The New Fiscal Responsibility

As of the beginning of this month, July 2012, my wife and I have embarked upon a new program of fiscal responsibility, thanks to the convergence of two trends that brought our fiscal, *dissoluteness* is probably the wrong word and so let’s go with *inattentiveness*, into focus:

1. The first trend is the one with a deadline this month: the tuition for our daughter’s private school, which has taken a rather large step up, for reasons that were made clear but do not change the reality, how how I feel about it.
2. The second trend is the ongoing flat-line of our salaries, which have seen one three percent adjustment since 2005. So, no change in seven years despite both of us getting promoted, being regularly prominent at the national level in our respective fields, and our various efforts to help out locally.

Some of this is no doubt due to the extreme financial difficulties forced upon our state by the hurricanes and then the election of a governor who is vying for national prominence by being tough on what conservatives are fond of calling the “cultural elite” of which the professoriate are a part. (Never mind a good chunk of us are moderates and/or conservatives: why deal with complexity when the simple version makes for better sound bites?) And some of it is the nature of things at a public university in the Deep South. You live with it the best you can: remembering to be thankful to have a decent job with decent pay and benefits when lots of others do not. And I should be clear: we enjoy our work and our lives on a daily basis.

Here’s the trends as an abstract chart:

Household Fiscal Trends 2012

And so it was time to rein in our spending. We are not profligate spenders. Our expenses for repairs on our house and one of the cars this summer dwarf the money we spent on a five-day vacation in Perdido Key, Florida, but the money was spent and we need to make sure we stay within a budget.

For too long, however, our budget has been an abstraction: a loose sense of the finitude of our finances. It was time to bring things into focus and to make clear to ourselves what we could and could not afford. Our focus is both on the immediate need to be able to pay our daughter’s tuition as well as achieving some long-term financial security goals, which include our own retirement as well as financing our daughter’s college education. We are thinking of it in terms of saving for things we *really want* (and which are largely more expensive) and spending less on things we *kinda want*.

To do this, we have put strict caps on our individual monthly spending. Groceries and certain household expenses as well as expenses associated with our daughter — the child needs clothes as she grows after all — will not count against those caps, but they will be tracked via a recording sheet which is now posted on the refrigerator. (I confess: I am regularly a bit too wanton in my spending on groceries. Places like Fresh Market simply offer too many little treats that are too easy to pick up and place in your basket as you wander about the store. *No more wandering!*)

We both spend money on books because our university library simply hasn’t bought books in the last seven years — that sounds bizarre, but it is close to the truth — and so the only way we can keep up with our fields is through individual purchases. We are simply going to have to find ways to fit that within a monthly budget or begin to find alternate ways to keep up with our fields. Our library does, for instance, maintain its journal subscriptions, and so we will look to spend more time there.

We both also have our favorite indulgences, and I suspect that we spend more money there than we would like to admit. The moment to indulge is past for now. Perhaps one day when times are better, we can indulge again, but not for the time being.

Would we like to be able to afford grander vacations than locations we can drive to? (We would like, for instance, to be able to afford a vacation to Europe while our daughter is young.) Sure, you bet. Would we like not to worry about how we are going to retire before turning 80? Sure, you bet. Would we like to know that our daughter can go to any school into which she has won admission. Sure, you bet. We hope that our new fiscal responsibility will get us there. If anything, it is making us more mindful of what we already have. That is a good place to start.

Forbes asks “How did capitalism get into this mess?”

The question is in the middle of an article reviewing a new business book that points out that managing a business to “maximize” shareholder value is, according both to the book’s author as well as the Forbes’ reviewer, “the dumbest idea in the world.”

I have long maintained that one key to the massive profits of the nineties and the first decade of the twenty-first century was the investment bubble created by the baby boomers after the Reagan era’s creation of IRAs. With that, a whole lot of money started flowing into the stock market, driving up prices. Of course, the only people who really profited from this were market professionals, bankers, and top executives. Employees saw little in their paychecks and only those investors who cashed out before the various crashes, and there is one more big one to come, made it rich.

But those who did were very rich indeed, and the finance and investment industry, which thanks to banking and insurance industry deregulation are pretty much all the same thing now, is going to make sure that that money won’t slip through their fingers again.

What I want to know is: what about piddling little investors like me who would like to invest in companies who make things and earn a return on our investment the old-fashioned way?

The Most Patriotic Thing You Can Do

The most patriotic thing you can do, according to Mark Cuban, is “Make a boatload of money. Pay your taxes. Lots of taxes. Hire people. Train people. Pay people. Spend money on rent, equipment, services. Pay more taxes.”

With rich and successful folks like Warren Buffett and Mark Cuban saying that paying taxes is a sign of success, I wonder what the conservative talking point machines is going to come up with next. Sigh. They will come up with something.

The Motley Fool

Given higher education’s future in Louisiana, there are only three ways we are going to be able to do any of the things we would like to do in the future — send our daughter to college, vacation in Europe, and retire. Those three things are:

  1. Win the lottery.
  2. Write a commercial novel that has moderate success
  3. Pick the right stocks
When it comes to picking stocks, I like The Motley Fool. Now I just need to screw up my courage and try it.

Record Keeping

### What to throw out and when:

1. Airline tickets and boarding passes: after appear on frequent-flier account, unless you need them for tax purposes.
2. ATM cash receipts: after appear on bank statement.
3. Credit card statements and receipts: Toss receipts after appear on statement, except big-ticket items or tax deductible expenses. Keep statements for three years (in case IRS asks).
4. Paycheck stubs: toss after receive W2 and check for errors.

### What to keep and for how long:

1. Tax stuff: keep copies of completed tax forms and W2 forms for at least six years (I have heard even longer). After three years you can get rid of supporting documents (receipts, canceled checks, etc)
2. IRA contribution slips: never throw out receipts for deductible and nondeductible IRA contributions. (you’ll need them to figure out taxes when you retire)
3. Bank statements: in general, keep for three years. Toss canceled checks unless back up deductions. Go through your checks each ear and keep those related to your taxes, business expenses, home improvements, and mortgage payments. Shred those that have no long-term importance.
4. Receipts for big-ticket items: as long as you own the item — for warranty, resale, or insurance purposes. (Go through your bills once a year.
In most cases, when the canceled check from a paid bill has been returned, you can shred the bill.) Keep the important receipts in special file.
5. Home-improvement records: as long as you own the house
6. Investment information: as long as you own the investment, and for six years after you sell it. You need purchase/sales slips from your brokerage or mutual fund to prove whether you have capital gains or losses at tax time.
7. Keep the quarterly statements from your 401(k) or other plans until you receive the annual summary; if everything matches up, then shred the quarterlies. Keep the annual summaries until you retire or close the account.