Setbacks

Tight Month Ahead – December Budget Breakdown

December 4, 2019 by tanya

Geeeeezzzz. I’m concerned about the budget this month. Because I’m self-employed, and my business doesn’t have any significant reserves, my personal budget is integrally related to the performance of the business. My projections for the business this month don’t look so good. In fact, I’m wondering how the business will possibly bring in what I need it to produce this month in order for not only the business’ budget to work, but my personal budget as well.

With this being December – the last month of the year and the month of 2 major U.S. holidays – I don’t see there being a high volume of certain types of client work. Everything kinda slows down this month. People focus on holiday parties, travel, and preparing for next year. It seems that, when it comes to certain legal services, the prevailing thought is, “If I haven’t gotten it done by now, I’ll just focus on it next year.”

Anticipating that this month will be tight, I’m planning to pay myself less than I’d like. This month, I’ll have $7,000 with which to work.

My hope is that the income will come in this month – even if it’s by the hair of my chinny chin chin.
~ Single Girl

I use Dave Ramsey’s EveryDollar software to do my monthly budgeting. I use the free version instead of EveryDollar Plus because I wanted to force myself to really connect with my numbers, instead of being able to simply drag and drop imported expenses from my bank account. I wanted to force myself to manually capture every single amount spent each month.

According to the summary of spending that appears in EveryDollar, here’s how the percentages of planned spending breaks down for the month:

You’ll see that giving (tithe), savings, housing, insurance, and debt comprise a total of $6,256.97 – 89% of the budget. A significant chunk of that is going to savings for that beast of an HOA special assessment I have coming due in February (½ of $8,200) and early March (½ of $8,200). Gas for the car, food, some minimal Christmas gifts and food for my Vegas trip (click here and see the section “Plans With the Bulldozer”) make up the remaining 11%. This all assumes that the business is even able to pay me an amount that will equal the $7,000.

What I pay myself consists of both payroll and shareholder distributions. In determining what I’ll pay myself, I balance the two. (See The Tsunami Situation – Tax Edition, which explains why business owners often split their income between W-2 employee income payroll and distributions as an owner).

Another challenge is that, with this being December, I really want to focus on getting ready for the New Year. I want to truly “hit the ground running,” which will require some dedicated planning and organizational time. I don’t want to start 2020 lacking in clarity or not having positioned myself to succeed. I really don’t want to write a post like this in December of next year. So, though I want to hustle, hustle, hustle, I also don’t want to hustle in a way that makes me feel unready at the beginning of the year. New beginnings are a big deal to me.

I’ve already started doing some business development by following up on previous leads (e.g., people with whom we spoke regarding potential representation). I’m also doing what I normally do to drum up business. My hope is that the income will come in this month – even if it’s by the hair of my chinny chin chin. How terrible . . . the fact that I’m even saying that I “hope” the income will come in this month. I should be in a position to be confident that a certain level of income will be produced every month. But, I deal in what is, not what should be. Unfortunately, I’m not yet in that position.

Handle Your Business . . . License

November 24, 2019 by tanya

When you start cleaning up, you’re bound to unleash some dirt.

As part of the process of me taking control of my finances, I’m also getting more organized in all of my affairs. This includes an assessment of my physical space, my physical fitness and health, and, quite importantly, my business.

My law firm serves as my main source of income. I’ve earned income through my real estate sales side hustle (If you missed that, click here), but the revenue from my practice is – by far – what I rely upon to live. I need it to continue to produce income; in fact, I need it to produce an increased amount of income. Moving into 2020, my foremost concern for my company is to generate significantly higher revenue on a consistent and reliable basis. Doing that requires that I really streamline our processes, learn more about and implement effective marketing strategies, and make sure that the affairs of the business, generally, are in good order.

I stay on top of my annual registration of the firm (it’s a limited liability company) with the Secretary of State, and I file the business taxes on the state and Federal levels. I also make sure to complete all requirements necessary to keep my professional licenses (i.e. my license to practice law in 2 states) in good standing, including the completion of annual continuing education courses and the payment of my annual license fees.

Though I’ve been on top of some things, I fell short in one particular area.

Like I said, when you start cleaning up, you’re bound to unleash some dirt. In my business, my big mess was my business license.

