Note of the Living Deb

Marginal tax rates

Many people mistakenly think that if you get a raise that pushes you into the next federal tax bracket, your take-home pay might actually go down. (I just read that more than half of Americans polled don't understand how tax brackets work, and I was also recently surprised to learn that I know (at least) one of those people!)

What actually happens is that only the part of your income beyond that tax threshold is taxed at the higher level. All the money below that threshold is still taxed at the lower rate(s).

Getting less money

Now, if you're used to seeing, say 70% of your raise in your paycheck, once you pass a new threshhold, that percentage you see will be lower. But it will not be negative--you will still get more money.

Also, there are some welfare programs that disappear as your income increases, and this can absolutely lead to a lower net income.

My financial situation is no worse than it was before the pandemic, yet I am also (I assume) getting the $1200 stimulus check later. Because I am selfish and can use the money, I will keep half. Because I want to be fair, I want to redistribute the other half somehow to people who need it more.

Here some ideas I have after a couple of weeks of brainstorming and paying attention.


Don't make things worse

Edited 4/10/20 to add this category.

"One of the difficulties with figuring out how to help is not un-helping by accident. In my area, a woman decided to help by making lunches for the hospital workers, until the hospital asked her politely to please stop. The rescue mission where I normally volunteer tells me that the influx of wanna-be helpers has overwhelmed the kitchen staff, who had do deal with training newbies in an already stressful time. I’m sure the list goes on." Miser Mom, in the comments to How to help people, how to keep sane


People I Know

One recently widowed person I know (I'm trying to keep her anonymous, but if you know me well, you can probably guess) can no longer afford her house payments and is trying to sell her house and move to a cheaper location. She was mostly packed when the market crashed (only flippers would want her house, so her real estate agent took the house off the market). Now she's stuck also paying a monthly storage fee for the moving pod full of her stuff. I plan to give her $200.


The Self-employed

Do you want a serious sci fi book set in a dystopian (fighting, racist against self-aware robots) future, centered on a teenager whose parents just got their dream jobs in a robot lab and a preacher who started hearing from God? It has great characters and fun dialog. I'm getting my own copy of that book and have one friend in mind who I'm going to ask whether she prefers paper or electronic books and get her one, too.

There are a couple other self-published books that Robin has bought that I am reading to see if I love them enough to get my own copy. So far, no.

I have a friend who's selling home-made face masks. I'm thinking of buying some. But I'm also thinking of making my own--but I haven't yet.

I'm also trying to remember if there is any art or Etsy-type stuff I've been wanting that maybe I should stop putting off.

Of course most of this type of spending is selfish, too. Also, I'm still going to my favorite mom-and-pop restaurants and getting take-out with a $2 hazardous pay increase in the tip, but that's with my regular money.

Edited 4/10/20 to add these other ideas: Buy gift certificates for restaurants, theatres. Ask if you can pre-pay for future service (hair cuts, maid visits) or just keep paying as if you were getting it. Books from bookstores that have delivery. Support content creators.

Frugalwoods says, "We’ve just found a neighbor to buy eggs from and we already have a local source for beef. I’ll be on the lookout for any other neighbors selling goods in our hyper-local economy in the coming weeks."


Food Banks

It would be much more effective to help food banks. But that's kind of treating the symptoms rather than fighting the cause directly, which is my preferred method of helping.

Edited 4/9/20 to add that in an interview on The Daily Show, Roxanne Gay recommended food banks, Planned Parenthood, and RAINN (which fights domestic violence).

Edited 4/10/20 to add charities that fight homelessness and also that support minorities because they are suffering the most.

Also The Cut has 102 Ways to Give Back During the Coronavirus Pandemic, most of which are in this category. Their subcategories include:
* Giving to restaurant relief funds
* Donating masks and medical supplies
* Supporting frontline workers
* Fighting hunger
* Uplifting small businesses and workers
* Defending the vulnerable


Fighting the Cause

Is there any way I can use the money to actually reduce the severity of the crisis directly? For example, is there a way to help start-ups making ventilators? A way to help hospitals buy/rent temp buildings?

