More specifically, how do I budget for a business that is VERY cyclical? If you haven't read my blog at all, you might not know...so first some background.

I'm 29, work as a software engineer at an airplane company, and live a very comfortable life at this salary. I think I've made smart money choices (except that darn NEW pickup I bought 4 years ago and have 2 years left to pay on it. Oh, and it already has 104,000 miles on it. Grrrr, darn ex-boyfriend that convinced me to buy it.) Over the past 6 years I've bought a house and sold it for a $15,000 profit, bought another house that I owe ~$70,000 on, (it is worth ~$90,000), I have ~$125,000 invested in 401(k)'s, IRA's, Roth IRA's and taxable accounts. I own ~80 cows in a partnership where I don't have to do any work on them but get 1/3 of the money from selling the calves (My dad - my business partner - gets 2/3 of that money for doing all the work). The cows are worth about $60,000 + probably $20,000 for my share of the calves about ready to be sold at the beginning of January. I was maxing out my 401(K) and maxing out a Roth IRA every year, plus investing in the taxable mutual fund around $50 every month. I've got a very workable budget for a steady income and steady expenses.

I am getting married to a farmer. Right now, at least before we were engaged, he was more of a "farm hand" than a farmer because even though he had 80 acres of farm ground he was buying, most of the work he did was for other people. He got paid from the guy he worked for, traded some welding and other work for another guy, and gave his labor away to his dad (that is another story).

When we got engaged, we decided that we wanted him to continue to farm and me to continue to work as a software engineer, at least until the 2.5 hour commute did me in and/or we had some kids. My off-the-farm job would be a HUGE help to getting going on farming for us instead of him killing himself for someone else. We decided I would only invest 4% in my 401(k), which is the company match, and take the difference and put it in a high-yield savings account (getting 6% interest) until we could save up enough to buy some land.

We decided that we wanted to get bigger in cattle instead of farming right now, and that would be our focus.

The first thing we did was invest in a tractor and baler. We got a loan from the bank, $12,500, over 3 years at 8.75% interest. About $5000 every year for 3 years in payments. I financed that through my bank, in my name, and the tractor/baler belongs to me (until we get married...then all of it belongs to both of us), because I am in a higher tax bracket than he is. Next year that won't matter, but this year it does. I can write that investment and all the expenses off associated with this endeavor off. He swathed and baled a lot of feed, prairie hay, and brome grass this summer; some of it I will get paid for and some of it I will get shares of the crop to feed my cattle. For this year, he is my employee. He kept track of hours he worked and money he spent on fuel, parts, etc., and I paid him an hourly wage of what he was getting paid by the other guy and reimbursed him for what he spent. I've spent about $4200 in parts and labor so far this year. Because we bought this so late in the season, we won't make that back this year, but we should make that back plus what we owe next November on the loan by the end of next summer.

Next, he had people asking him to cut sunflowers, soybeans and milo, but he didn't have a row head for his combine. (don't ask...just a special piece of equipment you need to cut sunflowers, soybeans, and sometimes milo). He found one for $800, and the first guy he cut for is going to pay around $850 for cutting his crops, so we bought that too. This deal was a little different than the baling business...I just floated him the $800 so he could buy it, and he is getting paid for all the work he does for the other farmers. He owns the combine already, so I couldn't come up with a fair way to determine how much of the paycheck the row head vs. the combine was worth, and there is not much depreciation in $800, so not worth the effort of figuring that out. He'll pay me back when he gets paid from them.

Finally, we were able to find enough winter grazing and summer pasture to take over 36 head of my cows from my dad. This way, we can keep all of the money from selling the calves instead of only getting 1/3. But, we took over the cows in November/December of this year, and they won't have their calves until Feb-April. We will grow em up and then sell them January 2009. Lots of expenses here...we had to buy fencing material, we have to pay rent on the winter and summer grazing, we have to buy mineral and other supplements to help them get through the winter. We are going to buy panels in case one of them has trouble calving, so he can get them in and help them (soooo worth it. If we save just 5 calves because of this, it will pay for itself. This is something that will last 20 years or more). We are going to by a hay feeder and a wagon so we can feed them during the winter. I'm going to guess $8500 this winter/early spring in expenses, plus his salary until we are married. These are all start up expenses...the expenses next year and after won't be as much.

Lots of expenses at the start up, but great potential down the road. He is really good at finding good deals, making due with old equipment, fixing things if they break, fabricating things instead of buying them (if he has time), etc. He has also been very good at explaining what we need, what his goals are, big expenses coming up, etc. I've really been hammering hard that if we NEED to buy something that will make us money in the end, then let's buy it. But if we don't NEED it, then we won't buy it. And he agrees with that.

Apparently, I'm good at writing checks, cause I've done A LOT of that lately .

I am going to be the accountant for our household and the farm. I can figure out the household stuff, as I've done that for myself for a long time, and we'll just need to compromise (as all married couples do) on that money.

