$147.59

Here we continue with our monthly series on personal finance and budgeting, where I lay out real figures and percentages of income in an attempt to clear the collective air around these "highly sensitive" matters.  After all, until we get real about money, how can we ever resolve some of the class conflicts that are so prevalent in American society?

We've talked about insurance and health care.

We've discussed home ownership and the American dream.

Today, the digital revolution:  phones.

Let me preface all of this by saying that we are kind of phone snobs.  This is a luxury that we allow ourselves.  We have no land line, no home internet, and no cable.  But we have top of the line phones.  I have a sleek black iPhone 4, and Jeff has a nice Android.  I don't talk on the phone that much, but I use it for data constantly.  (It especially saved my sanity when I was spending hours and hours a day trapped in bed with a newborn.)  Jeff talks on the phone more than anyone I've ever met in my life.  In the past, when we have had plans with a defined number of minutes, he always uses them all or exceeds the limit.

We were with Verizon for years.  After we married and my contract with AT&T ended, I switched over to his plan.  We were satisfied with the service.  And then we bought our house.

Our modest little home, in the middle of a city block in the middle of a city neighborhood, gets absolutely no service from:  Verizon, AT&T, Sprint, or Net10.  I mean, you can't make a call.  I couldn't have called the police if I needed to.  I couldn't send a single text message.  We spent several months after we moved trying to resolve this with Verizon.  It made no sense.  Our friends who live across the street have flawless Verizon service.  The best I can figure out is that we live on some kind of Indian burial ground or radioactive forcefield.  (Could this be related to the field of glass bottles that we live on?) (Sidenote:  we also have a ridiculously hard time receiving signal for basic television access with the bunny ears.)

After telling us that we lived in a "KTA" (known trouble area), and that the only option for reasonable service was to buy their expensive home internet service and a signal-boosting tower, all on our own dime, Verizon released us from our contract.

We cycled through the gamut of cell carriers, and nobody worked.  Nobody.  It was bizarre.

The one provider that we eventually discovered provided some semblance of coverage at our address was Cricket.  That's right - the ultra-budget pay-as-you-go no-contract service.  And we've never looked back.  The customer service has been great, we get reasonably good speed, and mostly - it works at our house.  The coverage area is drastically limited compared to Verizon, though.  When we go on road trips, we are without service for any length of time that we are in rural areas.  There are also a lot more dropped calls and missed texts.  I guess you get what you pay for.

We pay for Jeff's grandmother to be on our plan.  She has a very simple little phone with the most basic, utilitarian features.  She does so much for us - it's our little way of saying, "Just don't worry about this one thing."

I have an unlimited data and minutes plan.  Jeff also has an unlimited data and minutes plan.  No contract.

For the three of us, each month, we are paying $147.59.  This is a savings of almost $100 over what we paid for the same phones and less usage per month for just the two of us on Verizon.  And like I said, this is still with very nice phones.  We did have to buy the devices out of pocket, since Cricket isn't able to offer the same kinds of deep discounts on phones along with contract purchases.  But, I sold my Verizon iPhone on Craigslist quickly and only had to pay a bit to buy the Cricket version.

This $147.59 represents just 4.7% of our monthly income.  Grouped together with other utilities (water, electric, gas), we fluctuate from 10-12% of income, depending on floating factors like weather and season.

The move from a "name-brand" cell phone service to a budget carrier was a good move for us, and one that we never would have considered if we hadn't been forced into it by our strange signal-receiving situation.

What do you pay for cell phone service?  Do you like to have a flashy phone, or keep it simple?

$794.87

I have decided to continue a rollout of our family's budget categories and numbers, in an effort to demystify the American relationship with money and provide a forum for discussion.  Since so many people wanted to jump in on the conversation about health care costs last month, I thought I could do a monthly walk through the areas of our budget that stay static:  mortgage, auto and health insurance, student loan payment, phone, utilities (give or take), food (way give or take). 

This month is all about the mortgage.  We pay $794.87 each month for the privilege of the American dream - "home ownership" (a.k.a. living in a house while we buy it back from the bank).  I should actually clarify:  we pay $794.87 each month for homeowners' insurance, mortgage principal and interest, and property tax.  It's bundled and sent to the same financer, who places the extra in escrow and pays our other bills for us. 

When we knew that we would move back to Nashville in March of last year, we wanted to buy a house.  We haven't been living under a rock, so we knew that if ever there was a favorable time to make our first home purchase, it was now.  Historically low rates, sellers dying to get out of their homes, etc.

After months of haggling, being sure that we wouldn't get the house, arguing with the seller about upgrades to bring the house to basic code, and more . . . we signed (sight unseen, in my case - isn't that insane?)!  In June, we signed up for the biggest purchase we've ever made.  Our house, built in 1930, at a little over 900 square feet, cost $159,250.  We mostly paid for the neighborhood, which is hot.  (We constantly get offers in the mailbox from developers who want to buy our property and tear down the house!  Sorry suckers!  Not a chance!)  We paid for a good elementary school nearby.  We paid for amenities like shops, grocery stores, library, and parks in walking distance.  It was a bit of a shock.  In Topeka, where we had been living, the cost of buying a house was incredibly low.  We could have gotten the same house for half the cost.  I was really glad that we hadn't bought in Topeka, but had rather rented, because we wouldn't have gotten much in the sale between these two markets. 