I found this Go Fund Me campaign for face masks, but do hospitals really want this kind of mask?

"Fidelity Charitable has collaborated with the Center for Disaster Philanthropy to provide a list of organizations offering relief and support services. "These organizations can accommodate a large influx of donations and have a strong, established record of excellence." They have page on how to help with "Immediate medical needs to address COVID-19 include supplies, such as surgical masks, isolation gowns, and other protective equipment. Organizations such as hospitals and health systems are also preparing to respond to the anticipated surge in coronavirus cases, coordinating additional staff and specialists to support local medical personnel, specialized medical equipment, and portable clinics required for isolation, screening and treatment." That sounds like what I'm looking for.

The first organization on the list is the National Foundation for the Centers for Disease Control & Prevention, Inc. (CDC Foundation) - this sounds good to me.

But the second one is Gates Philanthropy Partners. Ugh. Yes, this is much nicer than most of what Gates does, but I do not like that guy and he already has enough power.

Then they list several organizations I've heard of for other reasons such as Americares and Partners in Health (but not Doctors Without Borders).

And then there's something called the "United Nations Foundation's COVID-19 Response Fund." That sounds good, too, but I haven't looked it up.


Non-monetary help

(Edited 4/10/20 to add this category.)

Frugalwoods talks about a neighborhood committee where some people volunteer to go into town to buy groceries, prescriptions, etc., and some volunteer as organizers to answer phone and email requests for aid and offers of assistance and communicate with the buyers.

Donate blood or, especially if you've recovered from the virus, plasma.

Teach people to use electronic meeting systems. Use these with kids you know, to give the parents a break.

Leave reviews for art and small businesses you like; contact managers with compliments they should hear.

Donate unneeded extras.


Other Ideas

Do y'all have any other ideas on how we can make a real difference?

Edited 4/10/20 - My current plan is to donate cash to The CDC Foundation.

I've read in frugality blogs that you can use vinegar as a hair conditioner and so I tried it.

What's the deal?

How does it work? Reading about how things work on your hair and skin is like reading snake oil ads. Sometimes they use science words to make the magic sound more palatable to modern ears. Since shampoos (and soap and baking soda) are alkaline and vinegar is acidic, there may be pH balancing going on. As for the cuticle sealing, exfoliation, and whatnot, I don't know.

How do you make it? I recall reading that you use half vinegar and half water, but since I buy vinegar that's 9% acetic acid and the norm is 5%, I use about a 4:1 water:vinegar ratio. I just pour some vinegar into my bottle, then fill with water. (Now, researching for this article, most of the ratios I'm seeing are much higher: a cup of water for only 1-5 tablespoons of vinegar.)

To be fancy, you can use apple cider vinegar (which is 5-6% acetic acid). Unless you're blonde. Maybe.

The next question is, how do you actually use it? "Apply." Unlike conditioner, it doesn't stay on your head, it just runs down your hair. So who knows? I just pour it all over the top of my head, leaning my head back when I'm pouring it near the front to keep it out of my eyes. Then I trust that it will run down to the bottom of my long hair. And of course it doesn't feel slimy, ahem, slippery like conditioner, which I've learned to associate with minimizing the tangles in my hair, so that's disconcerting.

Then let it sit, like regular conditioner. Then rinse it all out. When the hair dries, it supposedly stops smelling like vinegar, but that may not be entirely true for someone sticking their nose right in your hair.

Does it work?

If you know me, you might be thinking that obviously it doesn't! But my hair always looks like that, or even worse.

In fact, I think it actually does work, at least as well as conditioner does. With conditioner, my hair is much easier to brush than without, and that is also true of this vinegar rinse. In addition, my hair is slightly softer and smoother feeling after using this than after using regular conditioner. So now that's always what I use.

Obligatory disclosure: I have fine, thick, wavy/curly, dry, brown/grey/reddish hair, so your mileage may vary.

