Choices

What made it easier to transition to my new status as unemployed?

We lived below our means.  Our lifestyle choices made it easier.   We had taken certain steps years earlier, when we were both starting our careers, that have given us the financial flexibility and ability to deal with this blow.  We have always lived below our means, and so we were not dependent on both of our incomes to make ends meet.

What did it mean to live below our means? 

When I mentioned our lifestyle choices, there are several components and categories.  There are so many choices.  Housing.  Variable expenses.  It's very easy to spend A LOT in Silicon Valley or anywhere for that matter.

• Housing - in Silicon Valley, housing is a major expense.  In certain cities, the average cost of a home can be more than $1 million!  Cities such as Palo Alto, Los Altos and Cupertino have averages that exceed $1 million.  How can an average person afford a house?  Most people I know stretch quite a bit to afford a house.  

• While we bought  a house quite a while ago, housing was still quite expensive.   While we looked at houses in Los Altos and Palo Alto, there just wasn't that much value.  The houses were just too expensive (the cheaper houses didn't have the square footage we wanted, were older and required quite a bit of work) and our monthly mortgage would take up too much of our net income.  After paying the mortgage on these houses, we would barely have enough to cover our other expenses.  It made me think about the housing/mortgage industry and how it does not have our (the consumer) own interests at heart.  Real estate agents want us to buy the most expensive house possible so that they can get a bigger commission.  Mortgage companies say that one could get a mortgage that represents up to 30% of our gross income (they get more interest), but in my opinion, that is much too high.   

• Ultimately, we chose to buy a more modest house.  We ended up looking at houses in more affordable areas like Santa Clara, San Jose and Willow Glen.   I just wasn't comfortable stretching our budget too much to buy a house.  I wanted a mortgage that one income could support.  We made this decision based partly on our other goals:
• Family - we knew that we want to start a family and thus other expenses would need to factored into our plan (childcare expenses, saving for college, etc.).
• Retirement - both of us were conscious of the need to save for the future.
• Standard of living - we weren't really willing to sacrifice too much just to have a house in a certain zip code or have a house that had all of the bells and whistles. One thing that we realized is that real estate taxes are also quite high.  The more expensive the house, the bigger the tax bill. 

 It's a funny thing when I think about housing expenses.  I know a lot of people who had stretch quite a bit to buy a house.  Maybe it was because they wanted to live in a certain school district or maybe they just wanted a big "show" house, but to see their day to day struggle to pay the mortgage (in addition to their other expenses to keep up with their desired living standard) just made me feel as though I made the right decision. 

Funny thing is (or, really not so funny), it's a vicious cycle.  In some ways what makes us want to keep up with the mythical "Joneses"?   Once you live in a certain "prestigious" neighborhood, there is there pressure to keep up appearances.  Once you have a "nice" house, you'll need a "nice" car, and "nice" furniture and then go to the "right" school or preschool or even private school, and it's endless. 

 I think this is the main reason why even with my being laid off, we'll be fine.  By living below our means, it makes it easier to live without both of our incomes.  If we had spent all of the money that was coming in, then we would become dependent on ALL  of our income and any reduction would be a problem.   It would be difficult if not impossible to save.

However, by living below our means, we got used to living on a certain income.   Also, since we had the habit of saving, we have a cushion to lessen the blow.   I realized that there are so many demands on our money.  It's a finite resource and should be respected.  Balance.  That's what's needed.  Balance of wants and needs and a healthy dose of realism.  Yes, I would have loved to live in a really nice house, but was I willing to deal with the sacrifices to live there?  Would I want to deal with the stress to make enough to pay the mortgage month after month after month?  How would I deal with other expenses, such as childcare?  Would I be limiting my options in the future? Would I feel stuck if I had such a huge mortgage?  In the end, there were too many doubts and common sense prevailed.  I still think about the houses that could have been, but I'm so much happier now in my house.  It may be modest, but it's still my home.

We created a habit of saving.  This is part of living below our means.   We have saved and save consistently.  This now gives me great comfort during this uncertain time because now we have a bit of a safety cushion to manage any contingency.

We invested in our future.  We had always saved for our future by putting money into our 401(k) accounts (at least to maximize our employer match and then some). 

