual income may be taken into account by the credit card company when deciding whether to grant credit. So that means that a stay-at-home spouse with no income or only a small income (like me) would probably not qualify, even if the household income is substantial.

For those seeking to establish a credit history, improve a credit score, or gain financial independence, this is a knee-buckling change.The new rule is part of the CARD Act, the Credit Card Accountability Responsibility and Disclosure Act of 2009, discussed in detail in this creditcards.com article. The CARD Act makes the ability to pay off debt the paramount consideration when issuing credit. It is designed, in other words, to protect consumers from themselves. The act’s goal is to prevent cardholders from racking up mountains of debt that they can not repay effectively. Sounds good, right?

Living in a Material World

As we all know, even if you are opposed to making purchases on credit, having a credit card is virtually unavoidable. From simple transactions like renting a DVD or making a car reservation, to major transactions like qualifying for a business loan or a home mortgage, having a credit card is essential.

This change, although intended to protect consumers in general, places stay-at-home spouses at a distinct disadvantage.Imagine the case of a newly divorced or widowed spouse trying to get through the day without a credit card. In many cases, these people may have adequate resources, job skills, and assets to qualify for credit, but without individual credit history, a sudden change in marital circumstances could leave them high and dry, credit-wise.

This amendment also represents a major setback for stores that offer on-the-spot credit with a simple form filled out at the register. No longer will big retailers like Target, Home Depot and Kohl’s be able to offer customers credit cards at the point of sale—and they are not happy about it. While this rule may help curb impulse purchases, for consumers like me, there is a major downside.

Living abroad, I visit the United States a few times a year and normally arrive with a long shopping list in hand. Many items are dramatically cheaper in the States than here in Costa Rica, and other items are simply not available here. Last summer I racked up a big bill at Target, applied for the instant credit card, pocketed the 10% sign-up discount, and then zeroed-out the balance on the next bill cycle. Under the current regulation, I won’t be able to do this unless my husband is with me. Not a nice feeling.

Charging Ahead

If you didn’t apply for your own credit card before the Oct. 1 deadline, all is not lost. There are still several ways for a stay-at-home spouse to obtain a credit card, albeit with restrictions and caveats:

Authorized User: A non-income-generating spouse or child can be added as an authorized user on an existing account without being legally responsible for repayment of debts incurred on the account. The authorized user status does help establish credit history and so this is a workable option for many consumers.

Co-Signer: Just the word “co-signer” conjures up all sorts of credit horror stories, but for some people, it may be the only option. As a co-signer, you are legally responsible for debts incurred, so proceed with caution if you choose this route.

Work It: If a stay-at-home spouse has even a small income from a home-based business or part-time job, this may be sufficient to obtain a credit card with a very low limit. Properly managing a credit card account with a low limit can be a good way to establish credit history.

Hang On: If you have an existing credit card in your name, but anticipate a break in employment for any reason, consider zeroing out the card, but leaving the account open. Once your income ceases, it will be difficult to obtain a new account in your own name—so don’t close that account!

Note: In community property states such as California, Texas and Louisiana, different rules apply that may allow a non-earning spouse to receive credit in his or her own name. On the flip side, non-earning spouses may also be held liable for debts accrued by their partners.

This article was written by contributing author Laurel Gray.

Soup and Clocks: A Meditation on Frugality

Posted on by  at  11:26 am
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Today, as I was making a pot of chicken soup, I suddenly remembered a conversation I had over 15 years ago about a grandfather clock. At first blush, soup and clocks might not seem to have much in common, but to me, they help frame and define what it means to be frugal.

First of all, making homemade chicken soup is a tremendously rewarding exercise in frugality. After basing two dinners around the whole roasted chicken, amply rounded out with vegetable side dishes, the remainder is ready for the soup pot. I throw everything– bones, skin and all–into the pot.

Soon, the warm aroma of frugality fills the kitchen, and I am ready to start tossing in everything else I have lingering in the pantry and refrigerator. I start with a lonely potato, an onion and a less-than-perfect carrot. Then I throw in some dried barley, leftover tomato paste and some rosemary from the garden. After that, a few more herbs go in, as well as a handful of diced string beans that need to be used up.

As I was extracting the boiled-clean bones from the pot, the apparent non-sequitur of the grandfather clock popped into my mind. I wasn’t actively thinking about frugality at the time, but a few synapses deep in my thrift lobe must have made a connection. In a twinkling, the long-forgotten clock memory floated to surface.

Picking Sides

Years ago, I was working as a consultant for a large corporation with offices up and down the East Coast. I was doing some training in the Philadelphia office and was chatting with a clerical-level employee during a break. The woman was lamenting the fact that her mother wanted to buy a grandfather clock.