The Bad News For Me

This week I made a payment to the city for $4,047.08. I was told last month that I’d need to pay it and was given only 30 days to do it. If I didn’t pay it within the 30-day period, I’d have to pay additional funds in penalties. Four thousand dollars may not be a lot of money to some, but is a lot of money to me. Not paying attention and not being diligent in getting this handled earlier cost me heavily.

In my city, every business that operates within the city limits is required to have a business license. There may be some additional requirements (e.g., permits or professional licenses), but, at a minimum, the business should have a general business license.

I’ve known that businesses with storefronts needed business licenses (as they are usually prominently posted in the entry or near the cash wrap of retail operations). But, I didn’t come to that same conclusion for home-based based businesses and professional services businesses that didn’t require an office or storefront location that was not open to the public.

Several years ago, I was prompted to look into a business license because I was considering getting into government contracting (i.e., bidding to provide legal services to government entities). In order to be listed as a potential government contractor with the procurement departments of government agencies, a business must satisfy several requirements and provide certain documentation. Of course, evidence that the business exists (i.e., through formation with the Secretary of State) is an important one. Beyond that, there are a number of requirements, including the provision of a business license.

I began the process of obtaining the business license, but got held up at one part. When I reached out to one of the government agencies to get answers to my questions, I didn’t get much help. Because I wasn’t particularly pressed to pursue the government contracting route at that time, I let that little road block derail me. As time passed, I kept telling myself that I needed to resume that process, but I kept putting it off. Years went by and I continued to procrastinate.

It wasn’t until recently, when a client needed me to handle the business licenses for all of his businesses, that I got serious about the process again. Though it was still a bit cumbersome (in some other cities, it isn’t as complicated), the steps were clearer than I remembered them being years ago when I first attempted to get the business license.

The news for me was bad. Because I didn’t get the business license right after I originally started doing business in my city, I would have to not only pay the license fees owed based on the business’ revenues, but I’d also have to pay penalties. The penalty for failing to file each year is $500. I got lucky that the statute of limitations prevents the city from going back more than 3 years. But, even with the benefit of the 3-year limitation, my bill still ended up being over $4,000.

I got lucky that the statute of limitations prevents the city from going back more than 3 years. But, even with the benefit of the 3-year limitation, my bill still ended up being over $4,000.
~ Single Girl

How Can This Be?

How can a business owner not realize that they need to have a business license? I think that main reason is a lack of association of the physical, visible hanging license with businesses that are operated on computers and in Starbucks cafes. We’re all familiar with the slew of licenses and permits we see framed and hanging in the restaurants, stores, and entertainment facilities that we patronize. If the business doesn’t have a storefront or office, one wouldn’t readily know whether or not the business has or does not have a license. As lame as this sounds, maybe it was an “out of sight, out of mind” kind of thing. And, add the fact that, unlike businesses that have patrons coming in and out of them, a business that doesn’t have foot traffic isn’t faced with the threat that someone will call the city questioning the absence of a posted license or permit. When you don’t have a physical location for your business, the connection between those hanging, visible certificates and the legal status of the business is more tenuous. I guess. I’m not saying that’s a legitimate excuse.

With my firm, I’ve always worked either out of a home office or out of a shared office space. The office company providing the office space had a business license (again, framed and visible on the wall), but all of the businesses housed within the shared office space (including mine) did not similarly display the license. Once I experienced the hiccup in the license process years ago, I guess I just didn’t see it as a high priority.

It’s a wonder that no other client has ever needed us to handle this for them. We’ve formed countless limited liability companies and corporations, but have not, up until recently, really considered the business license process as part of our offerings. What I’ve found lately is that many people who do not run storefronts or businesses that are open to the public don’t realize that they need to have the business license.

The Bad News For You

The bad news for you is this: you probably need a business license, too. And, if you’re like many of the folks running home-based businesses and side-hustles, you probably don’t have one. You might very well be as non-compliant as I was.

For any business entity, there are a handful of critical elements:

Entity formation on the State level
The obtaining of a Federal Employer Identification Number (this should be done after the State has approved of the entity registration)
Business license on the local level (may be for the city and/or for the county)
Business permit (required for some businesses, but not all)
Professional license (required for some businesses, but not all)

To be clear: it’s not enough to register the business with the state (e.g., Jane Doe Productions, LLC). It’s also not enough to get an EIN for the business. To be fully compliant under the law, a business owner needs to take additional steps. For certain businesses, there can be a number of additional steps.