We avoided debt.  Don't get me wrong.  We still have credit cards, but we paid them off in full each month.  The interest rates were just ridiculous and if I couldn't afford it, I just waited until I saved enough so that I could pay it off by the time the bill came. 


  

My Unemployed Life

Besides analyzing my expenses and potential income, how did I deal with being unemployed?  It's a strange feeling, being unemployed.  I was so used to getting up each day to go someplace, and now, I didn't have any particular place or schedule to follow.

My feelings varied each day.  Sometimes I would be so anxious and wondered whether I would be able to find a job easily. Other days, I wanted to take a step back and just take some time and enjoy the break.  It was like an internal war was going on inside of me, which caused even more anxiety.  My mommy side, which wanted to take a break from work to focus on the kids was at odds with my career side, which wanted to continue to progress and find a job right away.  My feelings towards one side or the other ebbed and flowed constantly.  I couldn't put either side to rest completely, maybe because I wasn't convinced about what I wanted to do.  Was there a compromise between these two polar positions? 

I was worried that if I didn't start looking right away, that I'd lose an opportunity.  To which my friend replied, you'll find another opportunity.  However, I knew that I'd kick myself if I did find a job right away and didn't take the opportunity to take a break.  But, if I did take a break, I knew that I just would not be able to relax completely.  I. can. not.  let. go. easily.....  I had been working in the tech industry for over ten years.   The hours and pace were pretty intense and it was hard to just go from 60 miles/hour to a sudden standstill.  That was it.  I felt like life was at a standstill and it was not a comfortable feeling.  I was used to moving forward.  Also, I was used to a routine.  It's a bit jarring to not have a routine.  I am a bit of a creature of habit and not having a routine was a bit disconcerting. 

I find it hard when there are too many choices.  I also felt a bit guilty.  Worrying about "choice" and the fact that I had a "choice" is a luxury.  This was something that I was aware of and appreciated.  Also, why did I feel as though I could only move "forward" if I had a job and there was progression in my career?  Could or would I feel as though I'm moving forward if I focused on other areas in my life that were neglected?  Could I explore other options and maybe do something different?

Most of my friends encouraged me to just take a break and not look for a while.  I knew that I should really take this opportunity, but it was hard.

What did I do those initial few days while unemployed?  I was giddy.  I went shopping.  I reveled at the lack of lines at stores.  I spent more time with the kids.   I was also very anxious.  I wondered about the future.  I had long-term plans and being laid off was not part of the plan.

I could, however, choose how to react to this event.  Not to be too simplistic, but one could take this positively, like an opportunity, or negatively, like an disaster.  I guess it could be seen as both, but generally, I wanted to see this as an opportunity.   I understand that not everyone can see things this way.  What made it easier for me to see this as an opportunity? What made it easier for me to be able to make a choice about what to do?

Tracking Food Expenses - October 6-12

Last week, I tracked how much I spent on food at the market.  Here is the breakdown and the stores that I went to.


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Week	Store	Amount
October 6-12	Farmer’s Market	$23
	Whole Foods	$44
	99 Ranch	$4
	Costco	$54
		Subtotal:	$125

I was pleasantly surprised by the amount that I spent at Whole Foods, which was pretty reasonable.  Because I had gotten most of my vegetables and fruits for the week at the farmer's market, I only needed to get a few staples at Whole Foods.  Foods like milk, bread and some meat.

This week I got some bread, lunch meat, ground turkey and some pork chops, some vegetables that I couldn't find or had forgotten to get at the farmer's market, yogurt and some milk.   I knew that I was going to go to Costco, so I held off on buying some meat.

Costco is such a dangerous place to go to when you're on a budget or trying to control costs.  So full of temptation.  I always end up buying more than I had planned for.    We needed a few things like coffee, olive oil and some chicken breast.   Other than some organic raspberries, I pretty much stuck to the list, which made me pretty happy.

This week, I also made lunch for the kids.   I just have to set the expectation that I will make lunch for them once a week.  

Cash Flow Review - Other Expenses

While food was and is a major expense, I started to think about our other expenses.  There were still other major parts of the budget, mainly related to housing and other general expenses.  While I will get to what we did about our housing expense (mortgage), I wanted to focus on the variable expenses.

Did our expenses go down?