The woman had a low-level job, but had excellent benefits and job security. She was from an inner-city environment where she probably enjoyed more stability and financial well-being than many of her neighbors. In other words, she was dong fine but probably still saw poverty as a threat.

Her otherwise-thrifty mother was fixated on purchasing a grandfather clock. The whole idea exasperated her daughter, who saw the idea as a useless extravagance. Even though I am frugal by nature and shy away from showy purchases, my immediate gut-reaction was to side with the mother.

I could envision the mother as a child, growing up poor in a big city where opportunities were scarce. Did she visit a more successful relative with grandfather clock? Did she pass one in a shop window as a little girl? Did she see one in a movie? Whatever the origin of the desire, in her mind, the clock represented something much more significant that a simple timepiece.

As we go through our lives, pinching pennies by driving old cars, passing up the latest electronic gizmo, or making soup from a three-day-old chicken, we should remember the lesson of the grandfather clock.

Extravagant vs. Frugal vs. Spartan

We all carry within us some desires that are important in an elemental way, important to our idea of self. For the clerk’s mother, some significant ideal was represented by her desire for a grandfather clock. For you, the desire might be a trip to Paris, a piano, a huge fish tank or a beautiful piece of artwork for your home.

If you decide to spend money on a meaningful item that touches your soul and makes you happy in an enduring way, then it is not extravagance. Extravagance should be avoided, while keeping in mind the distinction between being frugal and being Spartan.

To be Spartan is to deprive yourself of things that nourish your sense of well-being.
To be extravagant is to see every new gadget as essential to your existence.
To be frugal is to know the difference and to act only when the item demonstrates its value, regardless of whether that value is emotional or practical.

As I stirred the soup, I weighed these concepts with a little smile. I don’t know if the clerk’s mother ever bought the grandfather clock. But I like to think that she did.

This article was written by contributing author Laurel Gray.

Driving a Paid-For Car on the Road to Wealth

Posted on by  at  5:00 am
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For the thrifty individual, buying a new vehicle is anathema. But sometimes the buy-quality-and-hold approach pays off in the long run. In 1967, my dad bought two new cars: an AMC Rambler and a Chevrolet Stepside C-10 Pickup. He had the car for more than 20 years and the truck for over 30. As a matter of fact, the truck outlived my father. 

With a brutal, roundtrip commute of about 150 miles every day, plus long family road trips on our school vacations, he managed to put nearly a million miles on the Rambler over its lifetime. When my older sister eventually got her driver’s license, being the frugal dad that he was, he sold the car to her. 

These days, folks have a tendency to trade in their cars every few years, always looking for a newer model with the latest bells and whistles. When I think of drivers who can’t get out of a parking lot without a GPS or who can’t live without seat warmers or decadent stereo systems, I am amazed at how our needs have changed. The old Rambler had an AM radio and what my dad jokingly called “Four-Sixty” air-conditioning—all four windows rolled down while going 60 mph.

People are so accustomed to nearly new cars that an odometer tripping over to six zeroes is now a newsworthy event or at least fodder for the marketing department. The Million Mile Pickup made headlines a few years ago, and at one time, automaker Saab offered to give a free car to any original U.S. Saab owner who logged over 1 million miles.

Those who hang on to their paid-off vehicles reap benefits beyond just freedom from monthly car loan payments. Older cars, like Frugal Dad’s 20-year-old van, might not turn heads but make up for their lack of pizzazz in other ways. Insurance premiums are significantly lower on older cars. Some states have reduced registration fees and much lower personal-property taxes for older models as well.

Note from Frugal Dad: I’ve been doing some work on the old van, and when I get it running again and cleaned up, I plan to share some pics. It occurred to me that I’ve talked about her for years, but never shown her off. Stay tuned!

Many consumers try to justify the purchase of a new car by saying that maintenance costs on an older vehicle negate the financial benefits. According to a 2010 Kiplinger article, barring a catastrophic mechanical problem, it is nearly always cheaper to maintain and operate an older, paid-off car rather than carry a car loan.

Bankrate.com, an aggregator of financial rate information, also advises consumers to hang on to their cars until the bitter end. Everyone knows that a new car’s value plunges as soon as it is driven off the lot. Depreciation is rapid for the first few years but levels out after eight or nine years. If you have a well-maintained, paid-off car in this age range, pat yourself on the back: your car is now holding its value well.

Drivers may be starting to wake up to the benefits of buying and holding. According to the automotive market research firm R.L. Polk, Americans are keeping their new cars for an average of 63.9 months, a figure that has been trending upward since 2008. Figures on used cars are also climbing, with 46.1 months as the average period of ownership.

For many people, having a new, luxurious, or otherwise impressive vehicle is very important. They may feel that their car reflects their social status, denotes professional success, or projects style and sophistication. No longer merely a contrivance to ferry passengers from point A to point B, in our culture, the car has morphed into a statement of self. Many people are so caught up in appearances that they neglect to save for their retirement or their children’s education in order to drive expensive cars.