Though I don’t like it, it does make some sense. The business license requirement is, effectively, a tax – a tax based on the revenues generated by the business. The Feds get their share of income taxes. Almost all of the states (except certain states like Nevada, Washington, and Wyoming) get their share of income taxes. Additionally the states get income from annual corporate entity registrations.

Does Your City Require A Business License? Probably.

I’ve done some quick, high-level research on some major cities around the country. I found that, like my city, these cities require that any business operating within their city limits have a business license – even those that are operated out of a home. Even those that don’t have employees. Even those that don’t make any money. If you have a business, you’re probably included in this mix.

CHICAGO, ILLINOIS:

A business license is required to “conduct, engage in, maintain, operate, or manage” a business in the city. Some types of businesses are exempt from the city licensure requirement because they are regulated by the Illinois Department of Financial & Professional Regulation (IDFPR). These exempt activities appear to be those primarily engaged in by people who are separately licensed (e.g., marriage and family therapists, dentists, real estate brokers, architects, chiropractors, etc.).

If your business does not fall within the exempt category, you need a business license. Even those who are self-employed or operate home-based businesses in their residence, need to obtain a Regulated Business License – Home Occupation.

WASHINGTON, D.C.

All businesses in Washington, D.C. must be properly licensed. The license will be issued by either the DCRA’s Business Licensing Division (most businesses) or by another D.C, licensing agency. This link might be helpful.

LOS ANGELES, CALIFORNIA

To do business inside the city of Los Angeles, one needs to apply for a business tax registration certificate. This link might be helpful.

CHARLOTTE, NORTH CAROLINA

In Charlotte/Mecklenburg County, all businesses need a business license (aka a “Privilege License”) – even those that are home-based. This link might be helpful.

Though the cities require that the business get the license or certificate, not all of these cities require that a business owner actually pay the tax. Since the tax is typically based on gross revenues, for business that make below a certain amount, a payment exemption may apply.

It Hurts, But It Needed to Be Done

Paying this damn $4,000 bill with only 30 days’ notice really put a dent in my business bank account. I’m so not fired up. Where I went wrong was in not filing for the license earlier – as soon as I started doing business in the City. If I had done it that way, I would have been paying this tax for a longer period of time, but I wouldn’t have had the shock of the lump-sum $4,000 payment.

Frankly, if I hadn’t affirmatively reached out to the city to go through the licensing process, there’s a chance that the city may not have ever said anything to me and I may not have ever had to pay the bill (or the annual bills that I will continue to pay, moving forward). But when you want to have your affairs in order . . . you need to get your affairs in order. Not having the license was the missing piece to being able to say that my business is fully legal and is operating in full compliance with the law. I’m glad that I can say that now.

One more business mistake down . . . more to go.

Will My Home Vaporize My Debt Snowball?

November 10, 2019 by tanya

Audio version of this post, read by the author.

I’m grateful that I have some equity in my condo. One day in the future, I’ll be able to reap the benefits of that. In the meantime, this home of my mine is putting a significant obstruction in my debt free plan.

Condominium Special Assessment

I’ve previously mentioned that my HOA Board is planning to issue a special assessment for the replacement of the roof on our building. Each unit owner must pay his or her proportionate share of the cost of the roof replacement, based on the size of their unit. This wouldn’t be a big deal if I lived in a highrise with plenty of units. Given that our building only contains 14 units, however, the projected cost of the roof on a per unit owner basis is several thousands of dollars.

When the initial projections for the roof were first presented, I was told that my portion to pay would be around $6,000. At our HOA meeting earlier this week, I learned that my contribution will be closer to $8,200. The HOA Board wants to ensure that we add some financial cushion to account for any construction overages or unexpected costs. As we all know, construction projects typically go over budget and the Board wants to ensure that we don’t end up in a bind to cover the entire cost when it comes due.

Each unit owner is supposed to be ready by February 15, 2020 with the first half of our portion of the payment; the other half is due 3 weeks later, during the first week of March, 2020. That gives me 3 months to come up with $8,200.

