In which financial security takes a backseat to pursuing your dreams (aka - so long corporate life)

Two months ago, I did something really uncharacteristic - some might even say reckless. I left my somewhat stable, lucrative, upwardly mobile corporate life where I'd spent the last decade to pursue a career I've considered since graduating college, the one I wished I had majored in the first place. Surely my dear readers will agree that making a move into teaching is a fantastic financial move.

(crickets)

No, I have not lost my mind. Yes, I do read the papers. And OF COURSE I am concerned about the availability of teaching jobs in 2011 when my class graduates. Having two close friends who are newer teachers in Arizona and California, two of the areas hit the hardest by the recession, I feel the impact personally. Although my friends are exceptional teachers wise beyond their tenure, they both received pink slips this year for the second year in a row. They have subsequently been rehired, but the process is quite jarring.

Additionally, I feel as if when I excitedly tell people of my career change, they give me the same look as if I said I was planning to move to Alaska to sell ice to Eskimos. One of my relatives, who is not known for her tactfulness, told me that my decision to pursue teaching "is the dumbest idea she ever heard”.

Ouch. One of my biggest weaknesses is indecision (I'm working on it - maybe), and as a result of the discouragement for the profession I was considering finding another management job and dropping to a part time or even less than part time program. Or perhaps reconsidering my move into teaching altogether. After all, beginning teachers make less than half of my last corporate salary and being in a substitute or teacher’s aide position would barely pay for my student loans. My current part time job in a summer school pays minimum wage, a salary I haven't worked for in...well...ever.

Just as I was having second thoughts about my career change and feeling misguided, the universe dealt me a cosmic whack on the side of the head. A few days ago I was looking through my sent email file to follow up on a seasonal teacher’s aide position in my district. Because of my search criteria and the fact that I don’t keep many of my sent emails, I found something I had sent to a friend of mine over 6 years ago. At that time, I had told my friend that I was tired of my profession and strongly considering a career change to teaching. It wasn’t the first time I’d had that sentiment, and at that moment I wondered why I stayed in a career I didn’t particularly enjoy for so long. After all, it seems I have always wanted to teach.

My classmates, as well as the college administration in general seem to be cautiously optimistic about our career prospects. I feel confident – lucky even - in my choice of a teaching certification program as all of my teachers are exceptionally talented teachers and have a breath of knowledge.

While I may not find a teaching job right away, I've come to terms with the fact that I must pursue my dream of teaching - now. Life is too short to spend your days in a job you hate. Things have a way of working themselves out in the end, and Mr. Cents and I will be okay financially. The price of staying in a job you dread going to every day is far more than you could ever make in a "secure" job.

Find an extra $9k in your budget (Budget bootcamp, lesson 1)

(Photo credit- visualeconomics.com)

The text in the article in italics represents the content from visualeconomics.com to explain the picture above. What's not in italics is my interpretation, a personal slant on how Mr. Cents and I find extra money in our budget, and how you can as well. Please feel free to share in the comments below on how the national average differs from your household!

The average consumer has a budget that is split into a large number of monthly and yearly spending. The average consumer spends $49,638 a year on a range of necessary and desired expenditures. These expenditures come out of an annual household income of $63,091 per year on average, before taxes. The average consumer owns 1.9 vehicles, and 67 percent of them are homeowners. Households average 2.5 people and 1.3 earners reside in each.


How do you measure up? It's helpful for Mr. Cents and I to see our budget in this context: we have both a smaller household and a larger household income. We own our home (usually owning is more expensive than renting), and are a dual income household with 2 cars.

Side tip: for beginning budgeters, I don't recommend using pre-tax income as a tool - it's much easier to plan expenses based on your take home income.

The largest expenditure of the average household is housing. This takes up an average 34.1 percent of the yearly budget of households. This is an average of $16,920 spent on housing. This amount includes $10,023 spent on shelter, $3,477 spent on public services and utilities, $984 spent on household operations, $639 spent on housekeeping supplies and 3.6 Percent spent on household furnishings and equipment.


