Teaching

New Year Organization

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I had a couple of posts teed up to reflect on last year’s finances and activities, but having some conversations with people made me realize that things that I find basic, aren’t for others. I thought I’d share some things that I do that help me be more successful (calm) in my day. I’m not an organization expert. I’m not the “lazy genius” that gets touted (although, I don’t see people executing what they learn there). I’ve found things over the years that have helped me keep my brain straight. This particular post isn’t financial related, but part 2 will be (but next week will be the monthly financial update, so come back in week 3 this month).

Even though I broke this up, it’s still long. Skim the middle, unless it’s pertinent to you, but the summary ties it up at the end.

I have my own home’s finances, thirteen rental properties, three kids with two in school (and they go different days of the week), investments (and Mr. ODA’s constant moving of money!), and whatever other ad hoc bills show up to manage. I don’t have the ability to think in a quiet and distraction-free environment after 7:30 am. I adapted so that I don’t feel stressed because I’m trying to pay bills while the baby is nipping at my heels and the 3 and 5 year olds are asking me for endless snacks.

Please note that I’m a stay at home mom that manages our rental properties part time and works ad hoc as a substitute. I fully acknowledge that all of this isn’t relatable to someone who is out of the house from 7 am until 5 pm, but I will point out that getting systems in place will make your shorter time at home less stressful.

For a real-time, real-life example, I’m frustrated because my writing of this post has bled into Mr. ODA and two kids being awake, and so I’m trying to finish my thoughts here while Kid #1 tells me about his 14 stuffed animals he brought down from his room, Kid #2 is telling me about her puppy and two babies, and Mr. ODA is asking me to meal plan for my dad’s visit. So here’s why I wake up before anyone else. 🙂

START YOUR DAY RIGHT

I wake up around 6:15 everyday. The kids are in preschool, which starts at 9. When my oldest starts school next year, I’ll start setting an alarm to be awake around 5:15 because I think he needs to be out the door at 6:45.

I know people who even say “I’m not a morning person,” who set an alarm and agree that starting your day without distractions from what you want to achieve makes for a better day.

I start my coffee and make something small for breakfast. I’ve learned that if I don’t eat something, then suddenly it’s 9:30, I’m frustrated by being asked for second breakfast by the kids while I haven’t eaten anything for myself (because if I make any move towards food, suddenly the kids NEED food right then also, even if they just ate). I eat something small, and then around 10 I have … I guess … “second breakfast.” I also learned that if I take time to actually sit and eat a bigger breakfast first thing in the morning, then I’m anxious to get to the other things that I want to do, so it doesn’t help me feel successful to the start of the day.

I empty the dishwasher. If you have young kids, maybe you’re lucky that they don’t see something and then immediately need that thing they wouldn’t have otherwise asked for, but I’d venture to say that’s not the majority. If I’m emptying the dishwasher and laying out their cups, waiting for their matching straw or lid to also get unloaded, they suddenly need milk in that specific cup. Therefore, I unload the dishwasher before anyone is awake and there’s no distraction.

I then make each kid their own water bottle. This was a surprising step to a few people recently. Sometimes this means just filling up the same water bottle as the day before, which is probably sitting on the counter from yesterday. Sometimes their water bottle was washed, so it was just unloaded from the dishwasher. I have specific water bottles that are our “everyday use” water bottles. They’re leakproof. They have a handle. This is what gets carted around when we leave the house. Having a full water cup means that I’m not in the middle of doing something and being asked for water. I refill the water at lunch and dinner, but sometimes there’s a request for more in between.

I set their water bottle and their respective vitamin on the table. When the kids wake up, they go to the table, eat their vitamin, and put their breakfast request in. Sometimes, I’m really on top of things, and I make a breakfast before they wake up (e.g., not cereal). If there’s a plate of food in their “spot,” then they typically just sit at the table and eat it. Most mornings, I’m giving a list of a few options and letting them pick.

I prepare their snack and water for school, if it’s a school day. Again, if I start rummaging through the pantry while they’re awake, they suddenly have preferences and questions. It’s better if I just have it done. As a compromise, I offered my oldest the ability to pick out his own snack every Friday. He wakes up before anyone else, so I have him pick it out before #2 wakes up (who wants everything #1 has or is doing).

If it’s a day that I want to pay bills and/or update our financial tracking spreadsheet, then I also make time for that before anyone wakes up. I can run through our finances in about 10 minutes without distraction. Sometimes, my son wakes up before I get to it, and then for 30 minutes I’m fielding questions about stuffed animals while also trying to keep track of what I’ve already updated.

I know a lot of people lay out their kids clothes the night before. Perhaps this will become part of my routine when my oldest needs to be out the door at 6:45, but at this point, we have plenty of time in the morning to get dressed and ready.

MIDDAY RESETS

I’ve consistently used a child’s nap time to reset the house. Pick up toys that are out (not everything, but most of what hasn’t been touched for a few hours). Clean up any dishes that have been left out. This started with my first’s nap time, and was really because I couldn’t physically sit and relax while I saw toys scattered around the floor or dishes piled on the counter. It has evolved over the years as we’ve had more kids, but the general gist is the same – give it a quick reset, but not a perfect clean up. It’s going to get messed up again before bed time, but it’ll be less items to manage at that time.

Now that my kids are a little older, I task them with it too. Since tidying our house has always been something they’ve seen, they do it well. While I put the baby down for a nap, it indicates that it’s time for them to straighten up. If they put their “morning toys” away, they get to watch a couple of episodes of a show.

I’m a stickler for pieces of toys to stay with each other, so this helps manage that toys don’t have pieces go missing. It also gives everyone a fresh slate to pick out new toys to play with, and it helps no one feel overwhelmed by the state of the room.

I clean up anything left over from lunch, wipe down the table and high chair, and at least get the dishes to the sink, if not the dishwasher. I used to fight anything being left in the sink, but I’ve let go of that.

I then use the baby’s nap time and the bigger kids’ tv time to make any phone calls needed, catch up on any financial things I didn’t get to in the morning, or clean a room.

END YOUR DAY RIGHT

Reset your house.

The two big kids go to bed around 6:30. After they’re in bed, I pick up most toys and clean up after dinner. When I clean, I focus on one room at a time. I start in the living room because rarely am I going to find something in the kitchen that belongs in the living room, but I’ll have items in the living room that need to go to the kitchen.

From the living room, I put any toys away that belong in that room. If a toy is meant to be in the basement, it gets put at the top of the stairs. If there’s a bedroom-related item that got left behind, it gets put at the bottom of the stairs. In both those cases, when someone walks to that area, they’re supposed to bring that to the next floor; in reality, I’m the only one who really does that. If there’s a cup or a plate, it gets put on the kitchen table (because that’s the closest to the living room). The point here is to work in phases. Don’t exert the energy to carry one toy all the way to the basement, to then see that another toy got left under the kitchen table and needs to go to the basement. This makes the task overwhelming.

Once everything is picked up, I move to the kitchen table area. All plates and cups (including whatever I’ve added from the living room), get moved to the kitchen peninsula. The baby’s high chair gets wiped clean, the table and chairs get wiped cleaned, and the dog’s food and water bowls get filled.