Are there side effects?

Cost - This is cheaper than regular conditioner, especially if you buy your vinegar in a gallon jug like I do.

Safety - The bathtub no longer gets slippery like when I used to use conditioner. So we don't need hard-to-clean mats in the shower anymore or those groovy flower stickers from the sixties.

Travel - When traveling I fill a 3-ounce bottle with straight vinegar to get through the airport checkpoint. Then I bring a larger bottle for mixing it with water and applying. If you have flights over several days, you'll have to reconstitute it bit by bit instead of all at one time.

Hipness - Martha Stewart approves. Well, I think she's still hip, but if she's not anymore, then nevermind.

Someone I know got a job that's technically contracting--he will be getting a 1099-MISC at the end of the year rather than a W-2 form. So I decided to research hints for contractors, specifically those with only one client where most of the work is done outside the home, no out-of-town travel.

Business Entity Type

Sole proprietorship is probably fine. You don't even need to name your business. But one source says "Determine your legal structure, register with your state, and consider getting business insurance."

Taxes

Federal income tax payment

As a contractor, you have to send in your own estimated taxes throughout the year--none will be withheld from your pay. Specifically you will need to pay "quarterly" taxes in the middle of April, June, September and January. (See About 1040-ES and click on the (PDF) form to see the deadlines and other useful information.)

Although of course you will not be earning the same amount each quarter, you will get hassled for sending in a different amount each quarter. An in-the-know source says she just sends in 32% every quarter and that satisfies them.

Self-employment taxes

You also have to pay the whole self-employment tax (15.3%) instead of your employer deducting FICA (6.2% for Social Security and 1.45% for Medicare) from your pay and paying the other half themselves.

Federal income tax deductions

There are many possible deductions. Besides deductions for contributions to HSAs and traditional retirement plans, you may also qualify for these other deductions that don't require itemizing:
* one half of self-employment taxes (the half traditionally paid by employers)
* medical, dental and qualifying long-term care insurance (but only if you are not eligible to participate in a health insurance plan maintained by your employer or your spouse’s employer). (I think employers who offer insurance also get this deduction, which is how insurance got connected with employment to begin with.) For information on how that interacts with Obamacare tax credits, see Health Insurance.org's Self-employed health insurance deduction, under "Deduction for self-employed isn't new."

Plus there may be business deductions:
* unreimbursed tools and supplies
* travel expenses - either for overnight travel or for same-day travel between different job sites ($0.58/mile for 2019) (but not for commuting)*

* Per the IRS: "If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. However, if for some personal reason you don’t go directly from one location to the other, you can’t deduct more than the amount it would have cost you to go directly from the first location to the second."

Turbo Tax

My friend uses Turbo Tax. My in-the-know friend strongly recommends paying extra for the guarantee. Small business owners are more likely to be audited than employees are. When my friend got audited, Turbo Tax asked for the records they thought they would need and they met directly with the IRS without her and everything was taken care of.

(Our state does not have income tax, so I am not investigating that.)

Records

Keep records. Probably for at least three years after the related tax return is due.

1) Income - it will be taxed

2) Deductible expenses
* unreimbursed tool and supply purchases - keep receipts
* travel expenses - keep receipts for overnight travel; keep a record of mileage; consider tracking the date, the location, a description of what's going on, the mileage (odometer start and stop are ideal), the type of expense (gas, oil, tolls, etc.), and the amount.

Figure out a filing system (paperless or otherwise). My friend may also contact his accountant friend for advice.

Accounts

Consider using a separate credit card and/or bank account(s) for business expenses. Keeping your business and personal expenses separate can make things easier at tax time and audit time.

If you need to allow others to withdraw money from your account, you may want to protect yourself by opening a separate account just for that which normall has a near zero balance.

Retirement

Apparently, the self-employed have five options.

IRA

As with everyone else, contractors can have a traditional and/or Roth IRA. The total contribution limit (for Roth and traditional IRAs) for 2019 is $6,000 plus a $1,000 catch-up contribution for those 50 or older (or total earned income, if less).