But, how do we budget for the farm? My job will pay steady, but unless my boss lets me telecommute some, I will have the same expenses I have now. If I get rid of all the wedding expenses I'm paying for now, I'll free up some money to pay the bills at the other house (yes, at first, we will have two houses, one by where I work and the other by where he works).

I can see big chunks of farm income coming in when we sell calves in January, get paid for baling either when the people we bale for sell their calves or sell their wheat, when we sell wheat in July, and for custom harvesting in July and September. I've always been one to keep just enough on hand to pay my bills and send all extra money to loans to get them paid off and not pay so much interest. I had a $3000 emergency fund, but with the above expenses, I drained that plus cut into some other money I had set aside for other things.

How much should I save up? Should I have a goal of trying to figure up what the expenses will be for 6 months (both the household expenses and the farm expenses) and save that, and then put extra money towards loans? Or consider the household expenses as being paid for out of a salary and just try to save up for the next 6 months of farm expenses? I guess I'm asking, how do I switch from thinking "I'll get paid in two weeks (or less)" to "we'll get paid for this 6 months from now"? And how do I plan for things like that?

It is not "supposUBly." It is "supposEDly."

It is not "ValentiMe's Day." It is "ValentiNes's Day."

It is not "taking a different taCT." It is "taking a different taCK."

It is not "your welcome." It is "you're welcome."

Ugh. Sorry for that. I had to put it somewhere or I would have exploded on some co-wokers.

At least in my company, they do. Ok, up front, my company gives good benefits. I am not comparing my benefits with someone who is self employed. I am also not comparing my benefits with someone who works for a school, or a bank, or even another IT shop or aircraft company. I am comparing my benefits with two other groups of people who work at the same company as me: married couples/families and same-sex couples/families.

I am looking through the benefits package for next year because the open enrollment is right now. I have to decide what I am going to choose for the first month for me, and what I am going to choose for my fiance and I when we get married.

I pay ~$1000 a year for health insurance for me. When I add him on, it will only be another $700. The vision insurance doesn't go up at all. The dental plan goes up by less than half. Why is that? How come he gets a better rate than I do? I mean, that is great for US, but really, how come someone who doesn't work for the company have to pay $300 less for the year compared to someone who does? So, the married couple gets a $300 break compared to the single person (in this company).

While looking this up, I saw a link for same-sex couples. I'd never looked into that before, but I was curious as to what the requirements were for them to get benefits and what it takes to change the benefits if they break up.

It turns out that my fiance and I either meet, or could meet within a day, all the requirements except one. Here are the requirements:

1. We have had a single relationship of at least 12 months duration and intend to remain in the relationship indefinitely. (Yep)
2. Neither of us is married to or legally separated from anyone else nor have had another same sex domestic partner within the prior one year period.
(Yep)
3. We understand that in those jurisdictions which offer registration for same sex domestic partners, the Company reserves the right to request proof of registration as a condition for or continuation of benefits. (I'd say this is a toss up. Kansas doesn't have one, so this doesn't apply)
4. We are both at least eighteen years of age and mentally competent to consent to contract.
(Yep)
5. We are not related by blood to a degree of closeness that would prohibit legal marriage in the state in which we legally reside.
(eew. And yep)
6. We cohabit and reside together in the same residence and intend to do so indefinitely. (The current arrangement will be the same as when we are married. I am at his house Thursday night - Monday morning, and work Monday - Thursday, so stay here Mon, Tue, Wed nights. The same will happen when we are married)
7. We are engaged in a committed relationship of mutual caring and support and are jointly responsible for our common welfare, living expenses and are financially interdependent and recognize our responsibilities for any debts incurred by each other. Our interdependence is demonstrated by at least two of the following which we agree to provide documentation of, if requested, and as a necessary condition to the initiation of benefit coverage:
a. Common ownership of real property (joint deed or mortgage agreement) or a common leasehold interest in property.
b. Common ownership of a motor vehicle (we could by tomorrow)
c. Driver's license listing a common address
(we could by tomorrow)
d. Joint bank accounts or credit accounts
(we could by tomorrow)
e. Proof of designation as primary beneficiary for life insurance or retirement benefits, or primary beneficiary designation under a partner's will
f. Assignment of a durable property power of attorney or health care power of attorney.
8. We are not in the relationship solely for the purpose of obtaining benefits coverage.
(yep)
9. We are of the same sex.
NOPE.

So, we meet all the requirements (or could by tomorrow) except we are not of the same sex. If it got him health insurance, since he doesn't have any now, I would do all of those things tomorrow.

I called the benefits office to see if I was overlooking anything, and the nice lady (really, she was nice) said that there was nothing for my situation, and that she gets calls about this all the time. I said, "that's kind of discrimination, isn't it?" and she couldn't say she agreed with me, but she sure did imply it.