In the kitchen, I clear the counters first. Everything goes where it belongs – refrigerated items go to the fridge, any spices left out are put in the cabinet, leftovers are stored away. The goal is to get all the counters cleared off, leaving the dishes in the sink for last. If the stove needs wiped down, I do that once the counters are cleared because the grates need to be placed on the counter. Then I load the dishwasher from the sink and rinse out the sink. I can either rinse the sink after I’m done clearing it, or I can scrub hardened on food in the morning. Put the effort in to do it right so that it’s not a bigger task later.

The baby goes to sleep around 8, so after his bedtime, there’s usually more toys to pick up and a few more dishes that were used.

Then the dishwasher is turned on before bed. Our dishwasher runs for 2 hours. While sometimes it’s overflowing and needs to be run mid-day, it’s more likely that we run it every other night, after we’ve cleaned up the last of our things that need to be loaded from the day.

If I don’t do these things at the end of the night, then they bleed over into my morning chore list. I usually don’t have any “extra” time for my morning chores, so I prefer to focus on my night time to-do list as often as possible.

WEEKLY TASKS

There are things that need to be done, but they’re not done daily. For one, the bathrooms need to be cleaned. I knew someone who said “Sunday is for bathrooms.” She knew that every Sunday, she’d tackle cleaning the bathrooms. I loved that there was a system. I can’t say I’m consistent in that though. I try to remember to vacuum upstairs once a week, but the first floor probably gets vacuumed every other day. One thing that I did that has helped me clean bathrooms more often is that I keep a glass cleaner, all purpose cleaner, and a roll of paper towels upstairs. This means that I’m not thinking, “I should clean this bathroom,” but having to walk downstairs to get supplies and carry them back upstairs.

I change the kids sheets every two weeks. I try to do laundry in order of how it’ll go back on the bed. If I need to wash their blankets and comforter, then I wash the sheets first (since it all doesn’t fit in one load), this way I can get that step done while the blankets are being washed. If I wash the comforter first, then I have to do the entire thing all at once when the sheets are ready (note: my daughter will take any sheets on her bed, but son only wants his Paw Patrol sheets, which is why this system is complicated).

As for laundry, I don’t have any perfect answers, except that piled of laundry do not overflow our hampers. I used to wash our clothes separate from the kids’ clothes because I’d prefer to fold our bigger clothes than theirs, but now it’s a crapshoot. One thing that I have found helpful is that I sort the clean laundry into piles per person. Then I carry the pile into the respective kids’ room, fold it in there, and put it away right then. While my laundry may sit in the dryer for a day or two, this at least gets it folded and put away a lot faster than it used to be. Sometimes I force myself to fold by putting a load of towels in behind the clothes. This means I need to clear the dryer, but it won’t be as daunting because I’ll have the “reward” of “just” towels behind it. Ha!

SUMMARY

The goal here is simple: eliminate stressors that I have control over. I get things done when I don’t have to also manage 74897 toddler questions and a crying baby. I get my house organized before I go to sleep so that I am not overwhelmed by clutter and tasks first thing in the morning.

I’ve seen multiple articles over the last few years that talk about reducing clutter in your house to make yourself feel better. That when your house is cluttered, it makes your brain feel cluttered and exhibits a physically negative reaction. There are distractions everywhere you look that are taking brain power and exhausting you. If you come up with a system that gets kids’ toys out of plain view, that gets your kitchen counter cleared off and the dishes into the dishwasher when dirty, and eliminates piles of papers that will take you an hour to go through and organize, you’ll physically feel more calm and be able to tackle more.

Additionally, just staying on top of little tasks in a “system” you create that works for you and your household makes each day feel more manageable. I do a quick 10-minute reset of the house at nap time. This means that I’m not left with all toys and dishes and mess to deal with at the end of the day when I’m tired. I clean up room-by-room, creating piles of items that need to go to a different room, rather than putting each individual item exactly where it goes as soon as I touch it.

I’ll also point out that even though I use “I” throughout this, it’s a team effort with Mr. ODA. He cooks, cleans up the kitchen, straightens up, etc.

What day is your house sold?

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The day that’s in the contract as the closing date.

I truly can’t believe how many people have asked some form of this question in my life recently. While I’ve had multiple in person conversations on this topic, this post really stemmed from a Facebook post. “Is it an expectation for people to be moved out of their home the day of closing when buying a home? We sold our house, and are moving into a new home that we’re supposed to close the same day. Is there not a grace period?” What would that grace period be? How would the timing be determined?

On one side, I see the “closing date” section of a Kentucky contract simply states, “The closing of this transaction shall occur on the ___ day of ________________, 20__.” That’s quite useless actually (as I consistently find in KY law and legal documents). There’s a lot to be inferred by that statement, versus it being explicitly and clearly stated. On the contrary (as this has gone many times over), Virginia wins out.

In the paragraph before this image, it states where closing shall occur and by what date. This excerpt clearly indicates the purpose of “closing,” leaving little room for interpretation.

However, if we take a step back from the legal jargon and contractual obligations, whether explicit or inferred, we can see the logic. If you’re the buyer, once you sign the paperwork to purchase the house, wouldn’t you expect the keys to be handed over to you right then so you can start moving in and living in this house you just paid for? Wouldn’t you want the sellers out of the house because they’re no longer financially responsible for the house, and you don’t want any liabilities of their damage (intentional or accidental) to fall on your hands? You’ve done a final walk through and signed off that the house was in the condition you expected it to be in at that point in time.

Now this isn’t to say that there aren’t other terms and conditions that can be agreed to between both parties. “Lease back” or “rent back” clauses are commonly used. Sometimes it’s beneficial for a buyer to process the transaction (e.g., a rate lock expiration), but they allow the seller to remain in the home for an agreed-upon period of time (e.g., to bridge a gap before their new house is ready/available). But all of these terms are to be agreed to, in writing, before the closing date.

When we just sold our last house, we allowed the buyers to store things in the garage. We entered into a contract separate from the house purchase contract, called a “Preclosing Occupancy Agreement.” I haven’t needed one of these in Virginia, so I don’t know their standard form, but KY’s form does well here. The document outlines the date the buyer can take occupancy and whether there’s a charge for it. There were other items that outlined incidentals, such as utilities. In our case, the buyers were simply asking for garage space to put some of their belongings (because they had a same-day-closing for their sale and purchase), so we didn’t require them to put any utilities in their name before the sale.

BRIDGE LOAN

I can understand the complaint. Financially, you likely need to sell your current home to afford a new home. The “cash” from your sale is what you’ll use as your downpayment, as most people don’t have 20% of $400k sitting in a savings account (nor should you!). That makes the option to buy the house, take a day or two or seven to empty out your old house, and then sell your house not feasible.

There’s such a thing called a bridge loan. It’s a short-term loan used to purchase assets until long-term financing can be secured. There are more fees and high interest rates associated with this. However, it could be worth it to save the hassle of Private Mortgage Insurance (PMI). PMI is required in many cases where you cannot provide 20% as a downpayment for a house purchase. It protects the lender in case you don’t make your mortgage payments. PMI is removed when your principal balance falls below 80% of the original value of your home, whether that’s through regular mortgage payments or you make additional principal only payments. You can request PMI be removed earlier than that if you provide proof that your home value has caused your principal balance to now be less than 80% of the value, which is typically proven through an appraisal at your cost. If you put 0% down on a $400,000 purchase, it would take almost 12 years of payments before your loan reached 80% of the original home value. That’s 12 years that you’re paying PMI on top of your mortgage payment, and those are funds that are doing nothing productive to your net worth. A bridge loan may be worth it if you already have a sale date on your current house and only need to cover a few days or weeks.