Spending $10k a year on housing adds up to a $833 monthly mortgage payment, which is far less than average for areas with a higher cost of living. A key observation here: typically banks will approve the amount you can spend far in excess of this percentage of income. Banks base "how much can I afford" numbers on a range of 28-36% of PRE tax income, NOT including things like utilities, household maintenance and furnishings. Mr. Cents and I spend about 15% of our post tax income on mortgage costs alone in a mid- high cost of living area (Chicago). Utilities can vary widely between areas of the country, for us the amount we spend is less than the US average of $290 a month. To determine your budget on a new home, it's best to get advice from the current owners or your real estate agent before purchasing a home.

How can you cut back here? Let's assume your mortgage and utilities are fixed costs, and short of refinancing and using candles for light, there's not much you can do to change those expenses. But what you CAN do is focus on expenses that are within your control: do your own landscaping, cut back on the toxic cleansers and make some of your own, cut back on the expensive mulch, fire your housekeeper. Cutting the categories of household operations and housekeeping supplies can really add up quickly. Yearly savings: $800

Additionally, you can drastically impact your budget by eliminating most of the household furnishing expenses. Postpone replacing your living room sofa for another year or consider buying a gently used lawnmower on Craigslist. Yard and estate sales occasionally have treasures for a fraction of new cost. Yearly savings: $1500+
The second largest expenditure for the average consumer is transportation. The cost of vehicles purchased is an average of $3,244 per year, making it 6.5 percent of the average budget. The cost of oil and gas for vehicles costs the average consumer $2,384 per year, for an average of 4.8 percent of the total yearly budget. Combined, the cost of vehicles and their maintenance costs consumers an average of $8,758 per year. This is a total of 17.6 percent of the yearly budget.


Oh, transportation - how much better off we would be financially if we had an advanced public transportation system like they do in London? Aren't car expenses fixed like housing though? Not necessarily. Let's say this average spend was based on one member of the household purchasing a new car every 5 years. If we spend more to keep cars maintained and elect to keep our cars 10 years, this would reduce our yearly expenditure by 50%. Shopping around for a lower priced, reliable mechanic as opposed to the dealership wouldn't hurt either. Yearly savings: $1600

Another large expenditure is healthcare. The average consumer spends $2,853 on healthcare each year. Another physical necessity, food, costs consumers an average of $6,133 per year. An average of $3,465 of that is spent on food that is consumed at home, and $2,668 of it is spent on food consumed away from home. Combined, the money spent on food is 12.4 percent of the entire yearly household budget.

Whew - 12% of a household budget is a big number. I bet you can see ways to immediately cut that percentage - ideally cutting back on unnecessary spending (meals out of the home). Food is a necessity, but even the necessities have room to cut back. Taking a closer look at those numbers, the average family spends $526 monthly on food - both in and outside of the home. Budget tip - taking more meals from home and target your spending on food to an average of $400 a month. Yearly savings: $1500.

Insurance and pensions are important financial considerations and they cost the average consumer $5,336 per year. This is a total of 10.8 percent of the annual budget. $5,027 f this, 10.1 percent of the yearly budget, is spent on social security and pension contributions. In addition, the average consumer pays an average of $309 each year, making up 0.6 of the annual budget.

This is a category Mr. Cents and I don't really have much ability to impact and also don't usually consider this even as a factor in our budgeting. After all, our social security expenses are part of our taxable income and we never even see that money. There's not much you can do to impact this category, unfortunately.

Other expenditures include a yearly average of $945 spent on education, making up 1.9 percent of the annual budget. Consumers pay an average of 3.8 percent of their annual income, $1,881, on clothing and related services. Personal care items add up to $588 per year for a total of 1.2 percent of the annual budget.