She then said that Kansas is a common-law state, so we could declare our situation common-law married. But then, if we broke up, we would have to get a divorce...lawyer fees, court dates, etc.

Here is what the same-sex couple has to do: sign a paper saying:
1. We are no longer same sex domestic partners
2. Please cancel the coverage on this date
3. I have provided my former same sex partner with a copy of this notice
4. I understand that I may not seek to declare a new same sex domestic partner for company provided benefits for a period of twelve months from the date on which the same sex domestic partner benefits are terminated.

I think both situations are unfair to the single person. If there is a married person, a person in a same sex relationship and a single person doing the same job for this company, even if they all have the same salary, the married person and the gay/lesbian person gets more compensation than the single person does because of the benefits they receive.

I got a nice surprise today. I was looking ahead to what I will have to pay on my natural gas bill and on my electric bill this month, and they are both WAY lower than I had budgetted for.

I budgetted for $150 for gas, and I only spend $16.05 this month (!). My highest bill in the past year was $150, so I budget that, but in the summer I don't use much gas (water heating and cooking is all I use it for, and you all know how much I cook). I'll put the other $133.95 towards replenishing my emergency fund.

I budgetted for $50 for electricity. Looks like the monthly bill was $52.28, but for some reason, I have a $40.21 "cost adjustment" and a $1.62 "tax adjustment", so I only owe $10.45 for the month. Yeah! Another $39.55 towards my emergency fund.

Just looked at my bank statement, and Curves charged me twice this month, with it being debited on Tuesday, 10/9/07. That is SOOO ironic (or is it? hmm...) because I cancelled my membership on Tuesday, 10/9/07. I just wasn't going, and it was a waste of money.

I called the owner, Krista, and she couldn't find any record of a double charge, but wanted me to fax her a copy of my bank statement. So, I did that, and hopefully they will just refund the money with no fuss.

I just booked the honeymoon cabin! When I called a month ago, they said if we stayed for 3 nights, the room rate would be 30% off. I intended to book it back then, but the one cabin I had my eye on, they said if it snowed, we couldn't get to it. So, I said I would call back after looking at some more. Found another one, and called today. For January, the room rate is 40% off! The cabin is usually $125, but we'll get it for $75. I had to put half down now, and pay half + $100 security deposit when we get there (we get the $100 back if we aren't too wild )

So, total for the three nights is $291.46. We'll have two more nights in hotels (one there, one back), plus gas, since we are driving from Kansas to Tennessee.

I have a FNBO Credit Card. This was my first card...I have had this card since 1996. I use it periodically, but never keep a balance on it. I also have a Chase Visa that I use every now and then. I recently got an offer for an American Express card with $22,100 limit, 0% interest, 0% balance transfer fee. So, since the FNBO was empty, and the Chase Visa didn't have much (only what I had bought that month) I transferred $2500 from AmEx to FNBO and $2500 to Chase Visa. Once that posted, I requested checks from these two cards. FNBO was no problem, got the check right away. Chase Visa wouldn't refund the full $2500, because I had a balance on there, but did refund me $2400ish, and I replenished that money with some from my spending money, so I had $5000 in my new 6.0% checking account.

That was easy, and I still had $17,200 credit left on the AmEx (after the first $100 payment). This time, I requested $17,100 of that transferred to FNBO. Here, I ran into problems. The money posted 9/14 and I called that day to request a refund. The guy said that they had to wait 5 business days to make sure the check cleared. ? That didn't happen the first time! He said the earliest he could request it was this Tuesday (9/25), but he would take care of it. I checked today, and that still hadn't happened. So, I called customer service. I requested the check, and after 10 minutes on hold, the lady said "accounting is backed up. It will be 8-10 days before it will get through accounting, and then we will mail it." I said, "well, that's terrible customer service. Can you bump me up to the front of the line because I called about this over two weeks ago and the other person I talked to said he would take care of it and he didn't?" She said, "hold please" Another couple of minutes, and she came back to tell me that they are cutting it now and I will receive it in 7-10 days, I assume because of the mail.

So, things I've learned...
- Next time I do one of these, I'll do it the same way, where I request a bit of money first and then a bigger chunk later. That way, if the bigger chunk doesn't get her right away from the intermediate transfer, I'll have the money to pay the first credit card and not have to dip into other money.
- Don't trust the customer service guy to follow up on your problem. I should have called back on Tuesday and Wednesday and Thursday...until I got what I wanted.
- If their solution isn't acceptable, tell them that, and tell them what you want. Their goal is to keep your money as long as possible, while if you are playing this game, your goal is to get the money as soon as possible. Keep asking them until they agree.
- I think the initial problem came because my credit limit on the FNBO card was $15,000 and I was requesting a check for $17,100. If it had been below the credit limit, I bet I would have gotten the check when I first called two weeks ago.
- This was still worth it, even with the hassle. I'll make about $1000 on the AmEx money sitting in a 6.0% checking account for a year (taking into account the monthly payments of 2% of the balance and getting it completely paid off before the interest hits), so some mouse clicks to initiate the transfer and two phone calls for 20 minutes each to get the check is worth that!