That gives me 3 months to come up with $8,200.
~ Single Girl

As someone who is following Dave Ramsey’s baby steps, I only have $1,000 in a baby emergency fund. In anticipation of the special assessment, I started putting money aside to be prepared to make the payment. I saved $1,000 last month toward that end. I also reserved some of the money I earned from my recent commission and put it into my sinking fund for home repairs. Currently, the account holds $2,058. In my budget for November, I’ve allocated $1,000 toward savings for this as well. So, as of the end of this month, I should have around $3,000 towards the $8,000 I’ll owe.

That gives me 3 months to come up with the $5,200 balance.

The HVAC Unit Strikes Again

Last weekend, I discovered that my HVAC (heating, ventilation and air conditioning) system went out. Completely. The thermostat wasn’t displaying anything and the unit wouldn’t heat or cool. Given the time of year this is, my heat was the main concern. I think that because half of my walls are brick, I don’t experience significant temperature fluctuations. Plus, we have both electric and gas service in our units. The oven is operated on gas. Gas payments are covered in my monthly HOA dues (which is the same payment every month). So what did I do? To warm my place while my HVAC was out, I’d heat the oven to 450 degrees then open it up and let the heat escape. I kept the oven on for as long as I needed the heat.

In September, the problem with the HVAC was that it wasn’t cooling. I spent $419 ($169 over what I budgeted) getting a short-term fix for that issue. This time, I had no idea what the problem was. My biggest fear was that it had totally died on me and that it would need to be replaced entirely.

I got a referral from a friend for one of the maintenance guys who does work at the apartment complex in which she lives. Because I’m really watching my coins, I wanted to get as low-cost a diagnosis as I could. If the issue was a major one, I’d then be more inclined to have the work done by a larger company – one that would be bonded and insured and could provide a formal warranty for their work. But, since this was a totally unexpected (and un-budgeted for expense), I needed it to be low-cost. Usually the lower-cost folks are those who do maintenance and construction work as a side hustle to their main gig.

I was happy to learn that the problem with the unit was a blown fuse. The maintenance guy changed the fuse for me and got the unit back to work.

Total cost: $100.

Water Heater

While the maintenance guy was on top of my bathroom diagnosing the HVAC unit (remember, my HVAC sits atop my bathroom), I asked if he could take a look at my water heater. A couple of weeks ago, the hot water in my shower started acting weird. The water gets hot, but it doesn’t get hot until I’ve turned the lever almost as far as it will go. Then, the water doesn’t stay hot for very long after that. (I’m no Jennifer Anniston, with her 3 minute “protect the environment” showers. I like to take long showers. Fortunately, water is included in my monthly HOA payment.)

The maintenance guy told me that my water heater is on its last leg and explained why my water isn’t getting and remaining hot like it should. He said that, if he were me, he’d replace it immediately. “I’m a budgeter,” I said. “I’m not going to be able to replace it this month.” He thinks I may have a month or 2, at most, before it completely goes out. I’ll wait a little longer.

Total cost for diagnosis: $20 (plus, I tipped him an additional $20).

The Plan

I have adequate space on my credit cards to cover both the cost of the special assessment and the water heater replacement. Plus, the HOA Board is considering allowing owners who are suffering a hardship to borrow from the HOA reserve fund, so that they have more time to come up with the money. I’m officially 102 days credit sober; borrowing the money for this in any kind of way is not an option.

For the HOA assessment, I’m deciding whether to put my debt snowball on hold over the next three months and save the $1,700+ per month that I need to cover the $5,200. It is possible that I may close on a small real estate deal between now and then, so I may get a couple of thousand dollars through that, which I could also use toward the assessment.

I plan to have the water heater serviced by the maintenance guy who is side hustling because (1) I was happy with his professionalism and his willingness to really take the time and effort to diagnose my problem, (2) I think his prices will be cheaper than most and (3) he thinks he may be able to get me a discount on the water heater. He said that a water heater like mine (a 40 gallon) should cost between $400 and $500. For labor, he would charge me $200, including picking it up for me from Lowe’s, Home Depot or wherever. Of course, I’m going to do my research on what the water heater and the associated labor should cost before making a final decision. I’ve got to look at the numbers for next month to determine whether or not I should move forward with it in December or January.

Broke + Homeownership = No Bueno

I cannot stress enough that a broke person should not own a home. When these expenses come up, you have to find a way to pay for them. And, clearly, these expenses can be significant.

Granted, I’m delighted that I have equity in my home. But that equity isn’t money that is accessible. I don’t plan to sell my condo for a few years, so, while (hopefully) my equity continues to grow in the upcoming years, I’ll be paying bills on this place all along the way – while trying to get rid of my tsunami-sized debt.