I think that this is a natural consequence to the loss of income, but I no longer felt the desire to go shopping or buy things.  I was no longer tempted by the emails promoting sales/discounts/incentives.  I was never much of a mall rat and now I had no desire to troll the mall. 

There was a change in mindset.  I was more focused on buying things that were "needs" as opposed to "wants".  Before, I was either so stressed or bored at my job that I engaged in a bit of retail therapy.  At the time, I got a lot of "wants".  I "deserved" it because I was working so hard or I bought some things for the kids to alleviate the mommy guilt.  As if material things could replace the time that I wasn't spending with them.  I just got what I/we "wanted" and occasionally a "want" purchase became a "need" purchase.  Somehow I just justified the purchase.  I tend to be pretty frugal and I usually buy things because we either needed something or I was anticipating a need, but now, I only buy what we actually need and it had to be an immediate need.  It turns out we don't actually "need" much.  Other than a new pair shoes for some growing feet, I haven't had to buy much.

What else went down?

• Commuting expenses- since I wasn't commuting everyday, our gas expenses went down significantly and didn't incur any more bridge toll charges, which were infrequent but necessary sometimes.

• Extended care charges - now that I could pick up the children right after school, we didn't have to incur any extended care charges.

• Food/Restaurants - we just didn't eat out as often and if we did choose to go out, we went for low cost options.  

• Clothing - I didn't have to buy any more clothing to match the style of my office. 

 Did any expense go up?

Surprisingly, some expenses actually went up (wrong direction), but these expenses were not significant and did not undercut some of the savings above too much.

• Telecom/Phone -  Since I was mainly using my work phone, I now had to get a new plan.  Luckily, I didn't have to buy a new phone and I could use an old phone that I had lying around. Also, if I found a job sooner rather than later, I knew that I would likely get another work phone and so I didn't want to commit to a long service plan.  I settled on a monthly pre-paid plan.  There are limitations, but I was willing to live with them.  The data limit was a joke, but at least I could still use Wi-Fi.    I mainly wanted to use this phone for emergencies and this fit the bill.  The minutes limit was quite high and I knew that I'd never hit this limit.

• Gym -  They say that after a layoff, once should create a routine.   I decided to join the gym.  No better time than the present to get back into shape.  I was still being a bit picky though. I wanted certain amenities - pool, newer equipment and more importantly, a low monthly fee.  I wanted to be able to de-commit at any time.  Luckily, I found a place.

Cash Flow Review - Tracking Food Expenses

Farmer's Markets

This weekend, we went to the farmer's market.  I love going to the farmer's market.  It's a chance to get outside and I've been going for a while, so I'm familiar with the format and the ware at each stall.  I frequent certain stalls and I'm getting to know some of the vendors.

Today, I spent a total of $23.  What did I buy?

Bunch of broccoli
Cauliflower
bunch of green onions
bunch of kale
bunch of bok choy
3 green pluots
large bunch of Thompson grapes
3 lunchbox size Fuji apples
4 large beefsteak tomatoes
celery
3 large onions

Not a bad haul and all of the produce was either organic or pesticide-free (according to the vendors).  I had enough fruits and vegetables to last us the entire week.     I usually buy certain fruits and vegetables, but sometimes something inspires me.

I then planned my menu for the week.  Usually, I buy certain vegetables and they are staples and I can usually work around what I buy.  This week, I was inspired by the bunch of kale.   Since the weather is getting colder, I thought that I should make some sort of soup or stew.  I'll need sausage.

Now I needed to get meat.  I'll need to get some pork chops, ground beef or chicken, chicken breast and some sausage.    I've had bad luck with the sausage at Whole Foods, so now where will I get some good, fresh sausage for my soup or stew?

Post Restructuring Cash Flow Review - To Buy or Not to Buy Organic

Should I continue to buy a product that is on average 50% higher (or more often twice as much)?  That's the question I started asking whenever I wanted to buy organic products.   Even if I limited the products that were organic based on EWG's shopper's guide to produce, they were still a significant expense.  Was it worth it?  To me, it was.  

What does it mean to be organic?

According to the USDA's National Organic Program, "organic" means:

"Organic is a labeling term that indicates that the food or other agricultural product has been produced through approved methods that integrate cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity. Synthetic fertilizers, sewage sludge, irradiation, and genetic engineering may not be used."  (See reference here). 