SUMMARY

Logistically, it would be great if you could buy your new home, move all your things, and then sell your current home. Financially, this isn’t normally feasible. A lot of the time, you’re needing the equity you have tied up in your current home to purchase your next home.

Our first purchase was made up of two 401k loans (that we maxed as residential loans, which are penalty free), a gift from parents because we were short just a few thousand dollars, and cash on hand. We needed about $80k. Our second transaction, we chose a new build house. We sold our house, went into a rental for 3 months, and then used the sale money to purchase. Our third transaction was also a new build. We hopped AirBnBs until that got old with a 6 month old and 2 year old, and then crashed in Mr. ODA’s parents’ basement. We had 7 weeks between selling our house and purchasing the new one, so the cash from the sale went into our account, and we let it sit there until we needed it to close. Then this current purchase was actually done before we sold our third house, but we had executed a Home Equity Line of Credit prior to the sale. We used the HELOC to put the down payment on the current house, and then the sale of our third house paid off the mortgage and HELOC before distributing the cash balance to us. In all of these transactions, we had the ability to float the funds. That allowed us the ability to house our belongings in “long term” storage (not a day or two) for those two times we had a gap between the sale and purchase. The HELOC allowed us to slowly move our belongings to the new house this last time, and then we did a final moving day of all our big items just before closing (our current house needed work when we bought it, so we didn’t move right away).

But in all cases, unless there’s a separate document indicating so, the closing date of a transaction is the date that you give or take possession of the property. If you were buying, you wouldn’t want to take the risk of the previous owners messing with something in a property you now own. If you were selling, the buyers would have the same expectation.

Fast Food Deals

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We stopped at McDonald’s on our way to visit family before Thanksgiving. We sat down at a table where someone had left their receipt. Their total was over $35. This other customer had ordered a 10 piece mcnugget meal for $10.39. We had ordered a 10 piece, a large fry, and a large soda, and we had spent about $2.50.

This thought to share these details was resurrected when my sister complained that she stopped at McDonald’s for two meals and spent $30 to feed just two people. It takes a minute or two of your time, even if you pull into a parking spot and place the order right there, to save a significant amount on your order.

MOBILE APP

Some restaurants only offer earning rewards with each purchase, to then be redeemed at a later date (e.g., I redeemed points earned in the Chick-Fil-A app for a free medium waffle fry). There are others that occasionally send a reward to you with a quick expiration date (e.g., Chick-Fil-A will send a free chicken sandwich if you haven’t ordered recently). While other restaurants may offer deals like coupons within the app (e.g., 50% off a 10 piece nugget).

In the era of scanning your own groceries and placing your own restaurant orders at kiosks instead of a cashier, it’s not surprising that companies are attempting to entice you into mobile ordering with deals. Not all fast food places have as robust of a ‘deals’ section as McDonald’s, which is probably why we almost only stop at McDonald’s on our road trips. However, it’s noteworthy that each McDonald’s restaurant offers different deals. Some may be completely different, while others may just be a different price (e.g., a 40 piece nugget for $9.99, or a 40 piece nugget for $13.99).

THE PROCESS

We typically use my phone and Mr. ODA’s phone to place two orders so we can take advantage of two deals. I fully acknowledge that this is all ‘extra.’ Most of the time, I don’t have the patience to put all that effort in, but Mr. ODA does. He knows the general menu prices so he can quickly evaluate where the best deals are. One time, I was given no instructions on placing my half of the order, and I picked the deal for $1 coke. For a while, that was a big deal because they had raised the price of soda so much (and took away the $1 anytime any size promotion they had run for a long time). It turns out, sodas are now $1.29 on the menu, so the $1 deal isn’t great when there are other deals to be had (like free fries). For McDonald’s, you can only use one deal in a 15 minute span. That means we’ve also placed an order to eat at the restaurant, and then placed another order once we were there and able to on the app.

For my local restaurant, the deals currently offered are:
– Free double cheeseburger or 6 piece nugget when you buy one
– 50% off a 10 piece nugget
– $0 delivery fee with a $15 purchase
– 20% off any purchase of $5 or more
– 30% off any purchase of $5 or more
– Free any size fries with a $1 purchase
– $5 daily double, double cheeseburger, or mcdouble, medium fries, and medium soft drink
– Free 10 piece nugget with a $3 purchase

First, you want to verify that the restaurant address is the correct one you’re going to. You need to utilize the deals of a specific location, and you need to pick up your order at that location.

With a family of 5 (and 3 kids who are 5 and younger…picky eaters), we don’t stray from what we know very much. But let’s delve into the deal options. A large fry is $3.29, a medium fry is $2.99; a McDouble is $2.79; a 6 piece nugget is $3.49, a 10 piece is $4.99, a 20 piece is $6.69, and a 40 piece is $9.49; a small, medium, or large coke is $1.29. McDonalds also has the $1 $2 $3 menu, even though nothing is ever $1 anymore (mine has a McChicken for $2.19, McDouble for $2.79 (glad that’s consistent on the menu), $2.29 small fry, and $2.59 4 piece chicken nugget).

The McDouble deal would be $2.79+2.99+1.29=$7.07. You’re saving $2.07 by utilizing the deal.

The 10 piece nugget meal is $8.39. A la carte, the cost would be $4.99+2.99+1.29=$9.27. You’re saving $0.88 by making it a meal. If I were to use the deals, I could order a medium fry and medium drink for $4.28, hitting the $3 minimum purchase requirement, and get the 10 piece nuggets for free. Then I’m saving $4.11 from the meal price.

We typically will order a large fry and utilize the 10 piece deal on one phone. Then we’ll use my phone to order a coke and use the ‘free any size fry’ deal. Depending on the situation, we may add one or two McDoubles or McChickens to the order. If we order two sandwiches, we’re spending $9 to feed 5 of us.

SUMMARY

We don’t eat from restaurants very often. Sometimes we feel like going out to eat, or running an errand that will include a meal (like a Costco food court meal haha). Most of the time, we’re eating at a restaurant out of necessity (yes, a necessity because I refuse to live off pop tarts and granola bars for a 12 hour drive).

This entire post is a plug to utilize rewards systems and apps to help your money go further. This doesn’t even scratch the surface of mobile ordering, which would include delivery apps like UberEats. Menu prices on these food delivery apps are higher than the restaurant, charge fees, and you have to tip. I don’t think people fully understand how much extra money they’re spending when they use an app like that. But as I said, that’s not the point of this post. If you’re driving to a fast food restaurant (or even a fast casual like Chipotle or Qdoba), join their rewards and take advantage of their app-only deals.

Be strategic and intentional on how you’re spending money. Put the one full minute it takes into placing a mobile order to cut your cost in half!

Rental Cost Changes from One Year Ago

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I keep updating my investment property tracking spreadsheet to reflect the current costs of insurance and taxes. My tracking shows last year’s amount, which I use as an indicator on whether I need to look further into this year’s bill (e.g., is the amount a reasonable increase?). For so many years, most of our insurance policies changed by a few dollars; now, I’m seeing large swings in what’s being charged. Where jurisdictions were slow to change property assessments, they’re now catching up, which increases the taxes.