Geez, $8,900 could do A LOT for my debt snowball. But, I recognize that life continues to happen while on a debt free journey. I also have to remember – things could be a lot worse.

Thou Shalt Cook – A Debt-Free Commandment

October 17, 2019 by tanya

(Sigh) I’ve been messin’ up.

Last week, I made a few mistakes: (1) I didn’t bother to meal plan (2) I went to the grocery store without a list and (3) I didn’t cook the meal I had planned to cook.

Audio version of this post, read by the author.

The result: I’ve not been eating very healthy and I’ve been buying take-out. Would this be a big deal for most people? Of course not. But, I’m not most people; I’m quite exceptional – exceptionally fighting through the torrential rains of a nightmare storm I’ve created for myself. Translation: I’m too broke to do this type of stuff.

Up to this point, I was doing so well. For over 3 months, I was consistently setting aside time every week to figure out what I’d cook to eat over the upcoming 6 days. With a budget of $25 per week for groceries, one has to make plans, think things through and prepare a list. After having prepared, I’d go to the stores I needed to go to with my Out of Milk App at the ready, and would purchase the items I needed. Even with my small food budget, I still ended up going to multiple grocery stores. Unfortunately, one place doesn’t have everything I need at prices that make sense.

I was sure to set aside time to cook and store meals that I could quickly put together during my usually busy week. I always made a huge salad. Throughout the week, I’d take a little bit of it out of the big bowl, put it in a smaller bowl, add the dressing, then toss and serve. I also prepared two meals that could warm well in the microwave. Lastly, I’d put together a small snacky kind of item – something I could grab a little bit of when I just wanted to nibble on something. Usually, this is tuna. I can just spoon a little bit of it out of a container and have it in between meals.

My shopping list primarily consisted of vegetables, beans and some form of turkey. As I’ve said before, I have a very limited diet. I’m gluten free and dairy free. When it comes to animal-based proteins, I only consume seafood and turkey. (People often ask me why I eat this way. I’ll explain in an upcoming post.) Prior to getting serious about becoming debt free, I usually ate seafood and rarely ate turkey. Remember, I was the queen of the white tablecloth restaurants. When I sought to be frugal or to cut back on spending, I’d buy fresh salmon, shrimp and crab legs from the grocery store. Those days are over. Aside from canned tuna or salmon, I have eliminated seafood from my grocery list completely. It’s much too expensive. Turkey is cheaper and goes much further in a range of different dishes during the week.

So, last week, on the heels of what had been a super busy prior few weeks, I decided I’d just go pick up some stuff from one grocery store – a store that I’d been meaning to visit. I didn’t feel like meal planning. I didn’t have any food in the fridge and I knew I’d need something soon.

The plan was to go into the store and buy the stuff I usually buy – vegetables for salad, turkey, maybe some beans, maybe some tuna. I don’t need a list for that, I reasoned. I know what I usually get.

MIstake. Mistake. Mistake. What did I end up buying? Oh, let me show you.

Gluten-free bread ($4.99!)
Strawberry fruit spread ($3.79)
Cotton Candy grapes (these grapes, which really do taste like cotton candy, are the best grapes in all the land, but I had no business buying them because they are $3.99 per pound)
Dairy-free yogurt (2 at $1.59 per cup)
French vanilla granola (a ¼ pound at $5.49 per pound)

A bought a couple of other small things but the items above were the ones that should not have happened. The grand total for this grocery store visit was $24.84.

That’s not a bad total. Frankly, my foray into No Shopping List Land wouldn’t have been that big of a deal if I had just done what I told myself I would do – cook a meal, using what I had in the freezer and in my pantry. That would subsidize the stuff that I bought from the store. Did I do it? Nope.

As the weekend progressed, I couldn’t convince myself to cook. I didn’t feel like it. I told myself that I’d just have to eat peanut butter and strawberry fruit spread sandwiches all week (which is something I don’t normally do because I don’t usually have gluten-free bread in the house). The problem is that there weren’t enough slices in the gluten free loaf that I bought to feed me for a week.

Instead of cooking, I went on a lovely date with Mr. Nice For Now and spent the majority of the rest of the weekend working. I kept telling myself that I should go ahead and cook the rice and spinach that I’d need to eat throughout the week because the turkey was already gone and the loaf of bread would be gone soon, too. The yogurt and granola were almost gone as well.

