Saturday, February 7, 2015

Better Late Than Pregnant - Fund that IRA

My grandpa was a colorful guy.  And despite the crudity of his characteristic idioms, the truth still rings through.  The right time to invest is as soon as you can.  And it doesn't get any sooner than now. 

In that spirit, I have finally made the move to fund my 2014 IRA.  I know what you are thinking, and yes, I know that it is no longer 2014.  However, IRAs have a handy feature that allows you to fund one up until the income tax filing deadline (April 15) the following year.  This little time cushion is very handy for serial procrastinators like myself.  

Ideally, I would have been contributing $458 every month to the IRA over the last year.  Over the course of 12 months, the $458 monthly payments would result in the IRA reaching the federal limit of $5500 by the end of the year.  However, I had made increasing my cash emergency fund a higher saving priority than funding the IRA, so it sort of fell by the wayside. 

But then during my 2014 year in review it became abundantly clear that I had failed completely on my goal to max out the IRA.  An itchy sense of guilt came over me.  I know better than this.  I know that key to compound interest is to start early.  And by letting the whole year go by without making any contributions, I had effectively cheated myself out of a year's worth of interest to the tune of a couple hundred dollars.  

But it's not too late to start.  My emergency fund has grown to a comfortable enough size (6 months of living expenses plus some) that I feel okay pulling out a lump to finally max out the IRA for 2014. 

Be that as it may, investing now is easier said that done in some cases.  For me, it's an issue of security associated with liquidity.  IRAs and other retirement accounts have some great benefits with tax sheltering and security in old age; however, they don't offer a lot in the now.  Taking money out of an IRA is not easy and can even result in financial penalties.  Yikes.  It's a little scary knowing that once my money goes in that I won't be able to take it out for nearly thirty-five years. 

This has been my main issue with funding my IRA.  Over the last two years, there have been a lot of large variable expenses.  So, I have felt like I needed to have more cash on hand in savings accounts, especially while I worked to grow the emergency fund to a comfortable amount.  This is not unreasonable since having the cash savings reduced my financial stress level, but it did mean that my IRA missed out on some sweet interest income.  

Going forward, I plan on being more proactive with funding the 2015 IRA instead of waiting until the last minute for the third year in a row.  I'll probably still do small lump contributions rather than make the tidy monthly contributions.  I'll guess we'll have to see how it plays out. 

Wednesday, February 4, 2015

The Hidden Costs of Snow Days

Monday was the most fabulous of fabulous holidays, Groundhog's Day.  In case you haven't already heard, I regret to inform you that yet again Punxsutawney Phil saw his shadow, officially predicting another six weeks of winter.  This isn't really much of a surprise to those of us living in the Midwest right now.  Winter storm Linus tore through town Sunday dumping more than twelve inches of snow on my otherwise quiet, suburban neighborhood.  

My first response to this was naturally to wonder when we started naming winter storms.  Isn't that just a hurricane thing, or are meteorologists branching out?

Next, attention turned to the daunting task of digging out of the driveway.  JT was scheduled to work the afternoon shift and had to get to work more than twenty miles away by 2:00 pm.  So we set to the task of clearing the driveway around 10:00 am (not a favorite lazy girl activity).  By the time we had cleared the ten inches of accumulation, there was still no sign of a plow in the streets.  And worse, another one to three inches were still expected.  

Hours ticked by, and no plow.  JT had to call work to let them know he was trapped at home, meaning the day shift person had to stay and work a double.  The first plow didn't come until after 9:00 pm, and even then, it was down an adjacent street, not ours.  We went to bed with the hopes that in the morning, our street would also be clear.  Unfortunately, that was not the case.  There was still more than a foot of snow blocking the street at 6:00 am.  Everyone on our street was still trapped.  Some people tried (and failed) to shovel or snow-blow their way out.  Others tried (and failed) to drive through the snow.  There were many calls to the town Public Works department, but with no success.  Eventually, a local farmer came to our rescue with a plow on his tractor.  

In the mean time, all the shoveling and waiting gave me a lot of time to think about the implications of the snow.  For JT and me the major implication was missing (in his case) and being late for (in my case) work.  We both have reasonably flexible schedules on normal days.  However, since he was scheduled to work on a Sunday, he would have received overtime pay. Since he could not make it to work, we missed out on this extra income.  For me, the concern is that I will have to make up the missed hours by working long days for the rest of the week.  

We might have been able to escape the neighborhood if we had a large truck rather than our small cars.  However, a decent size truck or SUV would come with a whole host of expenses that would put a serious dent in our reasonably tidy budget.  I'll get into this subject at a later date.  

Another thing that struck me while we were shoveling was the number of neighbors with snow blowers.  Growing up in an area that didn't get much snow, I was largely unfamiliar with modern snow blowers, which look like giant push lawn mowers.  From the vantage point of our driveway, we could see more than eight neighbors using these roaring beast machines.  In fact we were one of the few houses that were removing snow the old-fashioned way, with shovels.  At the time of the shoveling, it would have been really nice to have that snow blower.  But then again, would it have been worth it?  

A quick Google search shows that new snow blowers start around $200 and can cost as much as $2000 if you are in the market for the Cadillac of snow beasts.  In theory, you might be able to find a decent used one on Craigslist or at a garage sale for $50.  But then you still have the operating and maintenance costs to consider.  Like a car or a lawn mower, these snow beasts need to be cleaned and have oil changes.  They also need gasoline to run.  Which means you need to have the foresight to have gasoline in your garage before the storm hits.  Perhaps that means a special trip to the gas station the day before the storm.  The costs are mounting quickly.  

Doing a rough, back-of-the-napkin calculation, the snow blower could end up costing upwards of $5 to $10 each time it is used.*  Ouch.  I can think of a lot of thinks I would rather do with $10.  

In addition to being a huge savings, the manual shoveling has some other fringe benefits.  It forces you to go outside in a time of year when you don't get much time outside.  Fresh air and sunlight do wonders for health and well-being.  Plus, shoveling  can be a good workout depending on how much accumulation you got.  JT and I were shoveling drifts of more than a foot on Sunday, and you can bet we felt it the next day in our arms, shoulders, and legs.  

For now, I'll keep my rugged shovels and wait for the city (or farmer) to plow.  Maybe someday I'll move back to an area with a warmer climate.  But until then, I just have to keep taking what Mother Nature keeps dishing out.  

*This assumes: you paid $200 for your beast, it has a 5-year useful life, gas is about $2.25/gal, you have a two car driveway, and you get standard Chicago snowfall over the course of the winter.