I thought I was doing pretty well. In June, I was pretty flush with cash.

***warning - long rant***

Then I got engaged and I'm paying for everything having to do with that, except he bought my ring and his parents are paying for the rehearsal dinner, oh and one bridesmaid is paying for all of her dress...I had offered to pay for half of all the dresses. I think that everything I've bought so far has been either on sale or I've found something less expensive than what I originally found, but I've still already spent $1600 on that. I still have a lot to go...big items include my dress, reception hall, DJ, dinner for 200 @ $8 a plate, liquor for the open bar, honeymoon, flower girl dresses, gifts for bridal party, etc.

I also started a new business. My fiance and I started thinking about how we were going to get the farm up and producing more, and we thought the best way for that to happen was for us to take over some of the cows that my dad has been taking care of. My dad currently does all the work with my cows and when we sell calves every spring, he gets 2/3 of the money, I get 1/3. That has worked very well. But now that I am going to have a farmer husband, he might as well be working for us instead of working for another farmer. So, our plan was to take around 20-30 head over this year if we can find the grass.

But, my cows have their calves in February - April. If we move them to a new pasture and mix them with any other cows, we need to get them together early so the different diseases / germs from the different herds and the new pasture will allow the momma cows to get antibodies before the babies are born. Think of a daycare. All those kids around spread germs to one another. But if the momma cow has time to make antibodies, the baby calves will be more protected. (This is one of the reasons why people say to breastfeed. In fact, my older sister had chicken pox when I was nursing, and my mom gave me the antibodies so I didn't ever get them. I had a test when I was thinking about becoming a teacher to make sure that I couldn't get them, and the doctor said I wouldn't ever get them.) That means that we would need to take the cows over in December or January.

Another reason we need to take them over before February is that the hardest part of taking care of the cows is feeding them in the winter and helping them have their calves if they need help. So it wouldn't be fair to my dad for him to feed them and calve them out and then us to take them after that was over. But, the calves we have this Feb - April we won't sell until the next January, so we didn't want to wait until next year to get started.

Oh, and during the winter, the grass doesn't grow (ok, duh on that one) and we'll have to feed them. My dad had bought a used baler that the dealer couldn't ever make work. Dad and the dealer went round and round about that, the dealer saying "I'm going to come take it back if you don't pay on it" and Dad saying "come and take it, it doesn't work anyway". My fiance looked at it, and he thought he knew what was wrong with it, and asked my Dad if he wanted him to look at it. Dad was disgusted with the whole thing and offered to sell it to my fiance if he wanted it. We decided that because my income was so much higher than my fiance's, and we won't get married until January, for tax reasons, it would make sense for me to buy the baler as well as a small tractor and pay my fiance to run it. My fiance got it running perfectly - after a few weeks of broken parts, which cost quite a bit. So, technically, I own a baling business, with a baler and a tractor, and I pay a guy (who happens to be my fiance) to run it. When we bale feed for someone else, we get 1/3 of the bales. So, either we can sell those bales or we can feed our cows with those bales. Either way, it is a good investment, but it is at least a year long investment without any income from it for a year and lots of expenses.

I got a loan for the tractor and baler ($12,500 for both, a little over $5000 every year for three years) but wanted to pay for the operating expenses myself. I didn't want to go into debt to run the business, only to buy the equipment. I've spent about $1400 on it so far, with another couple hundred this week I haven't paid for yet.

I had to knock my emergency fund down from $3000 to $1700 to pay some of that, and right now I have just the money in my wallet to spend until payday on Thursday...my checkbook is "overdrawn" (it won't cost me an overdraft fee, because I have a few hundred dollars as a buffer in there, but not counting the buffer, I'm in the red.) Luckily, all I have to spend on from now till Thursday is food. All the living expense bills are taken care of, in a separate checking account, so as long as I don't lose my job, I won't have to worry about my house payment, truck payment, electricity, utilities, etc.

I'm happy with my decision to start this business. It is working great, we are either going to make a potload of money from selling the bales or have a potload of bales for the cows.

I'm happy with the wedding plans, even though I would appreciate some help from my parents...but I'm almost 30 for heck's sake...I should be on my feet enough to pay for it. Although, they gave my other 3 sisters about $600 each to help with their weddings. I kinda brought this up to my mom the other day, and she looked at me like "you have more money than we do." I just said "I'm still your daughter." She also asked me where her and Dad's names were on the invitations (I just have my fiance's and mine), and I just said "You're not paying for it."