Because of savings and a generous inheritance, we were able to put down 25% and avoid having to pay PMI (private mortgage insurance).  However, because we were able to put so much down, we also didn't qualify for a FHA loan, which would have had the very best rate of all. 

Jeff has okay credit, mine is good but not excellent.  We qualified for a 4.125% interest mortgage.  My stepdad's jaw dropped to the floor when I told him this number.  (He immediately called to refinance on all his rental properties!)  I didn't really realize it was that good a rate until I started talking shop with people who bought in previous years.  I felt really lucky that we could lock that on a 30-year fixed-rate mortgage.  Our broker had suggested even lower rates at the beginning - sub-4%! - but our credit and income just didn't get us there.

I am a person with good financial literacy, but the home-buying process boggled my mind a bit.  It became very easy for me to see how home ownership is a class distinction in our nation.  (Once upon a time, it was what defined the "middle class.")  Even if you have the money for it - if you don't have the paper trail, the people to vouch for you, and the understanding of what the h*** everyone is talking about . . . you can very easily get taken advantage of, or just cut out of the picture altogether.  I do have to confess, it made me feel like quite a grown-up to know what terms like "PMI," "sub-4%," and "escrow" mean.

When I wanted to know what a good price range would be for us, I found an incredibly helpful finance website that explained three rules for homebuying:  the rule of 28, the rule of 32, and the rule of 40. 

The rule of 28 is that your mortgage payment shouldn't exceed more that 28% of your monthly income.  We actually fall a little low on that.  Our mortgage payment is 26% of monthly income for us. 

The rule of 32 is that your total housing expenses (insurance, taxes, mortgage, and I count utilities in here, too) should not exceed more than 32% of your monthly income.  In a month with high utilities, we ride the line on this one, going between 30-35% of monthly income. 

The rule of 40 is that all your debt payments (consumer debt, student loans, mortgage, auto loans, etc) should not exceed 40% of your monthly income.  We do well on this one because we carry no debt except my student loan payment.  Our debt load is about 34% of monthly income.

All in all, I feel happy about our mortgage.  We are in an area we love, we are building equity in a long-term investment that we can borrow against in case of catastrophe, and even if my career causes us to move away, we can rent the house easily - there is a strong rental market in our neighborhood as well.  I'm happy that we didn't buy more house than we need.  It may not be the most impressive house on the block, but it's ours, and it's filled with love and family and good food and laughter. 

So tell me about your housing costs.  Did you buy high or low?  Still thinking about a first home purchase?  What do you pay per month for the American Dream?

down to one

One of my very favorite things about living in New York City during college was the public transportation.  So convenient, fast, and such a great equalizer of society.  The additional mixed-use zoning and population density that went along with it were major perks.  On one block, I could go to the drugstore, visit a friend, go to work, buy groceries, get a DVD, and more.  Plus, avoiding the headaches that go along with vehicle ownership was amazing!  No gas, no parking, no traffic, no insurance, no car payments.  Of course, there was the cost of public transit, but that was nearly nothing compared to all those other categories.

I have longed for the ability to walk or ride to work ever since then, but it has never worked out.  I have lived in areas of the country that are either too rural, too suburban, or just not friendly to public transportation on any kind of realistic basis. 

Until now.

You may recall my Christmas post on my lack of holiday spirit, capped off by the news that my husband had just run his truck into a parked car.  We have liability-only insurance on both our vehicles, meaning that the insurance will pay no benefits for damages to our vehicles, only for the ones that we damage.  Money is tight, and frankly we just don't have the funds to repair the truck without taking out a loan or applying for a credit card.  I'm not willing to do either of those things, trying as hard as we are to get out of debt.  Both of our vehicles (a 2005 Civic and a 2006 Chevy Silverado) are paid for, so we don't have to worry about car payments.

When Jeff came home after the accident, we looked at each other with the same thought.  Time to try out one car.  Coincidentally, I had brought it up a few weeks ago:  why don't we just try living with one vehicle, but not selling the other?  It would be a way to trim our budget substantially.  We would certainly save on gas, and if it works, we could just drop the non-used vehicle from insurance, but save it in case we ever need it again.  Turns out we were forced into that plan a little sooner than we expected!

Nashville's public transportation is not known for its efficiency.  There are mostly buses, with one rail line coming from the far east of the city into downtown (so it does nothing for me).  It operates on an outdated hub system, meaning that if you need to get across town, you have to stop at a bus depot downtown, wait, and switch buses.  If I had wanted to get from our house in East Nashville to Vanderbilt, for instance, which is on the mid-West side of town, it would have taken me about 1.5 hours each way - ludicrous!  When I could drive in 20?!