My desire to cook during the week continued to wane. So what did Single Girl do? I justified making stops for food at quick service restaurants here and there throughout the week. I say that I “justified” it because I was in a position to buy the prepared food without, technically, breaking my October budget. I had some funds in a separate account that were surplus funds for the times that I didn’t spend all of my allocated pocket change for the month or had not fully spent the funds allocated for a different discretionary item. There was a little bit of money sitting in that account, so that’s what I used to support my fall off the wagon.

I’ve been reminded that, in order to succeed on this journey, one has to be diligent in staying focused, in following routines, and in developing habits. I fell off the wagon and I’m feeling the consequences of that.

I’ve learned 4 key lessons:

1. Cooking Is Not Optional

For where my life is right now and what I’m working on, I don’t have the option to not cook. I cannot use busyness as an excuse; I cannot use work as an excuse. It needs to be a permanent part of my lifestyle. It seems that I’ll need to start being a bit more creative in what I cook so that I feel like I’m getting a little bit of variety. But, not doing it at all just isn’t a step that I can take.

There must always be something in the fridge or on hand that I can put together quickly, so I that I don’t feel inclined to just pick up something while I’m out. With my diet, I can’t eat cheap, quick things like dry Ramen or regular bread, so I’ve got to be intentional about having meals and snacks on hand for those times that I’m feeling tired or pressed for time.

I’ve also got to remain prepared with foods that I can take with me when I won’t be at home working. What I typically do is put some tuna in a glass container, along with a couple of ice packs in my lady-style lunch bag. I take that with me when I’ll be moving around. Even that takes planning and preparation.

2. Keeping A Routine Is Essential

My falling off the wagon isn’t my biggest concern. Staying off of the wagon, however, is. As James Clear says in his book Atomic Habits, imperfection is inevitable; the key is to get back on track as soon as possible.

The first mistake is never the one that ruins you. It is the spiral of repeated mistakes that follows. Missing once is an accident. Missing twice is the start of a new habit.
~ James Clear, Atomic Habits

I’ve got a long debt repayment road ahead of me, so I must routinize money-saving activities. Since having food to eat is a multi-step process (meal planning, grocery shopping and meal preparation), I have to make sure that I have a routine – a strong set of habits – around each of the steps involved.

3. Allocation of (and Commitment to) Making Time Is Necessary

I’m literally, going to start blocking off time on my calendar for the activities surrounding my meals. Otherwise, I’ll let other things seep into the time I need to get this stuff done. It wasn’t that hard for me to fall back into old habits because living this way is still fairly new to me. With every week being different, I’ll probably designate certain days for certain activities, giving myself some flexibility on the time of day that I will do each item. For example, prior to my tumble from the wagon, I did my meal planning on Thursdays, my shopping on Fridays and my cooking on either Saturday or Sunday. When my most recent tennis season started, much of my Sunday afternoons became occupied with tennis matches. So, perhaps my cooking day will be Saturdays, when I have Sunday matches and Sundays when I don’t.

If I were trying harder to meet men, I’d do my shopping on a weekday evening, right around the time that the fellas get off work and are in the store picking up their dinner. They’re usually in the deli area or near the hot foods bar. I’ve been going to the stores on Friday afternoons and evenings because I like being in the store when there aren’t as many people around. And, I hadn’t been all that pressed to meet any one. I’m thinking that I’ll change my program soon; I’m starting to feel a greater desire to meet more people. I’ll probably change my shopping day to a day and at a time when I might be more inclined to see something I want to see. :0)

4. I’ve Got to Streamline the Process

I like the Out of Milk app that I’ve been using and will continue to use it for my shopping list and for the tracking of the costs of different grocery and household items. I feel that there’s room in other areas of the process to streamline and make it more efficient – especially during those super busy times and when I don’t feel like doing the work. One way to do that might be to focus on making more crockpot dishes. Given the time of year, stews, chilis and soups would be a great meal choice.

My Recommitment

Even though I didn’t, technically, break the budget, I spent more money than I needed to. What’s worse is that I didn’t even really enjoy my shenanigans. I didn’t have that much money to spend, so I had to go with low-cost, quick food that I don’t even particularly like. Chipotle isn’t bad; it’s just not my preference.