I am trying to pay for a wedding and a new business and live the same way I did before these two things came on the horizon. That can't work. I guess yesterday when I balanced my checkbook and I was in the buffer zone, that was a real wakeup call. I'll just have to hunker down for the next couple of months and not spend so much.

My fiance and I went to register last weekend since it rained and he couldn't do the farmer thing on Saturday. First, we went to Dillard's and registered for some china. I really didn't want to do that, but his mom suggested we go there and get some good stuff. I picked out a few and let him make the final decision. We decided to register for 10 of them because I have a HUGE table that I have 10 chairs that will fit around it if all the leaves are in it. We also registered for 10 sets of silverware.

Then, we went to Target. We registered for a bunch of common stuff, you know, towels, shower curtains, bathroom stuff, kitchen stuff, etc... He ran the gun, so I would just point and say "two of these, one of these" and he would do it. We were going up to the front of the store, and went by the snack aisle. Well, we walked a few steps past the chips, he looked at me, and said, "just a second." Down the chip aisle he went and registered for 10 bags of Doritoes and 10 12-packs of Diet Coke! I just had to laugh. I think everyone will see that on our registry and give us that as a gag gift. Oh, and he wants me to go back and register for some peanuts and cashews! We'll have snacks for a year!

I had bought what I thought was a lot of ribbon from Hancock Fabrics, dark blue, about 4 5-yard spools. I have since discovered that each 5 yard spool will only tie 15 invitations. So, I had to get more. A lot more.

I looked on ebay, and I just have to say, thank you, Jesus, for the internet. It has saved me untold amounts of money over the past few years. I was able to by 4 100-yard spools for $15.50, including shipping.

That's 400 yards!

Do you know how much that is?

It is almost all the way around a running track. 440 yards ~ 400 meters. If one person started at the starting line and ran around the first curve with the end of the ribbon tied at the start line and the other end in her hand, she would get to the second person in the relay just when the spool ran out.

400 yards = where I would die in the quarter and have no kick left for the last 40 yards.

400 yards = 1/4 of a mile. The length of road I used to run for sprints from our driveway to the black top.

I hate this one. I can hear it coming. "400 yards is the length of 4 football fields." Everyone compares length to football fields, but my school played 8-man football, so the fields were only 80 yards. So, in my case, 400 yards is the length of 5 football fields.

400 yards is a great golf shot, so long as it is in the direction you want the golf ball to go.

Apparently, it is a significant enough span of space to warrant warning of no sidewalk.
http://www.freefoto.com/preview/41-08-93?ffid=41-08-93&k=No+footway+for+400+yards+Road+Sign


400 yards is too far away to shoot a deer, as post #8 eloquently says.
http://www.huntingnet.com/forum/tm.aspx?m=1751058

I've been thinking about possible readings for our wedding. I DON'T want the standard Corinthians one, what with the clanging gong and love being patient, kind, blah blah blah. Here are some interesting ones that I found...I think I'll ask Fr. David if these are ok. Still need to pick between the two Psalms.
------------------------------------
First Reading
Tobit 8:4-8
When the girl's parents left the bedroom and closed the door behind them, Tobiah arose from bed and said to his wife, "My love, get up. Let us pray and beg our Lord to have mercy on us and to grant us deliverance."
She got up, and they started to pray and beg that deliverance might be theirs. He began with these words: "Blessed are you, O God of our fathers; praised be your name forever and ever. Let the heavens and all your creation praise you forever.
You made Adam and you gave him his wife Eve to be his help and support; and from these two the human race descended. You said, 'It is not good for the man to be alone; let us make him a partner like himself.'
Now, Lord, you know that I take this wife of mine not because of lust, but for a noble purpose. Call down your mercy on me and on her, and allow us to live together to a happy old age."
They said together, "Amen, amen."

------------------------------------
Responsorial Psalm
Psalm 63:5-9
I will bless you as long as I live; I will lift up my hands, calling on your name.

My soul shall savor the rich banquet of praise, with joyous lips my mouth shall honor you!

When I think of you upon my bed, through the night watches I will recall that you indeed are my help, and in the shadow of your wings I shout for joy.

My soul clings fast to you; your right hand upholds me.

Psalm 128, 1-4, then Psalm 127 3-5
Happy are all who fear the Lord, who walk in the ways of God.

What your hands provide you will enjoy; you will be happy and prosper.

Like a fruitful vine your wife within your home, like olive plants your children around your table.

Just so will they be blessed who fear the Lord.
------------------------------------
Second Reading
Ephesians 5:21-28
Wives and Husbands. Be subordinate to one another out of reverence for Christ. Wives should be subordinate to their husbands as to the Lord. For the husband is head of his wife just as Christ is head of the church, he himself the savior of the body. As the church is subordinate to Christ, so wives should be subordinate to their husbands in everything. Husbands, love your wives, even as Christ loved the church and handed himself over for her to sanctify her, cleansing her by the bath of water with the word, that he might present to himself the church in splendor, without spot or wrinkle or any such thing, that she might be holy and without blemish. So also husbands should love their wives as their own bodies. He who loves his wife loves himself.
------------------------------------
Gospel Acclamation
1 John 4:7, 11
Beloved, let us love one another, because love is of God; everyone who loves is begotten by God and knows God. Beloved, if God so loved us, we also must love one another.