As a renter, your rent is increasing to cover these costs of the landlord/owner. Here’s a comparison of my fixed cost increases against my rent rate increases. As you’ll see, I’m not trying to get top dollar out of these properties because the market has increased so much (and that leaves me more exposed if someone doesn’t pay their rent on time). My rent increases barely cover the cost increases that are happening on some of these houses. Remember that while I’m showing fixed costs, this isn’t covering the maintenance calls that I receive and how they’re more expensive than they once were also.

ESCROW, CONCEPTUALLY

In most cases, for a traditional mortgage, an escrow account is set up. It calculates your taxes and insurance payments for the year, divides by twelve, and is added to your principal and interest payment for the mortgage. In addition to covering the total payments to be made, there’s also a requirement that the balance of the account never falls below twice the required monthly payment.

If your taxes owed for a year are $1500, and the insurance is $300, then your monthly breakdown is $150 ($1500+$300=$1800; $1800/12=$150). The minimum monthly required balance is $300 (twice the $150).

As taxes and insurance increase each year (typically), there’s an analysis done to ensure the projected monthly balance never falls below that $300 threshold. If the balance is projected to fall below the required minimum amount, then it triggers an increase in your escrow payment. Your escrow payment will increase to cover the shortfall, but also to cover the new projected costs to be paid. So while you may be offered the ability to make a one-time payment to cover the shortfall, your mortgage payment may still increase to cover the projected costs. For example, if last year, your tax payment increased to $1750, and your insurance to $350, then your monthly payment to cover those charges is $175 ($1750+350=$2100; $2100/12=$175). Your mortgage will increase by $25 per month because now your escrow agent knows the projected costs to cover are higher.

The analysis uses the current year’s amounts owed to project the coming year’s monthly balances; it doesn’t account for the probability that these amounts increase each year, which essentially means that there’s perpetually a shortfall. In other words, while in Year3, they know that there was an increase in costs from Year1 to Year2, they don’t inflate the costs of Year2 to cover Year3 projected payments.

I prefer to not have an escrow, but at this point, for any mortgages we have, they’re all escrowed. We have six of thirteen houses with escrow. While I pay more as my mortgage to feed into that escrow account, it means I don’t have to manage the annual or semi-annual payments. On the contrary, this means I need to be managing our finances to prepare for large outlays throughout the year on seven houses (in the last quarter of the year, I’m paying out over $8,000 to cover taxes owed).

ESCROW REANALYSIS

This post was prompted by a notification that an escrow reanalysis was done on a mortgage that was just transferred to a new company. I thought that their break down was the most clear I’ve seen. A quick note – your escrow will pay the bills that come due, regardless of the balance in the account, even if it means it’ll overdraw the account.

They clearly showed that the anticipated property taxes are projected at $199 per month (although, I’ll reiterate that this is based on last year’s actual outlay numbers, which aren’t accurate for the coming year). Then they show that the taxes are $43.08 per month. They then go as far to show the total of these two required outlays. There’s verbiage that explains the required minimum in the account must be twice the total taxes and insurance ($242.08 * 2 = $484.16).

There’s another detailed breakdown of each month’s escrow income and outlay (that I don’t have pictured here) that shows the month that is projected to fall below the required minimum. That month’s account balance is -$136.37. The difference between the required amount of $484.16 and the negative balance of $136.37 is $620.53 (pictured above). When that’s broken down by month, it’s $51.71. Take the total taxes and insurance payments and add the shortage amount to get the new monthly escrow amount of $293.79, a change from $222.25.

Below, they show you that there is no change in the principal and interest payment, then it shows how the current escrow payment is adjusted to the new escrow payment, along with the shortage amount.

I created this table to show the differences between escrow payments over the two years. I kept the houses that don’t have an escrow because it can be compared to a future table in this post. There is no House5 in this table because we sold it several years ago (houses didn’t get renumbered because House5 still exists in terms of tax documentation).

TAX AND INSURANCE UPDATES

Each year, we see an increase in these amounts. Usually it’s across the board, but Kentucky districts had kept the housing assessments the same through the pandemic. As housing prices increase, your property assessment can be increased by your tax jurisdiction. The assessment increasing leads to an increase in taxes. This is why people getting excited that house prices in their neighborhood are selling higher than expected isn’t great if you’re not planning on selling any time soon; those increases in values means you’re paying higher in taxes.

In Richmond, VA, the property taxes are $1.20 per each $100 of the assessed value. In 2022, House2’s value $163,000. In 2023, the value was increased to $203,000. And let’s not forget that we purchased the house for $117,000. While it’s nice that the home values in the neighborhood are increasing significantly (and we knew the area was going to get better and better based on development happening), we can’t realize this gain until (and if) we sell. So in the meantime, we’re paying higher taxes on this amount. Although, I suppose the assessment could be even higher because the actual value of this house is probably more like $260,000.

Among 13 houses (don’t get confused – there’s no House5 up there because we sold it), I need to cover a total cost increase for taxes and insurances of over $4,500. This doesn’t include the higher costs of trades people if there are any maintenance calls, so this increase is the bare minimum for me to keep my same income.

RENT INCREASES

I constantly see complaints about the cost of rent, or that a landlord is increasing rent. Unless we’re looking for a tenant to move, our general philosophy is to increase rent $50 every two years. This worked fine because home assessments increased at a slow, reasonable rate until recent years. Now jurisdictions are capturing these larger increases based on those inflated sale numbers when competition was high in from 2020 through 2022.

In some cases, the rent for the area brought it in a higher amount than compared to our purchase price of a house. In those cases, we went several years without increasing the rent. Looking back, that probably wasn’t the best idea because now we’re behind on capturing how significant these last few year’s fixed costs have increased. However, the trade off to that is that we’ve kept great tenants in the house, haven’t had to pay to turnover the unit, and have minimal maintenance calls.

This table shows the total increase in insurance and tax payments from 2022 to 2023 in the first column. I divided that by 12 to get the monthly amount of that increase (second column). Then, since I said we typically increase our rent by $50 every two years for the same tenant, I multiplied that monthly amount by 2. I’m showing that if we want to only increase rent on long term tenants every other year, then I need to plan ahead on how much my costs are increasing.

This isn’t a perfectly accurate capturing of our cost increases since I’m not going back to 2021 to capture those changes in amounts, but it’s a general estimate. This shows that if I were to increase all houses by only $50 every two years, it’s cutting into my bottom line. Only 6 of the houses have increases less than $50 for two years.

SETTING THE RENTAL RATE

Let’s pause and talk about “bottom line.” Landlords have investment properties to make a profit. They’re looking for an income stream.

I regularly hear people say they can own a house for less than their rent, which is likely if you’re speaking only on principal and interest of a loan. However, you need to qualify for that loan. You may not have 20% down, so you may be required to pay private mortgage insurance (PMI). You may not have good credit, which means you’re probably going to pay a higher interest rate than I’m currently paying. You need to be able to cover taxes and insurance, which means you’ll have an escrow account set up, which increases your monthly mortgage payment. Then there’s all the other costs of home ownership.