But we have a few things working to our advantage in our current situation.  One is that my church is directly north of our home.  That means I don't have to go through the downtown hub.  In fact, one bus gets me there pretty quickly.  Second, we don't live too far back into our neighborhood that walking to the bus stop on the main road is impractical.  It takes me about fifteen minutes to walk to either of the two nearest bus stops for the route I need.  The church is directly on the main road.  So, I just have to get off the bus and I'm right there. 

I've done it for a few days now, and it seems to be working out well.  It takes me about 45 minutes, in total - all the walking and all the riding.  It takes me about 15 in total to drive.  It's nice to get a brisk little walk in on the way to the bus and on the way home.  Once I'm not pregnant, I could ride my bike much more quickly to the bus stop. The fare is $1.70 one way.  There are some discounts for buying a multiple-fare pass, but they are negated by the cost of shipping to have your ticket sent to your home (get it together, Nashville MTA!).  For $3.40 a day, 4-5 days a week, we are saving big-time over the cost of gas, insurance, repairs, and headaches in driving.  And I get to read and relax with music instead of getting angry as I get cut off.  Can't beat it!

featured!

My post from last week on our health care costs was featured at a Personal Finance roundup!  Squee!  Check out the other entries here. 

$552.43

Americans obviously have a lot of problems with personal finance.  We have, on average, astronomical credit card debt.  We frequently buy houses and cars we can't afford.  Even going to college or grad school is put on the tab - and I'm as guilty as the next person on this one.

One of the biggest root causes of all of this is that, in spite of being so materially focused, we are still reticent to discuss dollar amounts that we pay for things.  Somehow that is still considered impolite conversation!  Salaries are closely guarded secrets that we guess at.

I want to help break this taboo with some real talk on our family's budget.  When we moved to Nashville, I took a serious pay cut.  At the same time, we bought a house.  The mortgage and homeowners' insurance is about the same as what we were paying for rent and renters' insurance, but there are of course all the auxiliary costs that go with home ownership, plus we had decided to put on a house addition because the house we bought was quite small (~900 square feet).  Shortly after we signed on the house, my husband lost his full-time job.  The addition was already in motion - the foundation poured.

Jeff picked up some work, and we have been okay.  But things are definitely tight.  We are regularly spending every bit of what we make in a month, and not saving anything.  As a United Methodist clergyperson, I do have a pension which is automatically funded.  This is quite unusual anymore.  I have the option of adding to it out of my earnings, but haven't been doing that while we are in this position.

The figure I want to discuss today is what we pay monthly for health insurance for the three of us:  $552.43.  This is high, and let me explain why.  My husband has Crohn's disease, an autoimmune digestive disorder that needs special care, a regular gastroenterologist, frequent colonoscopies, sometimes hospitalization, medication during flareups, and very rarely, surgery.  It is expensive.  Insurance companies recognize this, and he is virtually uninsurable as an individual.  Thanks to some health care law changes, he is no longer allowed to be outright blocked by insurance carriers on account of his condition, but the price gouging is intense.  We definitely can't find anything close to the quality of insurance we need for him for less than $550 per month.

Thanks to the United Methodist organizational system, we have the opportunity to belong to a pool through the Tennessee Conference.  As a full-time elder under appointment, my insurance premiums are covered 100% by the conference.  Adding any adult + children dependents at all (whether it is your spouse, your spouse and your child, or your spouse and your ten children) is an additional $552.43.  And that is a cut rate.  Because my base salary is the minimum allowable for a full-time elder, I am eligible for a reduced rate on the monthly premium.  We could search for other, cheaper insurance for Vicki, but it wouldn't make any difference - we would still be paying the $552.43 just for Jeff.

But wait!  There's more.  The premiums are only what we pay for the privilege of paying more.  There is a $1000 deductible (total, for the whole family) for all services except well-child, and then we pay 20% for pretty much everything after that, up to $2000 per year (including deductible).  One colonoscopy pretty much wipes that out.  So we're looking at $552.43 per month plus $2000 per year.

One upside that I mentioned above is that the rate remains stable for a given year no matter how many dependents you have on your plan.  So, adding the new baby will not be very stressful, since it won't increase our premium at all.

Just the premiums represent about 18% of our pre-tax, total earnings.  In a year where we pay the maximum $2000 out of pocket, the total cost for health care would be 23% of earnings.  

Don't get me wrong.  I am so thankful we have this opportunity, because it is way better than the alternative:  paying out of pocket for all of this at full price.  That would literally break us.  Jeff would not receive the care he needs and deserves.  But when people try to pretend that health care in our nation is not messed up, it bothers me.  More than a little.  I don't know the right answer, but what we have isn't working.  At least not for people who are actually sick and need help.

So, are you brave enough to tell me what you pay for health care per month, or per year?  Is it working for you?