------------------------------------
Gospel
Mark 10, 6-9
Jesus said "But from the beginning of creation, God made them male and female. For this reason a man shall leave his father and mother and be joined to his wife, and the two shall become one flesh. So they are no longer two but one flesh. Therefore what God has joined together, no human being must separate."

I recently got an offer in the mail for an American Express card with 0% balance for a full year and 0% transaction fee. I applied, and transferred $2500 to each of 2 credit cards that I pay off every month...so I could get the cash. This offer didn't say how much the credit limit was going to be, and it said that if the credit limit you did was lower than what you requested be transferred they would have the discretion to either pay some of it or turn you down. I figured that if it wasn't $5000 at least I would get $2500. My plan was to put the money in an online savings account, pay the minimum every month until next July and then pay off the lump sum before the interest started accruing. Quick and dirty calculations showed I could make almost $200 throughout the year doing this in a 5% savings account, and I figured I would just set it up to transfer the money automatically from the online savings account to a checking account that would then automatically pay this bill. I would keep one month's payment in the checking account as a buffer in case the online savings account transfer didn't happen for some reason.

Well, I just looked online, and the credit limit is actually $22,000. So, I have $17,000 left that I could transfer. For some reason, I'm hesitant to transfer this money over and do the same thing, even though I could make almost $800 during the year doing this with the exact same setup as I was planning on doing with the $5000. So, why my hesitation?

I am figuring that the payment would be 3% of the balance every month, so the first payment will be $660. It would go down a bit after that, about $20 a month at first, but the payment would always be available...transferred from my bank account dedicated to making monthly payments from this.

So, why am I hesitating? Who would turn down $800 for doing nothing except keeping an eye on the automatic payments from one bank to another and one bank to the credit card to make sure they are executed successfully? I already pay everything else on-line except one bill that doesn't accept it, and I already have 4 bills on automatic payment and have never had a problem with them.

Let's start like this. A stock is a piece of a company. Very simply, a stock is your stake of ownership in that company, and if the company does good, the stock goes up and if the company does bad, the stock goes down. If me, my brother and my sister bought a house together, we would each have one stock of that house, and each stock would be worth 1/3 of the cost of the house. If we fixed it up and sold it for a profit, then the "price" of the stock would go up and we would all make money. If we painted it all neon green and decided people don't really cook, so why keep that pesky kitchen in there? then the house would sell for less than we bought it for plus the cost of fixing it up and our shares would be worth less, and we would all lose money. Now, for a company like Coca-Cola, they have 2.5 billion shares instead of 3 shares like our house venture. But the principal is the same. You buy a share of the company and if they make a new drink that everybody likes, the price goes up. If they make New Coke again, the price goes down.

Investing in only one company is very dangerous. You are putting all of your money into trusting one company and board of directors to do the right thing. If everyone starts drinking Pepsi, you are sunk. So, someone came up with idea of a mutual fund. All a mutual fund is a collection of stocks...a place that you can send money in and they buy different stocks with that money. Let's say that one particular mutual fund is a "drink mutual fund" and it is invested 35% in Coke, 35% in Pepsi, 15% in Gatorade, 10% in Powerade and 5% in Jose Cuervo just for spice. If you were investing in this mutual fund, and you sent in $100, it would buy you $35 worth of Coke shares, $35 worth of Pepsi shares, $15 worth of Gatorade shares...etc... In reality, you have probably heard of the Dow Jones which is a collection of 30 companies, or the S&P 500 which is a collection of the 500 biggest companies in the New York Stock Exchange. So, if you bought a mutual fund that invests like the S&P 500, then you would own a piece of 500 companies instead of 1 when you sent your money in. There are many, many mutual funds to choose from, but that is a discussion for another day.

Now, a bond is really a loan to companies or government entities (like the federal government, the state, counties, cities, school districts, etc). Let's say that Ellsworth County wants to put in an ethonal plant, but doesn't want to raise taxes immediately. So they start selling bonds with 7% interest; that is they want you to give them money now and they promise to pay you back plus 7% in the next year. If you buy $100 worth, next year, you should get back $107. But, what if they can find some poor sucker that will take 4% instead of 7%? Then they will sell another bond to the guy that will take 4% and pay you off, so you will get your $100 back sooner, but you won't get the entire $7 in interest. But, what if the Indians took over Ellsworth County again? Really, what if the ethonal plant doesn't come in, and Ellsworth County spent all this money to make it attractive for that plant to relocate there? You might not get paid at all. Like stocks, it is risky to only invest in one bond. So, there are things called bond mutual funds that invest in a lot of different bonds just like stock mutual funds invest in a lot of different stocks.