That’s where people forget. When your hot water goes out, you call me. I spend $1,500 for about 2 hours worth of someone’s work to replace that. When you have a water leak, I spend $3,000 for a day’s worth of 2 plumbers’ work. When a storm drops a tree on your house, I’m the one spending hours on the phone with insurance, finding a contractor, getting quotes, and paying the contractor $3,700 before I get insurance reimbursement. Those are the big unexpected expenses. That doesn’t include all those smaller plumbing problems that cost $200 or $500 at a time.

Then in some cases, I probably put time and money into the house to even get it ready to rent to you. I didn’t always buy a house that was ready to live in. You may have projects that need to be done when you first move in also, so which costs money. Those are expenses that I’m trying to recoup through my rent rate also.

There may be other costs to my ownership that I’m trying to recoup through the rent, such as property management. I may have to pay someone else 10% of the rent, every month. I am projecting that there are going to be costs that I need to pay for also (e.g., water heater, roof replacement, plumbing issues). When I need to pay a plumber $3,000, I’m not coming to the tenant to say “I now need $3,000 to cover this cost.” Instead, I’ve set my rental rate the expect such a large payout on my part.

Not only am I trying to make sure that my rent is set at the right about to cover the costs that I’m putting into owning and maintaining the house, I’m also hoping that I’m going to make some money off owning this house so that I can live. I don’t get to pay myself for the hours I put into managing the property. Whether or not I have a property manager, there is still time that I put into managing the houses. Would you want to work for free?

BACK TO RENT INCREASES

While we manage each house individually on setting the rates (asking ourselves: do we think the tenant can absorb the increase, do we have to increase to cover actual costs now), this shows that our monthly income was increased by $475. If you look back at our total monthly increase in expenses of just taxes and insurance, it’s about $375; add in the cost increases for property management (increased rent means increased fees because fees are based on the rent price), and our fixed costs went up $415. On a whole, we’ve offset the increases.

However, you can see if we had one or two houses, some of those increases could be significant. House3 is costing us $64 more for each month, but our increases are typically about $50 at a time. We’ve had the same tenant in this house since we bought it. A $50 increase every two years hasn’t kept up with our costs. Since we have other houses, it helps cover the costs on House3.

House2 and House3 are identical in layout. House2 has been upgraded to all LVP, whereas House3 has carpet everywhere except the kitchen and bathrooms (granted, it’s new carpet two years ago). Since we purchased these two homes with tenants, rent was already set for us. House3 has been the same tenant since we bought the house, and the increases have brought us to $1200 per month in rent. House2 has been turned over 3 times: the first was a divorced lady who moved back in with her ex-husband; the second was there for several years, but we began having a lot of issues with her, and we told her the lease was up; the third was the one who flooded the house in December, and causing the need for the fourth. Now we’re renting that house at its market value of $1600. That means House3 is operating at a much lower rent than we could get if we rented to new tenants. However, the tenants are wonderful, and we’ve purposely not raised the rent on them in significant ways because we don’t want to cause them to move.

SUMMARY

Cost increases in rental properties can be significant over the years. With the rising costs of all goods and services, property values weren’t immune. The increase in property values leads to an increase in an assessment, which means an increase in taxes. That cost is relayed to the tenant, as this is a for-profit business. I’m trying to make an income for my family with rental properties.

I’m not trying to price gouge tenants, but make a fair living based on the costs of owning these houses. My first goal is to not turnover tenants, so I do what I can to make my tenants happy by taking care of the houses and not creating drastic rent increases each year. Secondly, I’m not going to set a price that my tenant can’t afford, thereby putting me in a hard position where I don’t have rent paid. Having multiple properties helps to offset the costs so I don’t have to play catch up on one or two houses worth of higher expenses, by putting my long-term tenants in an uncomfortable position where they can’t afford the rent.

Vacations & Their Cost

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Here’s an unpopular opinion: you don’t need to buy all the amenities to have a good vacation.

Our financial advisor has a saying in his family, “we can’t afford ice cream.” If they wanted to, they could clearly pay for their family to have an ice cream night on vacation. However, they choose not to spend their money in such a way for the sake of the big picture.

The point I’m trying to make here is that you need to stop and think about an expense. I can’t remember what the item was, but when I went to pay for it, it was $8. It’s not that I couldn’t afford to purchase something at $8. It was simply that this item was worth $2 to me. The value of it was not $6 more of my money.

This post (or rant) started because of this Facebook post that was made in a local mom’s group. Apologies for the large image, but you couldn’t read the numbers until I got it this big.

Quite a few people echoed my point – stop with the add-ons. You can have a great day without the additional amenities/activities, and without the all day dining options. We had a season pass to the Cincinnati Zoo. We ate before we entered, packed snacks, and then ate on the way home if needed – at McDonald’s, with deals (we lived over an hour away from the zoo, so sometimes we couldn’t plan it to have only one meal while out). At a similar place to Kings Island, I know people who have packed coolers and left them in the car because you’re allowed to exit and re-enter.

Not buying extras holds true for any event. Your kid doesn’t need a $20 light up wand, that will be promptly forgotten about at the 48 hour mark, at Disney on Ice. The show itself was exciting and a “treat,” so let it stand alone. Your kid doesn’t need a $15 ice cream at the theme park. Simply let them enjoy the experience without developing a sense of entitlement or expectation that they’re going to get a “treat” every time you’re out.

I completely understand the mentality of “go big” for vacations because it’s a special time. But what is that worth? I know some people spend all year saving up to go to Disney, and they want the “full” experience. Disney itself is very expensive, but then you start spending on gift shop paraphernalia and food in the park, you’ve now spent a small fortune for hours of entertainment.

DISCIPLINE

Instead of only being disciplined for those few days per year, focus on the question: what is each individual dollar worth? I have an entire post where I share the thought process and conundrum I faced for purchasing a $4 weighted tape dispenser. Seriously. While you’ve “saved” for this vacation, what if that saving mentality helped you be able to pay your regular bills along the way? Or what if instead of spending extra money on vacation, that money went towards paying for school supplies? It’s all about creating the mentality and discipline to ask yourself what the value of something is, both to you and to the economy – if you’d pay $2 for a water bottle outside a stadium, is it worth paying $6 inside the stadium? Or could you plan ahead and bring your own water?

This irritation isn’t only for vacations. A friend of mine would leave their house to go to a nearby gas station to buy gatorade and soda bottles. You were at home! If going to the gas station is a regular occurrence, and you enjoy drinking soda out of a bottle, why don’t you get a multi-pack and keep it in your refrigerator? Then there’s the person I used to live across the street from who would order door dash regularly. It probably averaged to once per day; some days there was two deliveries, and some times she may skip a day. Then she posted a GoFundMe for help to pay for her tuition and books to finish her RN. She also posted all the amazing toys (excessive and expensive) she got her kids for Christmas, while also complaining about her son’s behavior being out of control, and that her daughter was being so bad that she got tv in her room taken away – wait, why does a THREE YEAR OLD have a tv in her room? So tell me again how you can’t make ends meet, and how you need help finishing your degree, while you have zero discipline on spending the money you do have. Why is it everyone else’s problem to fix for you when you’re putting no effort yourself? I’ve digressed.