But if you're feeling rich, you also have additional options.

Solo 401K

This is a lot like an employer 401K plan. The total contribution limit (for all 401Ks) for 2019 is $19,000 plus a $6,000 catch-up contribution for those 50 or older (or total earned income, if less). You can roll over other 401K plans into it.

You can also make an employer contribution of 25% of net earnings after self-employment tax, which I don't really understand.

From what I've read, some providers (including Vanguard and T. Rowe Price) provide a Roth option. A few providers let you take out loans against them. Some providers (including Fidelity and Vanguard) have no set-up fees. Some providers charge annual fees.

SEP (Simplified Employee Pension) IRA

Unlike a solo 401(k), all contributions are technically made by the business. Employees, including yourself, don’t pay into their own SEP accounts. If you have eligible employees, you must contribute the same percentage of compensation to their plans as you do to your own. (Employees are eligible for the plan if they’re 21 or over, worked for your company in at least three of the previous five years, and received at least $600 in compensation during the tax year. However, your plan can have less-stringent participation requirements as long as the same requirements apply to everyone, including you.)

The 2019 contribution limit is the lesser of $56,000 or up to 25% of compensation or net self-employment earnings, which is apparently a bit complicated to compute. USA Today says, "For self-employed people, calculating net compensation is tricky because you have to account both for the SEP IRA contribution and for payments for self-employment tax. But in general, if you take your gross income, adjust lower for self-employment tax, and then take 20% of the remainder, you'll get your SEP IRA contribution limit for the year."

This would be in addition to any workplace 401K plan that you might also have. Only traditional plans are available (no Roth).

SIMPLE (Savings Incentive Match Plan for Employees) IRA

These are better for larger businesses.

Defined benefit plans

Say what? I'm pretty sure my friend would not be interested in this. But if you are, Nerd Wallet says, "Your options for brokerages are more limited than with the above accounts, but Charles Schwab offers defined benefit plans."

What else?

Got any more advice?

My retirement savings are mostly in index mutual funds in a Roth IRA at Vanguard. However, since I started that IRA, exchange traded funds (ETFs) have been invented. All the cool kids are using them! And there are probably ETF versions of all the mutual funds I have. So I'm wondering whether I should switch to ETFs.

I'm used to mutual funds and I'm used to stocks and I think ETFs are sort of like both, but how exactly? All I really know about ETFs is that instead of trading at whatever price they end up being at the end of the day like mutual funds, they trade in real time, like stocks. I don't really care about that. (I used to prefer real-time trading, but it's kind of freeing just letting go and letting the price be whatever it is.)

So I did some online research on the differences.

Commissions: yes (ETF) vs. no (funds). Except both are commission-free at Vanguard.

Minimums: 1 share (ETF) vs. a dollar amount ($3K for most Vanguard mutual funds).

Price timing: real time (ETF) vs. end-of-day (funds)

Pricing: There's a bid/ask spread for ETFs, but I guess not for funds.

Availability of automatic investments or withdrawals: no (ETF) vs. yes (funds)

Turnover: lower for ETFs, leading to lower taxes (except mine are not taxed)

Expense ratios: lower on average for ETFs--I thought there weren't any, like with stocks. [For the one index I looked up, the expenses were 0.11% (ETF) vs. 0.13 (fund).]

Here's what I do with my funds:

1) Have all dividends automatically reinvested (into fund they came from).

2) Occasionally sell part of some to buy more of others in order to rebalance.

3) Occasionally change which indexes I'm going for or what the proportions are.

4) Occasionally (now that I'm retired) deposit more money (woo, I have "earned income" this year!) or withdraw money (hello, visiting Norway and Spain in the same year).

Here's what I'm still wondering:

1) Dividends - do you get them trickling in as they happen with ETFs or still all at once at the end of the quarter? Hmm, investopedia says quarterly.