Clothing is a necessity, as are personal care items like hairdryers. But nearly $600 on personal care items? Drugstore necessities like shampoo are added into our food bill, and we choose to buy quality items that last for years. Personal care could easily be cut to less than $200 this way, saving the average family about $400. And although I'll be the first to admit how much I love clothes, you can easily cut this category as well by thrifting and requesting clothing items as gifts for birthdays and holidays. Mr. Cents and I spend $50 a month to maintain our professional wardrobes, and could tighten this area even more if we were shopping frequently at resale shops and garage sales. The average family could easily cut down this category without feeling much strain. Yearly savings for clothing and personal expense reductions: $1600.

Entertainment costs $2,698 yearly, making up 5.4 percent of the average consumer’s income. Purchasing reading materials makes up 0.2 percent of the average income, or $118 per year. The average consumer spends $1,821 per year on cash contributions. This makes up 3.7 percent of the consumer’s annual income.

Mr. Cents and I are huge library fans. Our library saves us much more than the $118 per year, as we would be spending 10x that amount if we had to buy every book we read. Additionally, there are ways to cut down your entertainment expense from places like groupon.com, entertainment.com, and researching free things to do in your city. You could easily cut this number in half, even more if you're a family focused on doing community event rather than a young urban couple with no kids.
Savings in entertainment - at least $1400
Alcoholic drinks cost an average of $457 per year, or 0.9 percent of the budget. Tobacco and related tobacco supplies cost an average of $323 of the average consumer’s budget, for a total of 0.7 percent of the yearly income. Miscellaneous expenses make up the remaining1.6 percent of the budget with $808 per year.

Quit smoking. You know it's bad for you and it's expensive. You don't need me to tell you that. Ditto alcoholic drinks - save the drinking for home or push the alcohol back into your entertainment budget. Miscellaneous expenses can be cut at least in half once you become more aware of your spending habits. Cut your own hair if necessary, trim back on the gifts. Hey, we're all feeling the pinch in this great recession.
Yearly savings - $1100.

I hope these tips are relatively painless, and you learned at least a couple things that help you make cents. Remember, budgeting and cutting back expenses is a gradual process, one which only gets easier over time.

Personal development and getting naked, part 1

There's something about personal development that seems like it should be held in the privacy of your own home, far away from prying eyes of others. I'm reminded of the private nature of personal development when I try to avoid running into someone I know when perusing the self-help section at the library. It's the same motivating factor that caused you to drive as far as possible to buy condoms for fear you might run into your neighbor. (Actually, I still do that...but I digress...)

However embarrassing, I'm determined to be authentic this year, and I'm sharing my personal development journey - warts and all! (Please turn the lights down, m'kay?)

Recently discovering and becoming inspired by Gwen Bell's post on creating your personal manifesto, I grabbed my market and set to do creative goal setting work. Personal manifesto? Sounds pretty cool, doesn't it? I thought so too.

Step 1 - Find some zen in your space

Some people can be creative in any atmosphere. And to some extent, inspiration can be found in the most unlikely of places. For me though, inspiration needs a place to settle around and get comfortable with as much room to expand as possible. Clearing the clutter in your space is important to get a clean slate in your mind. It's hard to be creative when you're worrying about the dirty dishes in the sink, those bills that need to be paid in your inbox, etc. etc. Get clear and make some room for your mind to relax.

Science shows that the happy mind is a creative one. So do whatever it takes to get you to a happy place before you can start to let your mind go for the best possible results.

Step 2 - Grab your thought provoking paraphernalia.

For me this amounted to a heaping mound of Sharpie pens, an career interest activity deck, a boat load of back issues of magazines with pretty pictures and inspiring ideas (Helloooo Martha, I knew we'd collaborate someday), and stuff to cut it up and put it together in one creative mess.

Step 3 - Brainstorm without reservations

This may take a few different formats, depending on your innate need for structure and comfort with playing with idea formation. My suggestion is to journal or mindmap what you want your life to look like for about 15 minutes.  If you already have an idea of where you want to go, you'll have some good ideas for a course of direction. This is particularly important if you, like me, get easily distracted by shiny, pretty things and catchy magazine headers. Perhaps you want to meditate on a few areas of your life - career, family, health, money, community, whatever is important to you - and think of what you want that to look like.