That is what people are talking about when they are considering buying stocks and bonds. Lots of people don't know that. Some people think they are gambling, really just playing a game with numbers, and they can't see the connection between what they buy and the company behind the stock or bond. But, if you keep this connection, that you are an owner of those companies, or you are holding a loan for those companies, you will have a healthier view of investing.

It used to be that you would work for one company all your life and when you retired, you got a gold watch and a pension. That is, the company would continue to pay you after you retired, to keep you from starving when you got old. Companies have stopped doing that lately, and so people have to now take care of themselves. The government recognizes this, and wants to give everyday people an incentive to invest for their retirement.

That is where the IRAs, Roth IRAs and 401(k)s come in. There is a fourth type that people forget about, but if people would talk about it, it would make more sense to everybody. That fourth type is the "taxable mutual fund". For, you see, all four of these vehicles invest in mutual funds. The only difference between them is how the money is taxed.

The only way the government can give you an incentive to do something is to reduce your taxes because of that activity. For instance, the government wants you to own a house. So, they let you deduct from your taxes the amount of money you spent on interest to buy that house. Or, the government wants you to own a business. So, you can deduct from your taxes any expenses associated with your business. These things allow people to accumulate money, provide for their families, hire other people, buy more things, and it is good for the economy, or your safety, or something, so the government wants you to do these things.

When you invest in an IRA, a Roth IRA, a 401(k) or a taxable mutual fund, really, you are buying a mutual fund and then checking a box that says "I want to treat this money like an IRA" or "I want to treat this money like a 401(k)" or "I am investing in a mutual fund the government isn't helping me out with". The stocks are the same, the bonds are the same, the idea behind the mutual funds are the same; you are just deciding how the taxes should work.

The first one everyone recognizes is the 401(k). This is a plan where you have money taken out of your paycheck and it is invested in (one or many) stock or bond mutual funds. The money comes out of your paycheck before taxes...that is, if you make $30,000 a year and put $5000 into your 401(k), then you only pay income taxes on $25,000. I guess really, $25,000 is the starting point; from there you take out your personal exemptions, your dependents, your student loan interest, etc. But, it is a great deal. Also, some companies "match" your contributions. They say "100% match on your first 5%". I don't know why they do this...maybe because they feel guilty that they aren't going to pay your pension anymore when you get old. But anyway, that means that if you make $30,000 a year and you are going to put 5% of your pay in a 401(k), you are going to invest $1500 that year and your company is also going to give you $1500 to invest that year. Boom, you invested $1500 and as soon as you do that you have $3000 invested. YIPEE! It doubled! People always say "that is free money" because the company you work for is set up to do that automatically...you sign up for your 401(k) and put money in there, and the match will show up. There is a limit as to how much you can invest in a 401(k)...this year it is $15,500, but it is going up next year. But, you can invest a little (for my company, I can only invest in percentages, so the smallest I can invest is 1% of pay) or a lot, just not more than that limit. Now, the government gave you this incentive to save for your retirement by not making you pay taxes on that money RIGHT NOW, but you will have to pay taxes on it WHEN YOU RETIRE. AND if you do put money in a 401(k) and you want to take it out again before you retire, then you can, but it will cost you. You have to pay taxes on it then AND you have to pay a penalty - 10%. Remember, you still buy mutual funds with the 401(k), the only difference is when you pay taxes on it.

The second one is the IRA. You buy stock or bond mutual funds with this as well (you'll get tired of me saying this, but you have to remember that !!! ). This is another incentive by the government to get you to save for your retirement. Really, it is just like the 401(k) except that:
1) It doesn't go through your company...you have to set it up yourself.
2) The limit is $4000 FOR EACH OF YOU (if you are married).
3) There is no match

An IRA is the same as the 401(k) in that you can deduct the money off of your income when paying taxes. So, if you make $30,000 and invest the maximum of $8000 ($4000 for each of you), then $22,000 is your starting point for paying taxes. Also, you can take the money out again later before you retire, but with the same penalties - you have to pay taxes on it when you take it out AND you have to pay 10% penalty.

