"Goals are dreams with deadlines" -- Diana Scharf

Thursday, July 25, 2013

Sacrificing a Hobby to Save Money

Image credit: rocket400 / 123RF Stock Photo

One of the things I love most about Mr. W is that he has a variety of talents and hobbies.  When he was twelve, he helped his father build a two-story addition on their house.  While he can wield a hammer, he’s also a whiz in the kitchen and can whip up a three-course meal in no time.  He’s obsessed with CrossFit, but he’s also a skilled swing dancer.  You get the idea.  All in all, he’s a pretty well-rounded guy. 

When we were in graduate school, Mr. W suggested that we take ballroom dance lessons together.  After hearing him mention this several times, I contacted a nearby ballroom dance franchise to inquire about the cost.  I had sticker shock: the cost for a set of beginner lessons was about $750.  That was a lot of money, especially considering our financial circumstances at the time.  We were both graduate assistants, which meant that we received tuition remission and living stipends of $12,000-$15,000 per year.  Our assistantships paid enough for us to get by, but we did not have much left over.  However, I had been babysitting and coaching to earn some money on the side and had built up a nice little nest egg.  I could sign us up for the beginner series and still have a good amount in savings.  I decided to surprise Mr. W with dance lessons for Christmas.  We aren’t usually this extravagant with gifts, so this was a special treat.  For the next few months, we had a blast learning to foxtrot, swing, waltz, rumba and tango.  We loved having a hobby that we both enjoyed and could do together.    Neither of us would have fared well on Dancing With the Stars, but we had made significant progress. 

The end of our dance lessons coincided with the end of graduate school.  For the next few years, we only danced once or twice a year, at weddings or other social functions.  We thoroughly enjoyed dancing, but the cost prohibited us from taking any more lessons at that time.   

Last summer, we signed up for another series of dance lessons.   The cost was significantly higher than the beginner lessons (and I’m serious when I say “significantly”).  However, we had become much more financially stable since our graduate student days.  The timing was also perfect: by resuming our lessons in the summer, we were able to brush up on our dance skills before our wedding.  Our lessons provided an outlet from wedding-related stresses.  Dance was an instant pick-me-up regardless of what else was on our mind(s).  We spaced out our lessons so that we were able to continue dancing for a few months after the wedding.  We both thought it was important to have a hobby we could do together, especially in our earliest days as a married couple. 

When we finished our most recent set of lessons, Mr. W and I had a heart-to-heart discussion about continuing dance.  There was no question that we loved it and looked forward to each lesson.  However, we just couldn’t reconcile the high cost with our big-picture goals.  In the next few years, these plans include buying a house and starting a family.   We estimate that we should save about 25% of our take-home income on an annual basis to be able to achieve our big-picture goals.  We’ve set up our household budget so that we are saving at this 25% level.  If we were to continue taking dance lessons, it would cost us several thousand dollars annually, which we have not included in our budget.  Yes, we could trim several thousand from our budget to make room for dance lessons.  However, it would require us to drastically reduce our budget in areas like travel (ie, trips to see my family) and fitness, both of which are important priorities to us. 

We made the decision not to continue dance lessons until some point in the very distant future.  The good thing about ballroom dance is that it’s an activity that we can do at any age.  As long as we are both mobile, there is no expiration date.  In fact, most of the students at our former dance studio were retirees or empty-nesters.  By contrast, our other priorities are much more time-sensitive.  Our budget and our spending should reflect this distinction.  If we want to achieve our big-picture goals in the foreseeable future, we need to sacrifice or delay certain hobbies.    

We attended a wedding last weekend, and were reminded of how much we love to dance.  I had a few brief twinges of regret that we had stopped our ballroom lessons.  I was even tempted to suggest that we reconsider our decision.  But I remembered a theme that resounds throughout personal finance: With careful planning, you might be able to have it all.  But, you can’t have it all right now. 

Have you sacrificed or delayed a hobby in order to save money?  What goals do you prioritize in your budget?

Friday, July 19, 2013

Sometimes, You Get What You (Don't) Pay For

Mr. W’s younger brother, K, has a knack for acquiring free stuff.  He’s a world-class schmoozer so everyone loves him.  As a result, whenever people have free stuff they’re looking to give away (sports tickets, fancy clothes, TVs, you name it), he’s the first person they contact.  I’m pretty certain someone even gave him a free boat, though I could be wrong about that one.   