Plus, I want to be deliberate in the choices that I make. So, if I’m going to have a freestyle kind of week, I want to have made the active choice to do that, without feeling any reservations or guilt.

Will this one week of freestyle foolishness be highly destructive? No, of course not. If I were to continue on this pattern, would it sabotage my aims? Absolutely. I’m committing to getting back on track.

Homeownership: A Speed Bump on My Debt Free Journey

September 22, 2019 by tanya

Though I knew this debt-free journey wouldn’t be completely sans obstacle, I didn’t expect to get challenged so quickly. I’m just barely getting started! This week, when I was presented with some major home maintenance costs, I was reminded that this road will not be smooth.

Audio version of this blog post, read by the author.

“When you own a home and you’re broke, it is a curse financially. Homeownership by broke people makes them broke-r.”
~ Dave Ramsey, Dave Ramsey Show

I totally understand why Dave Ramsey suggests that broke people not buy houses. I also am completely on board with the reason Robert Kiyosaki encourages us to not view our principal residences as investments. When you are not renting, home care and maintenance costs are your own responsibility. When something isn’t functioning properly or breaks, the homeowner usually must identify and pay a service provider or fix it themselves. No leasing maintenance department will come to the rescue. Unlike an apartment dweller, a homeowner can’t just make a call and schedule service – at least, no broke homeowner who doesn’t have money in the bank. As Kiyosaki states, unlike a true real estate asset, my residence doesn’t produce income. I pay to live here. Until I eventually sell, assuming that the value continues to increase, I won’t see the true upside. I’m not complaining, because I truly believe there will be a financial upside to owning this condo (see below). I’m just saying that I can see things for what they are.

“If all your money is tied up in your house, you may be forced to work harder because your money continues blowing out of the expense column, instead of adding to the asset column, the classic middle class cash flow problem.”
~ Robert Kiyosaki, Rich Dad, Poor Dad

While I like my space and the convenience of my downtown location, this thing comes with responsibilities, beyond the mortgage payments (1st and 2nd mortgages, totaling $1,045.41 per month) and the HOA dues ($282.43 per month). Since I’ve moved back into my condo late last year, I’ve been very strategic and thoughtful about the handling of maintenance. I spent most of 2018 living in a high rise luxury apartment in a different area of town – an area in which I’ve wanted to experience and reside in for years. I called it my little “experiment.” It was an $1,850 per month (for a 1 bedroom!) experiment. I leased my condo to a tenant during that time for $1,620 per month. As the end of my lease and the lease with my tenant neared, I decided to move back into my condo. Though I would have loved to stay in my high-rise luxury apartment with concierge and valet dry cleaning services, I was coming to terms with the reality of my financial situation, and I moved out of the apartment and back into my condo.

Thankfully, Single Girl has generous man friends who prove themselves to be helpful. When I moved back into my condo, a friend of mine kindly (and without solicitation) bought me a new stove, 2 new ceiling fans, and a couple of other fixtures that needed to be replaced. (Yes, this was truly a friend. Though he expressed an interest in dating, we weren’t dating and weren’t physical in any way.) In recent weeks, my ex (who has been my friend since I was a child, and a friend for way more years that he was ever a boyfriend), fixed my dishwasher. I would have had to replace it, were it not for his determination to figure out what was wrong with the 19-year-old thing. About a month ago, Mr. Nice For Now fixed a leak I had in my toilet. He discovered the source of the leak, went to the store the next morning to buy the necessary part, then installed it for me. Whew! Thank God for man friends!

Before I even get into the recent home-related expenses being thrown my way, let me say that my mortgage payment just recently increased by over $200 per month, mostly on account of significant tax increases on both the county and city levels. Since my lender requires that tax payments be escrowed, I pay the increased amount every month, as tacked on to the principal and interest charges for my 1st mortgage. Apartment dwellers don’t usually experience such a significant increase in rent. For those of us who pay property taxes as homeowners, these kind of increases can occur.