Why did I want to continue to buy organic food?    

A recent study came out where the researchers compared organic food to conventional foods.  They found that the organic food didn't have any more minerals or vitamins than their conventional counterparts.    The study noted that all pesticides found (some were actually found on organic produce but in smaller amounts) were within safety limits.

To me, the article by Brian Fung of the Atlantic in his piece "Organic Food Isn't More Nutritious, but That Isn't the Point" summed up my feelings the best.   I didn't expect organic food to be more nutritious (although milk was found to contain slightly more omega-3 fatty acids), I primarily wanted to avoid the consumption of pesticides, hormones and other additives and exposure to potentially to harmful bacteria.    Also, I believe in sound farming practices and thought that the best way to support this was to continue to buy organic food.

Why was buying organic so important to me?

My kids.  My kids were still young and I wanted to ensure that what they ate wouldn't have any potentially detrimental effects on their development.    They have smaller bodies and they were still growing.  Studies haven't been done to gauge the potential and cumulative effects of these contaminants on young kids.   Buying organic is a big commitment though, especially when it comes to buying organic meat.  Organic meat is particularly expensive, but I also wanted to avoid meat from animals that had been treated with antibiotics because I wanted to limit their exposure to drug resistant bacteria or other pathogens. 

I try to save money buy buying organic food in bulk from Costco (organic chicken breast is about $5.99/lb and they generally have organic raspberries and strawberries on sale).  Whenever I go to Whole Foods, I buy only as much as I need.  Also, I frequent stalls that sell organic produce at farmer's markets.

Post Restructuring Cash Flow Review - Using Coupons and Store Loyalty Cards

How will I tackle the food expense?  How will I lower it?  Should I start using coupons?

I have to admit.  I was not a regular coupon user.   Whenever I went to the store, I typically just stocked up whenever I saw a good deal on a product that I typically bought.  I was a creature of habit and had bought enough of some products that I knew the sales cycle.  For instance, whenever pasta sauce was on sale (like 2 for $6), I knew that should take advantage and buy a few jars of sauce.

After the restructuring, I was wondering whether I should look more closely at coupons. 

Use Coupons?

Should I start using coupons more frequently?

I have never really been a big fan of most coupons found in the newspaper or sent to our home.  They were for products that I didn't use and I thought that these products were generally overpriced.   Occasionally, I would see a coupon for a product and take the time to actually cut clip them, but then I'd forget about them whenever I was at the store.

Store Loyalty Cards

Besides the creep factor from giving a company insights into my purchasing decisions, I find that store loyalty cards save me quite a bit of money.   I guess there has to be some give and take to get a deal.  I shop regularly at Safeway and there are too many deals that are available to club members that are not available to non-members.  Also, I found that if I registered online, I could sign up for "just for U" digital coupons that give me discounts on products that I typically purchase and some other special ones as well.

I think that getting a store loyalty card is only worth it if you shop there frequently enough and where you buy things you actually need.  I have enough cards in my wallet, I don't need any more and there has to be a compelling reason for me to use another card.

Also, like anything, you don't get a deal if you don't actually consume or use the product.  One problem with shopping at most stores is that I'm constantly bombarded with "deals".  I've learned not to get tempted.  Unless the special is on a product that I need and/or typically use, I just walk on.  

Post Restructuring Cash Flow Review - Food Expenses Revisited (School Lunch)

I had done a review of our food expenses for the month, and I had neglected to include one category.  School lunches.  We were a very busy household and one thing we did was buy hot lunch for both of our kids.  This saved time and the kids seemed to actually eat their lunch whereas whenever I made lunch for them, most of the food came back.

Here's an updated table of our food expenses for the month before the restructuring and the month after.

	Before	After
Groceries	$580	$340
Eating out	$350	$100
School Lunches	$184	$184
Total	$1114	$624

Wow - we were spending a lot on food each month.  That's all I could think - Wow. 

School Lunches

As I reviewed our expenses, I thought that I should try to make lunch for my kids rather than have them eat hot lunch at school.   I looked at how much I could potentially save by making lunch.  A lunch consisting of a sandwich with peanut butter and jelly (or one made with turkey and/or salami) and multi-grain bread, a fruit strip, juice and another snack or fruit would cost around $2-$3/lunch.   Lunch at the schools generally cost between $4-5/lunch.