Need more structure? Sorry, this is a no limits class, ladies and gents. Your only instruction is to go nuts and imagine the wild success of your life.

Step 3 - Start putting the pieces together

Go through the magazines and grab what speaks to you. I had some ideas about what I value and want to see more of in my life, can you make any guesses from the picture?

Largely, this is a very personal effort and will look different for everybody - my poster may look nothing like yours - heck, you may not even want to have a poster! Think raw and naked, YOU don't have to post your pictures up for the world to see.

Step 4 - Leave it

Sleep on it, leave it overnight and look at it later, etc. Maybe it doesn't make sense now, but the idea is to avoid limitations or criticism, both of which inhibit the creative process. Next step - now what do you do with your creative work? Is it finished? Do you take it to the local craft store to have it framed or lock it away in a closet?

Neither, actually. Stay tuned...more personal development work is on its way.

Happiness, reinventing yourself and what's the point of money, anyway?

I arise in the morning torn between a desire to improve the world and a desire to enjoy the world. This makes it hard to plan the day. ~E.B.White

Mr. Commoncents and I are at a crossroads, specifically:

We have a passion for knowledge.

We want to leave the world a better place.

We believe that the future of the world lies in the youth of the world. And that youth, specifically in America, makes us very worried about the future.

But most importantly - we really, really don't like our jobs.


We don't impact even one of these ideals with our corporate, paper-pusher jobs. In fact, the only thing our paper pusher jobs allow us to do is the relative comfort of a biweekly paycheck and stability of being able to pay the mortgage. And eat. (Oh yeah, eating is very important to us in this house.) Yet, we've become increasingly aware of the importance of congruence: to be able to live your values, make an impact on those you touch, and to generally enjoy the process.

2010 is a whole decade beyond the time I believed as a child that I would be very, very old at the ripe age of 23. My eight year old self could barely fathom being double digits, much less (dramatic pause) well over 30.

So I've decided something: I'm going to change things.

2010 has a theme - The Year of the Transformation.

I'm going on a personal development journey and I plan to open all the ugly and beautiful things that come along with facing the truth:

- My simultaneous desire for security and fear of stagnation
- Not allowing myself to let go of things that don't serve a purpose in my life
- My need to improve the future of the world, coupled with my selfish desires of wanting to just be happy.

I'm going to do a lot of work, I'm going to discover the path I was meant to be on, and I'm going to enjoy the journey. Happiness and fulfillment or bust!

I hope you join me.

The End?

A few weeks ago, Mr. Cents and I vacationed to Peru in our long held dream to hike the Inca Trail to Machu Picchu. The experience was simultaneously the best and the worst days of my life. Hiking the same ancient trails the Incans did centuries ago was surreal - and exhausting. (Didn’t these people think of escalators? No wonder they were defeated by the Spanish Conquistadors. But I digress…)

But there are also people who lived there now, in conditions that would make any person from a “civilized” country cringe. Things we take for granted, like indoor plumbing, clean water and accessibility to first aid. I’m not much for camping typically, but even the intrinsically outdoorsy (read – our beloved travel companions) found some of our accommodations difficult to endure. It made me realize just how lucky we really are. After all, privilege is largely about where you are born. I’ve heard a lot about the arguments of basic human rights this election, but even the poorest populations in the United States often have far better resources than many of the impoverished families I met on our trip. The reality of the working poor in a less civilized country made all my ramblings about frugality seem pretty insignificant.

I don’t know if it was the trip, or being away from the internet for an extended period of time, but I no longer had the drive to write for Our Common Cents once I returned. Writing felt more like an unpaid obligation than a hobby. It wasn’t as fulfilling as it had been in the past, so I’m turning in a new direction. During the upcoming year I’m aiming at working on the things that enrich our life – not just make us materially richer. Should I decide to share our journey, it will be in another site, and in a very different direction.