2) Costs - how does losing out on the bid ask spread (ETFs) compare to losing out on higher fees (funds)? (Obviously this is highly variable; I don't make many purchases though, and I do currently have a fair amount on which to pay fees.)

3) Shares - Can you buy partial shares of ETFs so that all your money is working for you, or do you have to only buy whole number amounts of shares?

4) Does automatic reinvesting of dividends count as one of the automatic payments or deposits that isn't allowed with ETFs but is allowed with mutual funds? Investopedia says "ETF issuers are required to pay out dividends collected from securities held in their funds. The proceeds from these dividends may be in the form of either a cash distribution or a reinvestment in additional shares (fractional) of the ETF." So, it's possible in some ETFs, but I don't know if it's possible in Vanguard ETFs.

My current feeling is that the differences don't amount to much, so I may as well stick with what I'm doing.

What do y'all use and why?

It's all about the links today. Starting with two brothers talking about punctuality. It's cool.

1. On Punctuality (John Greene) - "Who could be opposed to punctuality? E.B. White, as it turns out."

Not just about punctuality, but about good traits in general. It's interesting to look at my most favorite good personal traits and see if I think I might be going overboard with them. (No. I may be more extreme than average, but I'm happy with where I am. And I think those around me are also fine with where I am.)


2. How to Stop Being Late Forever (advice for myself and other chronically late people) (Hank Greene, looking way more out of it than usual) - "If it's gonna take six minutes to get somewhere, I need to be driving out of the driveway with six minutes left. Not standing up from my desk to go find my computer and wonder where my keys are and then kiss my baby goodbye so that I get in the car and the meeting has already started."

I also love his epiphany that showing up someplace early is not necessarily a waste of time because "something interesting and useful" might happen at that place, just like it might happen at home.

Article of the Day - Hamilton Nolan's Oh Damn, 401(k)s Aren't Magic - It's been shown that defaulting to making contributions to a 401K tends to increase retirement savings. Unfortunately, "it turns out that when you make people who don’t earn a lot of excess money put money away, they just take out more debt!" And "[t]his debt more than offsets the extra $3,237 the auto-enrolled employees contributed to the plan, including the employer match." Including the employer match! (Crying, now.) The problem is that poor people don't have access to cheap credit. Basically, the magic of putting money into savings before you see it only works when you are making more than a living wage.

I decided to investigate how the new tax plans would affect me, Al Frankin.* I did not double-check my math, let alone my assumptions, so take the following with a huge grain of salt. (For a brief summary, scroll down to the [second] boldfaced part.)

I consider myself rich by normal standards (I make enough money to happily live on and have no dependents; by another measure, my income taxes are positive). But I do not consider myself rich by top 1% standards. So, would my taxes go up or down? (Suspense!)

With the current system it is best for me to bunch my deductions. That means that in alternate years, I shouldn't pay my property taxes until January; in other years, pay them in December. Thus, every other calendar year I would pay two years worth of property taxes. If I also save up the bulk of my charitable donations for those years, my itemized deductions are rather huge. Then in the other years I can take the standard deduction.

Under the current rules, my taxes would be about $850 for itemized years and $1125 edited to add: this number is way too low** for the standard years. That's an average of just under $1000. (I know! Tiny! But my pension is only $27K/year.)

Under the proposed tax plans, itemizing is not as profitable because the standard deduction is doubled (or nearly doubled in the House version) and there is no personal exemption. If I nevertheless bunched deductions, I could pay about $1320 (House version) or $1500 (Senate version). In the standard deduction years, my taxes would be about $1750 (House version) or $1850 (Senate version). That is an average of just under $1500 (House version) or $1675 (Senate version).

In conclusion, would the new tax plan reduce my taxes? No, it would increase them by 50%-70%. Edited to add: no, more like 7%** Yikes. I wouldn't mind an increase of 10% - 20% to finance important things, and admittedly 50% - 70% of my cute, tiny taxes isn't all that much, but I am not pleased. I had hoped that my conclusion to this post would be that although my own taxes would be better, I would still oppose the new proposals for all the damage it would do to other people. But no, I get to oppose the proposals for personal reasons as well.