The third one is the Roth IRA. You buy stock or bond mutual funds with this as well. It is another incentive by the government to get you to invest, but it works differently. For this one, you set it up outside of work with a mutual fund company (like Fidelity) and send in your money. The limit here is $4000 this year for each person, but it keeps going up every year. You DON'T write it off on your taxes, and you DON'T get any match, but here is the beauty of the Roth IRA...you pay taxes on it now and NEVER HAVE TO AGAIN. With the other two plans above, you pay taxes when you take the money out (so hopefully, the stock has gone up and you made a lot of money, but then you have to pay taxes on it), but with this one, you pay taxes on your income now and it grows and grows, and when you take it out you don't pay taxes on it! That is awesome, because presumably you will make a lot more money in the future than you do now, so when you take that money out, you should have paid higher taxes on it, but since it was designated a Roth IRA, you don't have to. Also, taxes were lowered when President Bush took office (almost the lowest ever), and you can bet your booty that if a Democrat is the next president the taxes will go up. Another thing is that if you invest $4000 this year, and $4000 next year (or $2000 this year and $1500 next year and $3500 the year after that...remember, $4000 is the upper limit, not the only amount you can send in) then you can take out whatever you put in without paying taxes and without a penalty. This helps alot of people feel good about investing, because with the other two plans, you think "I can't get that money out for another 30 years" but with the Roth IRA, you can get your original investment out at any time.

For any of these ways, the government wants you to invest, and provides a match if you do. Your AGI is the bottom line on the first page of your tax return. If that is less than $30,000 and you invested $2000 in an IRA that year, then on the second page of your tax return there should be a place where you can enter how much you invested and it will figure out how much of a tax credit you get back. You can at most get 50% back on $2000, so $1000 back is the most you can get back this way. But, YIPPEE!! You invested $2000, you got $1000 back after doing your taxes, so really, you only invested $1000 of your money and there is $2000 in the mutual fund. It doubled!

Finally, you can buy a taxable mutual fund. The only incentive the government is giving you here is that you only have to pay 15% taxes on the money you make on a taxable mutual fund, instead of your tax bracket. Say you are in the 25% tax bracket. I don't want to get into this now, but if you are married, you pay 10% on the first $15,650, 15% on the next $48,050, 25% on the next $64,800, etc. That is, for the money you earn at your job is taxed this way. The money you make on your mutual funds are only taxed 15%, so if you are married and make more than about $64,000 it is a good deal. If you are single, then if you make more than $31,850 it is a good deal too.

Alright, can change an IRA to a Roth IRA? Yes you can, it is called "rolling". To do that, you tell your mutual fund company that you want to roll your IRA into a Roth IRA. They sell the mutual funds in the IRA, buy mutual funds in a Roth IRA, you pay taxes on the money you rolled (but you don't pay a penalty) and it is now a Roth IRA. Also, if you change jobs, or your company is sold (like mine was this year) you can roll your 401(k) into an IRA (don't have to pay taxes) or a Roth IRA (do have to pay taxes) with no penalty.

One thing you might be confused about is how many of these plans can you have and how much can I invest in them? You can have a 401(k), and you can invest as little as 1% (I'm guessing here...your company may set a different lower limit) or as much as $15,500. If you are married, you can have one at your job and your spouse can have one at their job, each with a $15,500 limit. Also, you can either invest in an IRA or a Roth IRA or both, but only $4000 for each person for the year. So, you can invest $2000 in an IRA for you, $2000 in a Roth IRA for you and $4000 for your spouse for that year. The next year, you can do the same thing, or you can each put $4000 in the Roth IRA. One thing about the IRA and the Roth IRA, you will probably have to invest at least $1000 before a company will let you buy a mutual fund with them. There are exceptions, and we can look into that, but they don't want to piddle around with small amounts of money, so they set that bottom limit. You can put as much money into a taxable account as you can...there is no limit there .

So, which one should you do? Here is what I say: invest in your 401(k) up to the company match. If your company matches up to 5%, then put in 5%. If your company doesn't match, then skip this step. If you are not eligible for your 401(k) until next year, skip this step THIS YEAR. As soon as you are eligible, then invest up to the match.

Then, invest as much as you can in a Roth IRA up to the limit, but not in an IRA. After that, if you have invested $4000 per person on a Roth IRA, and you still have money left over, invest in your 401(k) up to that limit. And if you have money left over after that, open up a taxable mutual fund.

Wheh! Take a deep breath. Don't be scared of all of this, because I've been looking into this and reading about it for 6 years now, and it is kinda complicated, but nothing you can't handle. Just keep a link to this blog, keep asking questions and look around on the internet for some more information. You are just starting now, but you are young! Just thinking about it now and just starting with a little bit of money can really help you in the future.

Finally, how do you juggle this and any loans that you have? I think it depends on what the interest rate of the loans are. I think you should ALWAYS get the 401(k) up to the company match, and if you can get the tax credit for the IRA, then you should do that, because that is 100% return. If you have loans (credit cards, car loans, student loans, anything, really) that charge over 8% interest, then I would pay that off first before investing any where else. If you are having trouble paying the bills every month, then I would pay off some loans to free up some cash flow and then start investing. Personal preference here, but if all your loans are under 8% and you are living without having to depend on the credit card every month, then I would start investing more. It is something you will have to feel out for yourself, cause everyone is different. And it is a marathon, not a sprint, so remember you have to live a little too, not just wait for retirement to get here and then start living!