We’ve been lucky enough to benefit from some of K’s charisma and resourcefulness.  Each year, when K returns from college, he collects an assortment of unwanted things that his roommates would otherwise throw out.  Last year, he gave us a window-unit air conditioner.  Apparently, some roommate thought it would be too much of a “hassle” to take the air conditioner with him when he moved out.  We had been planning to buy an A/C for our living room, so K’s freeloading saved us $150-$200.  Thanks, K, for keeping our living room cool and comfy! 
This summer, we decided it was finally time to buy an air conditioner for our kitchen.  We’d tried to resist getting another air conditioner.  We already have three window units, which seems like a lot for a four-room apartment.  But we just couldn’t stand the temperature in the kitchen.  On a mild summer day, it averages 86 degrees.  On a brutally hot day, such as those we’ve been having recently, the kitchen temperature creeps closer to 95, even if we make an effort not to use any heat-generating appliances.  

We were having dinner with Mr. W’s parents and they mentioned that K had brought home yet another free air conditioner from school.  K wasn’t planning to use it since he already had one.  K wasn’t home at the time, but Mr. W’s parents offered it to us.  It would save us another $150-$200.  Awesome, right?  Everyone loves free stuff. 

At 8:30 PM on a Sunday evening, we trekked home with the air conditioner and started the long process of installing it in our kitchen window.  Having lived in 1920s houses his entire life, Mr. W is a pro at installing window-unit air conditioners.  He installs at least half a dozen every summer.  Let’s just say that installing this particular A/C was quite an ordeal. 

For starters, our kitchen window looks like this:


Yep, it’s a really small window.  And it’s about 8 feet above the ground.  It’s also usually blocked by a 4’ x 3’ kitchen island, which currently holds our wedding registry gifts (not pictured, above).  All 19,000 pounds of them.  Here is how our evening progressed:

8:30-9:00 PM: Move all items off of kitchen island.  Move kitchen table to make room for kitchen island.  Move kitchen island to allow access to window.  Start to feel anxious about all the miscellaneous appliances that are now scattered around our apartment.  (Okay, this was just me.  Mr. W does not have issues with clutter)

9:00-9:15 PM: Discover that window is too small to install A/C without removing the bottom window pane.  Remove bottom window pane.  Balance precariously on kitchen chair, while lifting air conditioner into window.  Discover that there is now a slight gap between top of window and top of air conditioner.  Thus, there is no way to secure the A/C in the window. Decide to try wedging some planks between the window and A/C to eliminate the gap. 

9:15-9:45 PM: Mr. W drives to his parents’ house to pick up planks. 

9:45-10:15 PM: Once again, balance precariously on kitchen chair while lifting A/C into window.  Successfully wedge planks between window and A/C.  Unit now fits securely in window.  Mr. W tries to use screwdriver to screw A/C in place. We’ve manually screwed in every other A/C in our apartment, but it’s just not working in this case. 

10:15-10:40 PM: Mr. W drives to parents’ house to pick up his power drill.  In the meantime, I’m standing on the chair, holding the A/C in place above my head (keep in mind, it’s over 90 degrees during this entire ordeal) 

10:40-11:00 PM: Mr. W returns with the drill and screws the A/C into the window pane.  We plug the A/C into the outlet.  With bated breath, we press the “ON” button.  The A/C turns on for one enticing second, then switches off again.  We tried resetting the outlet, and still the same thing happens.

11:00-11:30 PM: We wonder if there could be something wrong with the outlet.  Perhaps the A/C voltage is too high for that particular outlet?  Mr. W does some Googling but his research is inconclusive.  We decide to try plugging the A/C into another outlet.  The A/C cord isn’t long enough to reach another outlet, so we disconnect the extension cord from another appliance.  We plug the A/C into an outlet we use daily.  Still nothing. 

At this point, we were done troubleshooting.  We were both tired, cranky, and dripping sweat.  I was still feeling anxious about the fact that there was a KitchenAid stand mixer on our guest bed (We weren’t inviting anyone over.  What was the big deal?)  Our kitchen island was where the kitchen table usually went.  Our kitchen table was blocking the front door.  We moved those back into place so we could leave for work in the morning.   We left the A/C in the window, figuring we’d ask K if he knew why it wasn’t working. 

The next day, Mr. W called his brother K.  He explained our difficulty and asked K if he had ever used the free air conditioner.  After a long pause, K said, “Oh man…I don’t think that A/C will work.   It was sitting outside in the rain for three days.” 