Was it worth it to make lunch?

I would be saving between $1-2/day.  But, what were the costs?  Time.  Waste.

We were still busy in the morning and it takes time to make lunch.  I was taking time away from other things that I needed to do.  Get kids breakfast, get them dressed, brush their teeth, organize their materials for the day, and then get ready myself.

Also, during the Summer, I made lunch for the kids every day, and they didn't eat much of the food that I prepared.  I worried about whether they were getting enough food and energy for the day and I worried that we were just wasting food.

Ultimately, we decided that it would be easier and better to just let the kids continue to get hot lunch at school.  It saved time and they enjoyed it.   The school lunches weren't like the ones we had when we were kids.  They were actually healthy and there was variety.    We gave certain parameters for lunch.  No candy.  Milk at least 2 or 3 times per week.  Fruit was a must.  They should only get what they thought they could eat. 

Also, to balance out the cost, maybe I would make lunch once or twice a week.  

Post Restructuring Cash Flow Review - Expenses (Food)

Now that I did a review of the expected income, I now had to do a review of the expenses, fixed and variable so that I can see if there is a gap.

I had listed some fixed and variable expenses. 

Fixed:

• Mortgage 
•  Daycare/Preschool
• Gas/Utilities
• Taxes (property and income)
• Food
• Insurance

Variable:

• Credit Card bills for daily and other expenses such as clothes, dining out, services (TV), and entertainment
• Savings - retirement, college and other

There were some expenses that were not going to go away or change, such as the mortgage, but I knew that even if some expenses were essential, that I could possibly make some changes to lessen the expense.

Target: Food Expenses

One area that I targeted was food.  While food was an essential expense, it was an area where I felt I could control the extent of the expense.   I did a comparison of food expenses before I found out that I was affected to my run rate afterwards.  The results were quite eye-opening. 

 

	Before	After
Groceries	$580	$340
Eating out	$350	$100

I didn't realize that I was spending close to $1,000 per month on food!  The groceries came from a variety of stores depending on what we needed.  I shopped at Whole Foods for some basic organic items like fruits, vegetables and meat, Trader Joe's for some specialty items that we enjoy and can't find anywhere else, Safeway for some basic things, 99 Ranch for the ethnic items and the local farmer's market.  Since I worked full-time, I was so tired at the end of the day that it was hard to think about cooking, so I think we ate out instead.   While I tried to plan a menu each week, we ended up not eating a lot of the food that I bought and we wasted so much food.  I felt so guilty about this, but I always had good intentions.

To buy or not to buy organic

After the restructuring, while I had to take a hard look at expenses, I still felt that some areas were not worth the compromise.  Since we had small children, buying organic was a must, such as with milk and meat products.  I was willing to make do without or do with less if it meant buying organic milk, for instance.   The Environmental Working Group (EWG) puts out a list of the fruits and vegetables with the most pesticides (and should be bought organic) and those that are the lowest in pesticides.  I generally use this as a guide to figure out what I should buy organic.

One way to control food expenses

Some use the envelope method to allocate how much should be spent on food each month, but I chose to get a gift card that I could reload. That way, I could put down how much I wanted to spend per month at that particular store.  This was one way to control the expense and also keep track of my run rate for that particular store for the month.   It was too hard to keep track of the overall food expense when everything went on the credit card and I wasn't disciplined enough each month to do an analysis at the end of each month and break out and calculate all of the food expenses. 

Eating out costs went down

One other thing that I noticed was the amount spent eating out went down significantly.  This was not surprising.  I had more time now.  I had more energy now.  While some healthy meals could be found at restaurants, it's not the same as cooking at home.  I could control how much oil, salt and fat was put into the food.   Not only that, but cooking was always an enjoyable experience for me.  It was almost like therapy.   Cooking is a creative process from picking all of the elements, putting them all together so that it all tastes good.   

While we still ate out a bit, it wasn't a regular occurrence anymore.  My kids seemed to miss it a bit, but when we eat in, we have more time.  We now have time to go to the local park or go out for some treat like frozen yogurt.