I’ll keep you posted.

The sky is falling! (Or is it....)

Occasionally I'll start blog posts and never finish them. For some reason, be it an idea that comes to me on another topic or the call of unfinished laundry, I'm just not feeling it. This has been happening a lot more often lately so today I found myself looking at old, unfinished posts. What I found was interesting...

On March 23 of this year, I started this post. It was in response to people's attitude about our financial difficulty. What I wanted to explain was that we were not in a recession, what a recession was, and the state of the economy. This was another one of those "just not feeling it" kind of posts. I thought I knew it all and couldn't voice my feelings that we had battled much worse before, we were not in actual economic chaos, and that the outcries were an overreaction. People were losing their homes and their jobs but only a fraction of what we faced in the Great Depression, and still much less than we faced in the 80s.

I wanted to shake the people who were claiming financial Armageddon and explain that the economy is cyclical, therefore, we will survive and live to tell a brighter story. There was no reason to worry if you were doing everything you should be doing. Responsible people, the ones who lived frugally and did all the right things, many of my dear readers who diligently planned meals and bought a home they could afford, those people would be unscathed.

I feel much differently today. Our future, both as a nation and as individuals, is a little more uncertain now. This may mean many of us will have to pull our belts tighter, and think even more creatively about cutting back. Although Mr. Cents and I have a relatively frugal lifestyle, we've already begun thinking about changes to discretionary spending. We have our regular budget as well as a contingency plan B in case we lose our jobs. We've also been tossing around the idea of drastically downsizing our lifestyle for the past several months and call this the "minimalist budget".

Mr. Cents talked about selling our home and living more simply with our friends in the past. Sadly, instead of supporting our lifestyles, our friends looked at Mr. Cents as though he had two heads and one of them spoke Latin. I find it amusing that now simple living and frugality has become almost trendy, instead of completely alien to our culture. A definite improvement in the times which comes from a dire necessity. Magazine covers now feature headlines like "Getting the most for your money at the grocery store" instead of "How to dress like Paris Hilton". These days, as people realize they need to make real changes to their lifestyles, saving money is in. That change in people's attitudes gives me hope that we will be resilient and overcome our current economic situation. Perhaps the original post wasn't as far off as I thought.

Bright words for dark days

Today is a typical October day in Chicago – it’s brisk and overcast, the leaves are beginning to turn and fall off, summer plants are reaching the end of their life or have been replaced by mums. Under normal circumstances, I love fall – the smell of the cold air, the vibrant foliage, excitement around upcoming holidays, anticipating crackling fires and apple cider so hot it burns your mouth. Today though, the ominous clouds hanging low overhead and the complete lack of sunshine make my mood all the more reflective of my current interpretation of the weather – dark. Gloomy. Depressing.

By nature, I’m very introspective. I could spend hours in self reflection without a second thought, and it’s as much a blessing as it is a curse. Case in point –
• I can learn very quickly from my mistakes and rarely repeat them more than once = good.
• I often spend far too much time worrying about the way events transpired, or paralyzed in fear of what’s to come = not so good.
Recent events in the marketplace, the uncertainty of our country’s future and sensationalist media (Dow drops 1000 points! The sky is falling! Etc…) doesn’t help my case. It also doesn’t help that I feel far from alone in my concerns. People outwardly discuss worry about their jobs, their homes, and their 401k balance in the way with as much casualty as the latest antics of Britney Spears. They want understanding and sympathy and someone to point the finger at RIGHT NOW.

But this is not the time for placing blame on greedy Wall Street, unethical Washington, or predatory mortgage brokers. Instead, now is a time that we all need to take responsibility.