Would the new tax plan at least simplify my taxes? No, I would still save money bunching my deductions. And I would still look up my taxes in a table or multiply by 12%. Well, I wouldn't have to look up my estimated sales tax in a table during the itemization years, so that would save me several seconds in alternate years.

*This is from an old "Saturday Night Live" skit format where Al Franken would discuss how various current events affected him personally, as if anyone else cared.

**Sorry, bad math. See my revised calculations.

I got one of those time-sucking things in the mail today: a letter of resignation from my HSA custodian.

The background

Back when I was underemployed for two years, I got an HSA-qualified health insurance plan and gleefully maxed out my new HSA plan for as long as I could. I found Alliant Credit Union for my custodian and I liked that there were no fees and the interest rate was good, like an online bank, not like a regular bank.

Eventually, I noticed that their savings account interest rate exceeded that of my online savings account at ING Direct/Capitol360, so I started putting my savings there. Later in an attempt to simplify and move from banks to credit unions, I closed my other online savings account and moved everything to Alliant. And I closed my two rewards credit cards and got a new one from Alliant. I still love that place, but they are moving everyone's HSAs to HealthEquity. The letter doesn't say why, but a press release explains:

"We recognize that HSAs are growing rapidly, and soon even more robust technology and significant dedicated resources will be needed to keep up with increasingly more stringent compliance requirements," said Dave Mooney, President and CEO of Alliant. "That's why we have partnered with HealthEquity. We want our members and employees to have access to a best-in-class HSA platform that will provide superior service and an easy, convenient way to manage their HSA funds."

The press release also says that like Alliant, HealthEquity is top-rated HSA provider and it is the nation's largest health savings account non-bank custodian.

The research

Well, first I had to look up how much I have in my account, because most places have tiered interest rates, and I can't contribute more, so I'm stuck with what I have now (plus future interest). I have just over $6K.

Alliant has no fees and pays 0.68% APY, so I'm hoping for something better.

I checked out HealthEquity. It pays 0.1% interest at my tier.

In the interest of maintaining my newfound simplification, I then checked whether some place I already have an account with provides HSAs. I already knew UFCU and Vanguard don't. I see no evidence that Scottrade does, either. They were bought by Ameritrade, but Ameritrade's HSA page references HSA Bank, a different organization. (And I expect Ameritrade to change my account in some way that will encourage me to transfer it to Vanguard anyway.)

Then I looked for other recommended HSA providers. They all were also worse than Alliant except for United Bank of Michigan, which seems to cater to locals only. It reminded me of that time I eliminated every career I could imagine and had to start over with lower standards. And also of that time I almost eliminated every grocery store near me and had to give them all another chance. So the best of these is Elements Financial with no fees and 0.5% interest at my $6K level. (You get 1.0% for $10K+.) Just a little worse than Alliant, but workable.

So then I looked up places local to me (both banks and credit unions) in case there was a cool one like in Michigan. Most didn't have HSAs and those that did had monthly fees and/or amazingly low interest rates. (Seriously, one place bragged about how they paid out interest every month even though it was only 0.01%.) But then I got all excited about Capitol Credit Union which pays 0.75% APY. Only it turns out to be Capital (with an a) Credit Union (thanks Google, for changing what I typed), local to Michigan; Capitol (with an o), local to Austin, doesn't have HSAs. Then I got excited by Farmers Insurance Group Federal Credit Union, which pays 0.6%, but I don't qualify for membership.

The Decision

And so that brings me back to Elements.

But how much does it really help me to get to have lifetime tax-free interest when I'm only getting 0.5% interest? I could roll it into regular savings (assuming I've spent--and can document--over $6K in applicable medical expenditures since I opened this account, which I think I have). That account earns 1.104% (which after taxes at my marginal tax rate of 15% would leave me with "only" 0.94% interest). And it would simplify my finances, too. I already got the benefit of pre-tax contributions. So given today's data, the choice easy. But in the future, these numbers (including my tax rate) are likely to change, and could change drastically. So I've been leaving it in to hedge my bets.