OUR RECENT TRIP

We just went on a trip to Jellystone. My son had asked to go back to a cave since we left a cave last year. He’s obsessed with space and Earth. He was 4 at the time of this trip. For 2 adult tickets, all 5 of us were able to take a 2-hour tour at Mammoth Cave (children 5 and under are free). That was $40 worth of entertainment. I figured it was a good time to take advantage of their pricing structure before it would become $60 next time we’d try to go. While I felt the $40 was worth our time and money, I mildly regret it. His excitement for the caves was worth it, but we missed out on activities at Jellystone that I think they would have enjoyed. At 4 years old, we could have easily skirted the cave desire because he doesn’t know that a cave is 20 minutes away when we’re at this location.

We paid $433 for a 4 bedroom cabin for two nights, and that included a $50 charge for bringing a pet. We packed all our food for all the meals. My choice to allow the kids to stay up way past bedtime and for the two older ones to share a room cost us on day 2; I promised them ice cream if they powered through the cave, so that was $14 for all of us to have ice cream, which wouldn’t typically be an expense we incur. Other than the cost of gas to go 260 miles roundtrip, we spent nothing else.

There were opportunities to pay for things. We could have rented a golf cart for $70 per day. We could have paid for the mining sluice, which didn’t have a price advertised, and would have been 3 minutes of entertainment. We actually did try to do their obstacle course, but none of our kids were tall enough. Instead, we took advantage of their amenities. We drove pedal cars, played at their numerous playgrounds, went swimming, went to their beach to play in the sand and swim, ran around the splash pad, did their craft times, attended their character greetings, played bingo, played minigolf. We probably just sat at the cabin for a total of 3 hours between 3 pm check in on day 1 and 11 am check out on day 3; we even let the kids stay up until 8:30/9 (their usual bed time is 6:30).

UPCHARGES

So let’s look into amenities at GWL. I’m going to look at Mason, OH’s location. First, because it’s the one closest to me, so I’m familiar with it, but also because whenever there’s a Groupon for $99 nights, Mason is always $149. That tells me that Mason’s probably on the middle-to-higher end of amenities and their cost.

For a weekend in October, my room options range from $410 to $1035 per night. They provide a rate calendar option for you to see the rates on other nights because you may feel that $1035 for a night in a water park and hotel is absurd (I hope you do….). I also encourage booking with a code (there’s a Facebook group that shares active codes for deals), using a Groupon, or planning in advance and being flexible on dates.

You select a room option (I picked $410), and then it offers you a late checkout option. Check out is 11 am. For $50, you can stay in the room until 2 pm. What are you going to do with your room between 11 am and 2 pm? When this option is presented to you on the screen, what are you thinking? Are you thinking it must be a necessity because it’s being offered? Are you thinking that it’s needed because you don’t want to “leave” at 11 am? Or are you really thinking about the cost/benefit ratio of this charge? Are you expecting to be done with the water park for the day at 1:30, so you’ll go shower and change before the 2 pm check out? If I’m spending the day at the resort, I don’t see where I need the room between 11 and 2. I have one exception, which is very specific right now. If I hadn’t just paid $400 for a night there, I may consider the upgrade because we still have a napping kid from 11-1, so that could be helpful, but that’s not worth the additional $50 to me, personally.

GWL does a good job at pushing their pass options. There are 3 levels, ranging from $50-70. The options include a variety of: MagiQuest, Build-A-Bear, Mining Sluice, mini golf, bowling, GWL goggles, $5 to the arcade, candy, and an ice cream. Purchased individually, the price for the pass is a better deal by a few dollars than if you purchased these individually. However, do you have the time to do ALL of these activities and enjoy the water park? If you’re staying one or two nights, you likely don’t have the time to get the most out of everything. Don’t forget that they offer several ‘free’ activities (e.g., yoga, character greetings, bed time story, crafts, etc.) each day as well, not to mention that you’ve just spend $400 on the stay to play in the water park.

Don’t forget that on top of the room rate, there are taxes and a resort fee. If I wanted to stay for two nights with 2 adults and 3 kids (even though one is less than a year old), with no extra purchases, my total is $1,023.70. That’s $820 for the room, $124 for taxes, and $80 for resort fee.

These options that are presented don’t even include all the options you can pay for. For instance, you can rent a cabana. You have to call to book it, but I’ve seen it priced at $200 and at $500 for it. It’s not private. It’s not secluded. It’s not secure for your belongings. Make sure you ask yourself what you’re getting for that cost and if that money could be put to better use.

As a kid, we used to go to Lake George. We joked that it was our vacation from our vacation. The point of Lake George was to do nothing. You played in the pool at the hotel, walked the town, and got ice cream each night. It was relaxing. I remember lots of our trips, but Lake George sticks out as a favorite. Even our trips that were busy – it was busy because we were sightseeing and driving far; it wasn’t busy because we were paying for activities and trinkets.

We went to Disney on Ice, and my son still thanks me for the experience; he didn’t get any trinkets while we were there, and he still loved the experience. Your kids will remember the time they spent with you. That’s the point of the vacation – spending uninterrupted time with your family, not making it an exhausting, jam packed few days where kids are overstimulated and sleep deprived.

This isn’t a parenting advice post. It’s simply a moment to stop and think about your spending. Take the time to determine whether a dollar spent on an activity is worth that dollar’s cost in your day’s/week’s/month’s/year’s goals. The tape dispenser. Truthfully, I didn’t know it only cost $4. Regardless, I still took the time to consider whether buying this thing that I need for 1-2 days per year was really worth spending our money on, or could that money be put to better use.

In 2021, we purposefully took trips each month. We had looked into buying a vacation home, and we decided that we’d rather go to different places each trip than the same place over and over. The mortgage was going to be about $1200, so we allocated that much as our trip budgets. In May, we spend $618; June was $200; July was $690; August was $1069. I say this for perspective.

Take the time to analyze the spending that you’re doing, independent of the deals being offered. Will that one trip be worth the cost of it? Will the money spent for that trip be worth anything that you may have to give up to make that trip happen?

Financial Freedom

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Our church had a series about “taking significant steps toward financial freedom.” In their terms, financial freedom doesn’t mean FIRE (Financial Independence, Retire Early), which is usually what we’re referring to here. They mean that they want people to be free of financial burdens and not “bound up” by finances. Mr. ODA and I have been in control of our finances for a long time now, so this isn’t teaching us much about what to do differently. However, I’ve enjoyed learning their perspective and have several take aways to share.

Many have heard of Dave Ramsey when it comes to christian-based financial teachings. Dave tells you to pay off all your debt and pay cash for everything. We disagree with that approach. Debt is not bad when it’s used responsibly and you’re being a good steward with your finances, and that’s what our church’s lesson is too.

People seem to think it’s ‘cool’ to talk about how ‘broke’ you are. And yet, it’s taboo to mention if you’re in a good position with your money. What if we made it so that you’re taught that when you find someone in a better financial position than you, you ask questions and learn what decisions got them to that position?

The lesson is how to manage your mentality with money. It’s not about restricting your spending or making you feel guilty for buying your coffee, but it is about how you make informed decisions day-to-day that grow you towards a position where money isn’t controlling every aspect and decision of your life in a stressful manner. If you take control of your money, instead of your money controlling you, you’ll work towards eliminating that stress.

THE WHY

The workbook starts by asking you to determine your net worth. Money-in minus money-out is your cash flow, while assets minus liabilities are your net worth. The goal here is the gauge the current status of your money and where you should probably plan to be. There’s also an exercise where you determine your motivation. Are you motivated by freedom from financial burden, having a feeling of security, having power, or through love and giving? When you determine your “why” behind making money, you know what direction to go.