I suppose I fall more into the buy-and-hold category than the shop-to-impress category: I’ve had the same used Honda CR-V for the last 12 years. I’ve logged about 146 months and have racked up nearly 179,000 miles, many of which have been accumulated on the punishing roads of Costa Rica. Although one of my friends recently pronounced my car “old and shabby,” I am unperturbed. I don’t expect to match my father’s record, but somehow, I think he would approve just the same.

This article was written by contributing author Laurel Gray.

Forget Swimming Pools, Homeowners Opting for Admission to Doomsday Bunkers

Posted on by  at  5:00 am
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With real-life doomsday scenarios like mega-tsunamis and nuclear meltdown making headlines, companies marketing survival shelters have seen a spike in interest in recent months. A few days ago, CNN Money ran an article on a new type of “economy class” doomsday bunker for thrifty folks who still want to hedge their bets against catastrophe.

These pared-down bunkers are part of a 100,000 sq. ft. underground facility called “Vivos 1000.” The four-bunk compartments cost $9,950 and promise customers six months of “autonomous” survival. Units in the Vivos company’s high-end bunker complexes—which feature comforts like pool tables and stocked wine cellars—sell for $25,000 to $35,000 and promise clients survival for up to one year. Although these luxury units were selling steadily, the recent uptick in interest spurred the company to develop a budget-priced model and thus, the Vivos 1000 was born.

Vivos and a slew of competitors market their survival shelters as protection against a host of apocalyptic scenarios, including tsunamis, nuclear accidents, volcanic eruptions, asteroids, epidemics, solar flares and instability in the Middle East. Even though the recent Rapture predictions proved false, many people still wonder if the Mayans were on to something with their doomsday prediction for 2012.

Editor’s Note: After reading the article, 12 Things that the Mainstream Media is Being Strangely Quiet About (via The Daily Crux), I took stock of our own bug out bags and various stockpiles. As they say, plan for the worst; hope for the best

Some shelter companies market family-sized backyard bunkers, but others, like Vivos, are counting on filling up entire post-apocalyptic communities. Vivos has more than five 200-occupant shelters in the works around the U.S., as well as a mega-shelter for up to 1,000 survivalists in Nebraska.

Shelling out thousands of dollars for a berth in one of these bunkers has a big downside: access. During a “life extinction event,” clients may not be able to reach their costly safe haven. If transportation routes collapse, food and fuel become scarce, and anarchy reigns, getting to Nebraska might not be a fun-filled road trip.

Bugging In

In the event of a catastrophe, sheltering in place might be a more practical solution. Many websites, including the American Red Cross and the Federal Emergency Management Agency-sponsored site Ready.gov, provide basic information on sheltering in place and disaster preparedness.

Selecting a home with a basement that can be utilized as a bunker in times of emergency is a practical choice. There is no need to invest in an off-site facility when a basement bunker can be reinforced and stocked to the specifications of the homeowner. Access in an emergency is simple, and there is the added comfort of being at home during chaotic or uncertain times.

If your home does not have a basement that can be used as a shelter, you may be able to build a bunker elsewhere on your property. Such shelters can serve double-duty as a root cellar or wine cellar while providing a safety zone during an emergency or natural disaster.

My family had such a shelter when I was a child, and although it was ostensibly used as a root cellar for potatoes and preserves, I know my military-minded father had its other purpose in mind when he built it.

Safe Rooms

A safe room is an option for a home that lacks both a basement and sufficient outdoor space to build a below-ground shelter. Often designed to withstand high winds, a safe room can also be used during a home invasion or other emergency.

A safe room can be as simple as a closet retrofitted with an exterior-grade door and a heavy lock, or as elaborate as a ventilated structure reinforced with concrete, Kevlar, or steel sheeting.

Several websites, including FEMA.gov, offer valuable tips on safe room construction. An integrated safe room is convenient and economical because it does not require the construction of a separate shelter. A home’s safe room can be a bathroom, storage closet or other room that has been reinforced, anchored and stocked–but that still blends seamlessly into the home’s floor plan.

Any shelter should be equipped with emergency supplies including food, water, flashlights, blankets, first aid supplies, sanitation supplies, a portable or fixed toilet, and any self-defense items deemed necessary by the occupants.

Some homeowners are happy to forgo a new swimming pool or family vacation in order to pay for a safe haven for their family. Recent events prompted one family to take $20,000 they had set aside as a down-payment on a new home and instead purchase a space in a Vivos stronghold.

Will this decision turn out to be a wise move or a personal-finance cataclysm? We’ll just have to wait until 2012 to find out.

This article was written by contributing author Laurel Gray.