Well, that research took over two hours, and now there's still the decision process and, since I know I am not going to decide to let my account automatically roll over to the new company, I will then get to spend more time taking action.

This year my homeowner's insurance went up 9.5%. Unless you count the new installment fees ($2/month); then it's 12%. And last year it went up 18%, but at least that year they also raised my limits. So I called.

The lady who answered offered to re-write my insurance. Then if the new number was lower, I could switch to that, but if not, I didn't have to. And the new number was lower than last year, though not as low as the previous year.

Apparently, the insurance companies don't check on whether there have been changes to your property, so they just assume there have been some that you haven't reported. And so your rates just go up every year. But if they "re-write" your insurance, they ask you a bunch of questions all over again and start over with a new number.

The questions were about things like what the square footage is, what kind of foundation I have, how many stories, what size the garage is (I wish!), and what materials the flooring, walls and roof covered with.

I asked how often one should request a rewrite, every ten years? Every year? And she said very little changes in one year. She recommends every three to five years.

Other changes: 1) I'm now all electronic (they won't send me paper by mail), though apparently I can change that back online. 2) I'm paying once a year instead of in monthly installments. 3) I'm getting insurance for the replacement value, which I never could figure out if I had before, but which I apparently didn't.

Blog Entry of the Day - Miser Mom's "Garbage Offsets"

This is a charmingly-written post about 1) ways to prepare tomato plants and 2) how to offset your landfill use. Warning: this writer really, really hates wasting things and you might think she's extreme. Mostly that makes me happy but if it drives you nutso, so will this post.

Quote on tomatoes: "But my high-E windows mean that my tomatoes languish without additional help, making the transfer from jars to the ground problematic, unless I give them a way to get full-spectrum light. So during April and early May, whenever the weather is warm enough, I take my tomatoes outdoors to play during the day, and then bring them back in at night to protect them from cold and/or rain. What's different this year is that these field trips have a new tomato school bus, so to speak."

Quote on trash: "What would happen if, for every garbage can my family produces, I rescued an equal amount of perfectly good stuff and got it into the hands of people who could use it? My net effect on the local landfills could be zero, even if I'm not technically zero waste myself."

When buying homeowner's insurance, the recommendation is to insure your house for the amount it would cost to re-build it.

So how much is that? I started with the default amount my insurance company suggested the first year. And then every year you can keep insuring for the same or for a higher value they add, and I've been choosing the higher value about half the time.

Actually, that's probably just flood insurance. It looks like my homeowner's insurance is adjusted upward each year automatically.

Personal finance blog advice

Personal finance blogs say you might be over-insuring because construction costs could be much less than the market value of your house which includes both the value of the buildings and the value of the land (location, location, location).

My tax office actually sends out notices of the appraised value of the property and they even break it down into categories. The relevant categories for my house are "structure and improvement market value" and "market value of non ag/timber land." So I could choose the value given for the "structure and improvement" part only.

However, an interesting thing happened between 2013 and 2014. Apparently they realized that gentrification was happening, so they raised the land value from 55K to 100K. And at the same time they lowered the structure value from 110K to 95K. Yeah, I'm pretty sure that construction costs did not plummet during this period.

I've tried googling construction costs in my city. If I could find average construction costs per square foot, that would be very helpful. But no. I can't find any such metric, and people asking this question always get answers that say it depends, with either no numbers or ranges so huge as to be worthless.

But at my last neighborhood association meeting, I picked up some meeting minutes from the Austin Neighborhoods Council that says "the total cost of new housing units in Austin is now averaging at least $245 per square foot (construction by itself representing $175 of that cost)." Score!