Making more money isn’t always the right answer. To make more money, you may need to take on a second job or more hours at your current job. Is putting that time in worth the extra money that you’ll bring in? Will putting those extra hours in make you more happy? If not, perhaps decreasing expenses is that way to go to make ends meet. If you don’t have the ability to take time for yourself or do things that bring you joy or have “down time,” then it’s not worth taking more time from your week.

I quit working in May 2019. Since then, I’ve done odd jobs just out of excitement, not financial need. I learned different industries and only had to commit part time. I was recently feeling the pull to find another part time job. There’s a consignment sale that comes into town twice per year, and they were hiring. They said they pay $8 per hour with at least a 4 hour per shift commitment. The consignment sale is being held 30 minutes from my house. That means that a 4 hour shift requires me being out of the house for 5 hours. The gas to get there and back would cost me about $7 per day. That means I’m out of the house for 5 hours (away from nursing my baby and being with my kids) for $25 before taxes. That cost/benefit ratio was not worth it to me.

THE PLAN

My favorite analogy given was to a plumber. A plumber doesn’t just start laying pipes in walls and hope it works out. He will have a plan of how to get water from the source to the faucet. Without that plan, how would you know that the water will get to where you want it to go? Same with money. If you don’t have a plan for your money, how will you know that it’s going to the right places with minimal effort? Without a plan, that’s where the stress comes in.

If you’re worried that you’ll be able to pay your electricity bill, then money is controlling your life. Sit down and make the plan. Allocate funding to the necessities first. It’s ok to eat at a restaurant or buy a coffee, but is putting your money towards those expenses creating financial freedom or causing more stress?

Mr. ODA and I have a money-spending mentality, rather than a budget. In my opinion, when you create a budget, you’re either looking to spend everything you’ve set aside in that ‘envelope,’ you’re willing to move money around without discipline, or you think of left over money in that ‘envelope’ as a bonus and you spend frivolously. If you put $500 for the month’s groceries in an envelope, but you only spend $450, what are you doing with that $50? I’ve seen it happen plenty of times that someone splurges. Instead, Mr. ODA and I weigh every single purchase. Literally every purchase, I swear. I told the story about my weighted tape dispenser.

Every single year, I sit on the floor and wrap Christmas gifts. I don’t seem to notice during the year when I’m doing birthday gift wrapping (or perhaps I’m quick to grab a bag instead of wrapping paper for those instances), but at Christmas it’s apparent. I need a weighted tape dispenser. Having to find the tape on the floor in a mess, then having to use two hands to get a piece of tape off the little plastic dispenser, is just so much stress. It was YEARS of thinking “I need a weighted tape dispenser. Nah, I don’t need it for just this one week every year.” I finally bought one. It was $4.22. I agonized over this purchase because I didn’t feel it was truly a necessity and it turned out to be less than $5.

Grab your bank account statements and credit card statements. How much money did you spend? In what categories did you spend that money? Was it for necessities or was it spending that creates a strain on your ability to pay the necessities?

This is an exercise worth doing if you feel you’re drowning. I see posts daily in my mom groups that people say they make “good money,” but they can’t seem to pay the bills. I want to intervene. “Did you stop at the gas station on the way home from work to get a gatorade?” You could buy a 16 pack of gatorade, put it in your refrigerator, and have it waiting for you when you get home, which is probably about the same amount of time for not stopping at the gas station to make that inflated purchase.

So many people don’t seem to realize how fast those daily, small expenses add up. Ask yourself if there’s a better way to get such gratification, but in a way that furthers your dollar earned. Create the habit of weighing each purchase, determining if it brings you joy, and then either walking away or purchasing it. Know that if you purchase it, that will have ripple effects. So if you’re worried about paying that electric bill, then that instant joy gratification wasn’t a step towards financial freedom, where money isn’t controlling you.

Our Money Management

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I manage all our income and expenses (at a high level, like credit card payments, not individual line items). I have a spreadsheet that I set up in 2012 and have used religiously since then. I’ve shared how I set it up in the past, but we’ve entered a new phase that makes my spreadsheet even more important to me.

BACKGROUND

FIRE. Financial Independence, Retire Early. This isn’t a post about FIRE specifically, although it’s the movement that sparked Mr. ODA to go down our financial path.

The purpose of our rental portfolio was always for both Mr. ODA and I to quit working. We had covered my income before any kids were born, but I kept working because there was no reason to not be working. Once our son was born, I took 14 weeks maternity leave (not a separate bucket for Federal employees back in 2018; it came out of my own accumulated sick leave), then I worked about every other day for 8 months while Mr. ODA and I swapped child care roles, and I burned down my leave.

While we don’t plan to work full time, we do plan on keeping part time positions. We’ll work on things that bring us joy, rather than an office job with office politics. Since I stopped working, I’ve done odd jobs, part time. For example, I worked as a census taker and served beer at a local race track over the last 4 years. These were all seasonal, part time positions, with no long term commitment.

Now that I quit working, it’s Mr. ODA’s turn. We hardly skipped a beat when we left my six-figure salary behind (although a pandemic probably helped curtail spending on our behalf!). However, the thought of losing his salary as a safety net and losing insurance are two items that have caused some pause.

THE SPREADSHEET

For you to understand my panic that I’ll get into here, I thought a quick reminder was necessary. This is how I manage our money. It’s nothing fancy, but it works. I don’t miss payments. I can allocate expenses to a specific 2-week period against what income is brought in at that time.

There are two parts to the spreadsheet. Well, there are about 10 tabs, but this first tab, with two sections, is what’s pertinent.

Part 1 is this section. This image is a very scaled down version of the section. We have 13 houses, 6 mortgages that get paid, 6 credit cards that get paid regularly, and a few other lines that I removed.

All numbers are made up place holders, except the investments. I deleted my IRA contribution line because it’s wonky (but I will max out IRA contributions), but I wanted to show how much we’re investing regularly. There’s $75, per kid, per month, going into their investment accounts. Then there’s general investing happening with one $1000 transaction and two $800 transactions per month. Mr. ODA is investing into his IRA to max it out ($6500/12=$541 per month..sort of).

You can see that I’ve listed Mr. ODA’s pay dates at the top, and then his salary income on the next line. The gray section accounts for all rental income. I’ve allocated the income into the salary two-week period that makes the most sense (about half pay me on the 1st or 2nd, and the rest pay on the 5th). The green section shows routine rental property expenses. The entire next section are our personal expenses. The blue is left over from when I was managing two personal homes last summer (but kept it to differentiate our house bills versus other bills). The next gray section (which I’m only just realizing is a second gray and should be a different color as to not conflate the two grays.. what a rookie mistake) accounts for expense that come out of Mr. ODA’s bank account. Finally, I have an “other” section. This is where I capture large expenses that don’t need their own line item because they only happen once or twice a year. Here I’ve put tax payouts that will be due in October (that’s 4 houses worth, and it’s last year’s numbers – because I want to know how this year’s amount owed, when it comes in, changed from last year’s to discern if it’s reasonable or if I need to dig into it).

This is part 2. Now, part 1 accounts for the general timing of income and expenses, but it doesn’t perfectly capture the due dates, scheduled payments, or whether I’ve paid it and it’s hit the account.