Oh boy.  I’m not sure why that A/C was sitting in the rain for three days (???!).  And none of this is K’s fault.  We just appreciate his generosity.  He hadn’t been home when Mr. W’s parents offered us the A/C, or else he would have warned us accordingly.   But Mr. W and I both felt like schmucks for not testing the A/C before going through the trouble of installing it in our kitchen window. 

The very same day, we went to Home Depot and spent $170 on a new air conditioner.  After removing the free inoperable A/C, installing the new one was much easier.  As far as we’re concerned, it was the best $170 we’d ever spent. 

Moral of the story: if you accept something free, confirm that it works before you waste a lot of time or effort.   
Have you ever received something free that turned out to be too good to be true?

Thursday, July 18, 2013

When to Offer Unsolicited Advice

Image credit: iqoncept / 123RF Stock Photo
A close family member (let’s call him “B”) mentioned that he recently opened a new credit card through his bank.  He already had a Discover card, but thought that he should have something more widely accepted as some retailers do not take Discover.  This approach seemed logical, until B said this: “The bank gave me a $7,500 credit line.  And, there is a promotional 0% APR for the first 12 months.”  He seemed excited by the high credit line and the promotional interest-free period, but I was concerned.  This family member is very bright.  In most situations, he’s practical and has plenty of common sense. However, I worry that he may be setting a dangerous financial precedent if he starts to rely on credit.  Here are some background details that cause me to worry:

*B and his wife are 24-year old newlyweds.  He financed the engagement ring.   According to the jeweler’s website, loans are interest-free if paid in full within 12 months.  If the loan is not paid in full within 12 months, interest accrues from the purchase date at an APR of 29.99% (oh boy...)  I don't know whether he paid off the loan within 12 months, but I sincerely hope he did.  That’s a super high interest rate.  The ring is quite lovely, by the way.  But I just don’t think it’s a good idea to buy a ring unless you can afford to pay for it in cash. 

*B and his wife just finished Master’s degrees.  While in graduate school, they both had part-time positions as graduate assistants/researchers, but never held full-time jobs.   I estimate that B and his wife each earned $15,000-$18,000 a year as researchers.   Given these modest incomes...

*I don’t believe B has much in savings.  I could be wrong, but I doubt he would have financed the engagement ring if he’d had the cash to spend. 

*B will start medical school in a few weeks.  Over the next four years, he will take out six figures in loans.   

*B’s wife is currently seeking employment (until recently, he had been deciding between a few medical schools.  The medical schools were in different locations, and B’s wife waited to apply for jobs until he had decided on a medical school)

*A $7,500 credit line?!!!  Someone can get themselves into a lot of trouble with a $7,500 credit line, especially if he/she does not have a source of income. 

I have an uneasy feeling that B and his wife may get in over their heads with this new credit card.  I inwardly cringed during this conversation because I would hate to see B and his wife make a financial mistake that could haunt them for years.  Perhaps I am being paranoid and should give them more credit (bad pun, I know).  They’re adults and are capable of making their own decisions.  When B told me about the new credit card, I decided not to offer him any advice.  We were in a social setting with his parents and I didn’t think it was an appropriate moment to climb onto my soap box.  I had to resist the urge to tell B what I really thought: 1) Credit cards should be used as if they are debit cards; only make the purchase if you could afford to buy it in cash, 2) Pay off that balance in full, every month, even if there is an interest-free period.  It’s not as though you could leverage credit to your benefit in this scenario, so you’re better off paying your bills, and 3) a $7,500 credit line for an unemployed person seems like predatory lending on the part of the bank.  Be very, very careful whenever you use that credit.  The bank is counting on you NOT being able to pay your balance after 12 months, at which point they’ll slam you with a very high interest rate.

I wanted to say all those things.  Really, I did.  But I thought this might sound too preachy and judgmental.  B was simply making conversation.  He hadn’t asked my opinion, so I didn’t feel it was my place to offer advice, especially with his parents standing nearby.  Instead, I said, “Wow -- $7,500?  That’s higher than my credit line!”  I am hoping that my comment will put his high credit line in perspective.  His parents are both financially savvy, so I imagine that they taught him about credit cards when he was younger.  If not, I’m hoping they will warn him after hearing this worrisome conversation.

So, friends, here’s my question: Have you ever offered unsolicited financial advice to a friend or family member?  If so, how was it received?  Do you think I should have said something more forceful in this situation?