-crickets-

Yes, I know it’s not your fault. You saved diligently before you bought your mortgage so you had a big down payment, you were educated about your financial situation, and you didn’t take a home equity loan you couldn’t afford to pay. And likely you were very, very far removed from anyone who had any direct responsibility. Chances are you were closer than you think. Even if all your money was in cash under a mattress (which I really doubt, knowing anything about my target audience) and you rented an apartment from your mother, this situation has touched nearly everyone. Even if you don’t know a single person who took a home equity line of credit only to later have to foreclosure on their home, you probably have a parent with a substantial amount of money in an IRA that was in a “safe” investment of CDOs (collaterized debt obligations, which are essentially a mutual fund of home loans). Perhaps your employer was affected by the credit crunch and backed away from the necessary capital to stay competitive because they were investing in a higher return mutual fund. But what does it really matter now? What can we do about it? As I tell the people who work for me “Blaming only wastes time and energy – don’t blame, create solutions.”

The fact is, there is very little we can do right now, so it might be prudent to do a little ostrich emulation (putting our heads in the sand). Make a disaster plan for what you could do if the sky really felt, and then put it away. Stop checking your 401k. Stop listening to the downward slope of the Dow (again) today. Surround yourself with as much positive energy as possible. Take joy in small things like hot apple cider and vibrant fall foliage. Do something nice for someone without expecting anything in return. Volunteer. Bake. Exercise.

There’s an interesting relationship between anger, worry and health. People involved in lengthy lawsuits nearly have a much higher incidence of serious health conditions. People who suffer depression are more likely to have accidents, develop cancer, and die of stroke. Financial uncertainty can cause depression.

It’s no coincidence that we are all so downtrodden.

Anyone who took Psych101 (and didn’t sleep through it completely) knows about the self-fulfilling prophecy, aka – what you focus on becomes reality. There is no stronger proof of this phenomenon than in the stock market. If everyone is scared that everything is going to hell with no recourse and promptly depletes every stock they own in order to keep all their money “liquid”, guess what – the stock market drops.

Focus on what you can control, not what you cannot. If you have people who work for you, focus on helping your employees improve at their jobs, instead of where your next paycheck is going to come from, or whether you will be the impact of a job cut to reduce expenses. If you work for someone, focus on adding value and continuous improvement, so you can be resilient in times of change. Do your best and relish in the sense of satisfaction of a job well done. Help someone less fortunate to give yourself some perspective. Tell your family and friends how much they mean to you and watch how rich you suddenly feel.

I’m always amazed that we live in one of the richest nations of all time and we still complain about how much we lack. It’s sad that we rarely talk about how much we have. In times when I dwell on fear and impending financial doom, Mr. Cents has a way to ground me like no other – by talking about the “worst thing that could happen”. The conversation usually goes something like this:

And what if you lost your job, what would happen then? I would have to try and find a new job. But if I couldn’t in time, we would not be able to pay our bills.
And what then?
We would lose our savings, our house and all our things.
And why would that be so bad?
We would have to start over from scratch.
And why would that be so disastrous?
We wouldn’t have a place to live.
You’re saying if we were completely destitute we would have no where to turn?
Well, I suppose we could live with our parents or our friends until we were able to get on our feet.
And that’s the worst that could happen? Is that really so bad? Is that the end of the world?
Well, it would be awful, but I guess…we would survive.
Right, we would survive. And we could pick ourselves up again.

He's so smart.

Though I’m no stranger to dark days, I do see much brighter days ahead. Money means nothing if you don’t have something to live for, and we have far more than we need to survive. That, my dear readers, is true wealth.

Whenever life gets particularly difficult, I turn to an inspiring passage left on a church pew by an unknown author in the late 17th century. It’s still as true today as it was hundreds years ago. Below is an excerpt of the Desirada. I hope you get as much peace and satisfaction out of it as I do:

And whether or not it is clear to you, no doubt the universe is unfolding in an ordered manner. Therefore, be at peace with nature and the mysterious process of evolution, whatever you conceive it to be; and whatever your labors and aspirations, in the noisy confusion of life, strive to maintain your own inner peace while you do those things bring you happiness and contribute to the survival of humanity. With all its sham, drudgery and broken dreams, it is still a beautiful world.