The top line is linked to the section that I update our checking and savings account balances. Then I transfer all the items per pay period into this list format. In this example, let’s say I’ve already scheduled the gas payment. So I mark it as gray and put the date in the left column. Similarly, our investments are automatic, so I mark them in gray as we get to that two-week period.

At each border lined, I put the total for that section. You can see that at the end of the 9/2/23 pay period, I project a negative balance. Truly, we seem to have more income than I project (rewards cashed out, someone paying partial rent a little early, etc.), so I don’t take any action until I need to. There are Federal regulations regarding savings accounts; so we can only make 6 withdrawals from the savings account before fees apply. I manage these projects to know whether I need to make a withdrawal. If I need to, then I project what other expenses I may have and transfer a little more than I deem necessary.

THE PLAN

So our first step to him leaving is to pretend we don’t have his salary. Mr. ODA set up a new bank account. The majority of his paycheck goes into that account. We still have $250 going into another account, and about $400 going into a third account because we need to meet the requirements of direct deposits to prevent any account maintenance fees.

Our general principals in account management was always to take money into our main checking account, pay out bills for that two week period, and put the balance into savings. However, that wasn’t creating any forced feeling of managing without Mr. ODA’s salary. I’m more of a visual learner, so I appreciated this concept of having the money automatically transferred to a completely separate account.

EXECUTION OF THE PLAN

The first month of this plan had me on edge. The accounting in the checking account meant I was constantly back down to a balance of about $500. When I worked in an office, I was at the computer everyday checking our money. Now that I’m responsible for 3 tiny humans, I’m rarely on the computer. I project out our routine expenses, but there have been plenty of times where a $100 or $500 charge goes through that I didn’t have listed in my expense column for that period. Therefore, I like to keep at least $1000 as a buffer in the checking account to cover those little expense that can add up. So keeping the projection to less than $500 in the checking account panicked me.

Now wait. It’s not that we only had $500. We have a savings account linked to that checking account. We have this online account that’s taking Mr. ODA’s salary and just building the balance because we don’t use that account for anything. We have Mr. ODA’s old personal checking account. And last but not least (as my adorable 3 year old says all day long), we have plenty of investments that can be liquidated within 24 hours. We have the money. It’s just the panic of having the money in the spot where the bills are being paid.

SUMMARY

I’m sure there are easier ways or “better” ways to account for this. I don’t like automatic payments for bills because I like scheduling them against our cash flow. I’ve used this exact set up since 2012, and it hasn’t failed me. Taking full responsibility to pay bills means I am very scared to miss a payment and cause a negative hit on either of our credit reports.

Now that we’ve eliminated about $5,000 per month of income, without changing our spending in any way, I’m interested to see how things go. We have a great spending mentality – we’re not spending on frivolous items and we weigh the cost benefit of a purchase to us. That’s not to say we can’t do better. I’m sure we can be more diligent about our grocery spending or at least cooking what we already have in the house (we don’t spend much at restaurants in a month). I’ve already started tracking our expenses month to be sure we can watch our trends and re-evaluate our spending if needed.

Now that we have this account growing with no need for it to pay the bills, we will use it for fun things. We’re not very good about doing fun things. Two summers ago, we wanted to buy a vacation home at a nearby lake. We decided that instead of spending $1200 per month on a mortgage to go to the same place all the time, we’d plan vacations each month and spend up to $1200 without “guilt.” It was great. We had so much fun. But it lasted 3 months. Having a newborn put a damper on activities, but we’re ready to do the same again.

Credit Card Rewards

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I’ve not been quiet about the benefits of a credit card. We put every dollar we spend onto a credit card for the rewards, and we pay it off every month. Some cards give 1% back on purchases, some give another 1% back for payments (important to cash out your rewards to your checking account, and not as a statement credit because they don’t give 1% back for the credit), some have bonus categories where they increase the percentage back (e.g., 5% back for gas purchases), and some have retailer-specific incentives.

PERCENTAGE BACK

There are the flat rates given by some credit cards, and then there’s some bonus categories that provide an additional percent back.

In some cases, the percentages are fixed categories. You’ll get 1% back on all purchases, but then there are bonus categories. Their categories are 2% cash back on grocery store purchases, 3% on dining purchases at restaurants, and 4% on gas station purchases. However, this particular credit card caps the earnings at the first $8,000 in combined purchases in these categories annually, per your opening date. If you spend $300 per month on groceries and $200 per month on gas, that leaves about $165 per month on restaurant purchases. Those numbers are doable, but we spend more than $300 on groceries.

Then there are other credit cards with a revolving cash back category. This requires you to ‘active’ the reward and keep track of which reward is occurring in which quarter. However, these have lower spending limits before you run out of that extra bonus. “Earn 5% cash back on up to $1,500 on combined purchases in bonus categories each quarter you activate.” The bonus will default back to 1%, so it’s not a complete waste, but you may have a credit card that has a better-than-1% bonus for that category. We have a credit card that operates like this, and the only category that I seem to remember well enough to actual use is the gas one.

RETAILER BONUSES

While I’ve shared a lot on cash back type bonuses, I haven’t really touched on retailer-specific bonuses. Someone on Facebook recently shared a screenshot of their bank’s bonus. It’s an ability to earn 10% cash back when purchasing a Great Wolf Lodge stay.

It’s important to pay attention to the fine print on these types of offers. There’s usually a low cap on what you can earn, and there’s usually a fairly quick deadline associated with it. It also requires you to active the offer. That means that you can’t make the purchase and then go back to active it; you need to know about these opportunities in advance, active the code (usually by clicking something within your credit card portal), and then make the purchase. In some cases, it may even require you to use the link embedded in your portal to make the purchase.

Opportunities change frequently, but there are some that rotate fairly often. I currently have 25 offers available to me to activate. Some of them expire as early as 8/13, while some are good until October. Mr. ODA clicked a Kroger fuel offer. It states, “Earn 5% cash back on your Kroger Fuel purchase, with a $3.50 cash back maximum.” That means that if I spend more than $70 at the pump, then it will revert back to the 4% gas category. Here are the categories on this credit card.

SUMMARY

When looking for a new credit card to open, I always suggest looking for extra bonuses. Typically, we open a new credit card because we’re about to have a large spending need, so we’re looking for an introductory rate of 0%. There are other initial bonuses, such as spending $1000 in the first 3 months for a $300 bonus. We’re also typically looking for a $0 annual fee. I say typically because we have had credit cards with annual fees if we thought the incentives were worth the cost. In some cases, a credit card company may provide incentives that effectively reduce their annual fee (e.g., travel statement credit, paying for TSA pre-check).

When using a credit card with categories of cash back at a retailer, it’s a good practice to check back on how you earned cash back. For example, we have a credit card that provides bonuses for gas stations. However, their coding specifically only allows for purchases at the pump, and not purchases in the convenience store associated with those pumps. This was particularly frustrating because the “everyday spending” category only earned a quarter of a percentage, not even a whole percentage back.

We manage our purchases through 8 credit cards. That’s a lot to keep up with, and we’re not 100% on picking the “correct” card for the category that we’re spending (particularly when it comes to the card that rotates bonus categories each quarter).

In 2022, we earned over $2,000 worth of cash back based on our purchases, being diligent with the spending categories, and paying our credit cards off each month.