New Issues On The Homefront

(1) The Air Conditioning Unit

This week, I was presented with bigger issues than a toilet or dishwasher. Lately, my air conditioning unit has not been cooling as well as it should. A new A/C unit was installed about 7 years ago (cost: $6,500, but Single Girl’s boyfriend at the time owned a construction company, so she didn’t end up paying for any of it), but I haven’t had it serviced since then. Sure, I’ve had the filters replaced, but haven’t really had someone come to inspect it and see if anything needed to be fixed or adjusted on it. Part of the reason it hasn’t gotten as much attention as is probably should is that part of the thing is located on top of my bathroom and the other part of the unit is located on the rooftop of our condo building. There’s no ladder or fire escape that goes to the rooftop, so it’s always a production when any service provider needs to get up there. With the unit not cooling well lately, I decided to get someone to come out and look at it.

The A/C unit is the big green thing on the left side at the top of the image. It sits on top of the bathroom.

The air duct over the bathroom connects to the A/C unit.

Long story short: the first provider I had come and look at the unit tells me that the unit has a leak (although he doesn’t know exactly where it is) and that the unit is extremely low on coolant. The coolant is $95 per pound, and it looks like I’ll probably need at least 3 pounds. There are some other issues with the unit, including some rusty coil thingamajiggy. All in, the costs look like this:

Leak Detection $430.25
Leak Seal $207.90
Coolant $95.00 per pound (3 pounds = $285)
Replacement Coil $2,550.00
TOTAL $3,473.15

Or, as the technician suggested, I should just consider replacing the unit entirely. As I mentioned, a new unit would be somewhere between $6,000 and $7,000. I paid the provider $99 for the cost of diagnosis and sent him on his way.

I usually get more than one quote when I’m having work done, so I got a referral from Mr. Nice for Now. His guy had much better news. To my delight, he didn’t even mention the possibility of replacing the entire unit or the rusty coil thing. He ended up putting 4.2 pounds of coolant (his price was only $55 per pound) into my unit, which should get me through the remainder of the summer and into the early part of 2020. This will buy me some time so that I can properly plan and save up for the fixing of the leak. I ended up paying him $320 for the diagnosis, the coolant, and the labor associated with putting the coolant in the unit. The system is now cooling well.

For September, I only budgeted $250 to diagnose the issue. I ended up spending a total of $419. To cover the budget shortfall, I took some money out of a sinking fund I have designated for personal care.

(2) Condominium Special Assessment

I also received news this week that I need to be prepared for a multi thousand dollar special assessment by my condominium association. Our building needs a new roof. Though we’ve known that the roof would, eventually, need to be addressed, we didn’t realize that it would need to be addressed so soon. Over the years, we’ve had it patched and repaired in pieces only to find that our patchwork approach caused additional damage. At this point, several of the units in the building (not mine, though) are experiencing leaking whenever there is a heavy rain.

In our homeowners’ association (“HOA”) meeting this week, the HOA Board presented potential solutions to the roof problem. The roof is going to cost $90,000 to replace. There are only 14 units in our building. Do the math on that. Each unit owner is going to be responsible for over $6,000 for this roof! The primary solution the Board is proposing is a special assessment for each owner’s proportionate share of the roof replacement. The Board is going to present more details in the upcoming weeks, including how payments can be made on this.

Single Girl, Why Don’t You Just Refinance?

The current Zillow value of my condo is $277,128. I owe $107,649 on it. Given the amount of equity in the home, one would think it would make sense to refinance and pay off about $150,000 of my debt.

(1) The terms of my modification would require that I share the “income” with the bank 50/50. Several years ago, I modified my loan. It was at a time when the market was still way down and people were buying similar units to mine in my building for less than half of what I paid. Since I’m a lawyer, and I actually read some things, I saw that the terms of my modification required me to hold on to the property for a number of years before selling or refinancing. If I didn’t wait for the requisite period of time, I would have to split any sale or refinance proceeds with the bank. I’m not willing to do that. I’ll just wait. The time period expires in 2021. That gives me time to continue to work through this debt repayment journey.

(2) I wouldn’t want to encumber my home on account of credit card debt or car debt. If I were to default on my credit cards, the credit card companies couldn’t foreclose on my home.

(3) I don’t want to use any of the equity in my home to help me clean up my mess. I want to use the next several years to develop the habits that I’ll need in order to have a productive and healthy financial life, moving forward. I want to use this time to become disciplined about using a budget, become accustomed to making sound financial decisions, and planning for the future. When I sell my home, I want that equity to be a gift to myself for working hard and taking my debt free journey seriously.

Now I’ve got to figure out how I’m going to come up with the money to cover both the assessment and the repair of the air conditioning unit.