Suddenly I want to do comparisons:
* Latest appraised value of my house (last July) = $125K structures
* Square footage of my house times $175/square foot average = 960 x 175 = $168K.
* Amount of insurance I'm actually paying for = $133.5K dwelling + $13.K other structures = $146.5K
* Amount of flood insurance I'm paying for = $150K

And what about last year?
* appraised value = $95K structures
* homeowner's insurance = $144.7K
* flood insurance = $150K

So I seem to be paying between the appraised value and this researched amount--so maybe not enough, but not as little as it could easily be.

Anyway, this quote was summarizing something a guy named Wendler said based on a study his development firm made on housing affordability. Well, he won't be doing a study every year. And how much can I trust a development firm--I don't know if his is one of the slimy ones, or even if there's such a thing as non-slimy development firms. Oops, my bias is showing. Sorry, decent development firms!

Interestingly, this time when I googled construction costs in Austin I found the Texas Higher Education Coordinating Board's Construction Costs Standards. These show "New Construction Average Cost per Square Foot plus One Standard Deviation" for various types of construction such as labs, food service, and parking lots. No telling how much a standard deviation is or even why they would just add that on. But they update these every year. They don't list houses, but they do list "Housing, Apartments," which should be a little cheaper. And the amount they list is $179, very close to the $175 value in the study.

So I could look here each year to keep up with inflation. (Last year the figure was $171.) I can always look up inflation in general, but construction inflation may be very different.

Of course this is for the whole state; I'm not sure how well other college towns are correlated with mine. I'm pretty sure Houston and Dallas used to be more expensive and now they are less expensive.

Insurance company advice

According to Forbes:

Insurance experts say failing to have enough insurance to cover the cost of rebuilding your house if it’s destroyed is the biggest mistake homeowners make. Amy Bach, executive director of the consumer advocacy group United Policyholders, says one 2009 study found that two-thirds of U.S. homes are underinsured.

Why? For one thing, many homeowners buy only enough insurance to cover the amount of their mortgage. But the mortgage may be, at most, 80 or 90 percent of the value of the house, depending on the original down payment (less, if the home has appreciated in value).

For another, some policyholders insure an amount equal to the current value of their homes. But this figure may be far less than the actual cost of rebuilding your house, including labor and supplies (and both of those may rise sharply after a storm when there’s big demand and short supply).

What should you do? First, calculate how much it would cost to rebuild your house.

You could ask your insurance agent, but Bach encourages you to use a professional home-replacement cost estimator, who’d likely provide a more accurate number. The fee can run about $300, but some insurers offer this service for free to their high-value customers.

Ugh, and double ugh. Of course I expect insurance companies to say you should buy more. But they have a real point about everything costing more right when you need it. (Well, it's probably worse for hurricanes and earthquakes, that we don't get, than floods and tornadoes and fires.)

For the second ugh, I am not paying $300 per year to get this estimate; that's many months worth of premiums. Nor am I willing to be a high-value customer to, well, anyone.

Vaguely related information

According to those same meeting minutes, Wendler's study defined affordable as "a price of no more that $312,000 which is said to be what a family making 150% of the median family income might be able to afford." That implies that a family making the median family income "might be able to afford" a $208,000 house. Half the population can't even afford that. So $312K is a pretty whacked definition for "affordable."

The minutes continue: "In the 78704 area the study found that the prices of housing ranged from a low of $300,000 to $750,000 with the lower end all being what he called 'tiny' units of 500 sq. feet or less. In the 78702 area, the prices ranged from $300,000 to $600,000 with again the lower priced being 'very small.' In both areas Wendler said his study found that the closest thing to 'affordable' housing units were either existing older single family houses or older apartment units--both of which are being torn down to make room for newer higher cost housing."

I used to think that new housing means more supply which means lower prices. But the new housing I see is ALL "luxury" housing and I'm rarely in the two zip codes mentioned above. Market economics means those things should stay empty until the prices come down and people should quit building that stuff, or at least the prices of the older stuff should go down, but that's not how it's working. I mean, if things aren't affordable, where are people living? They don't all have millions of roommates like in NYC. Do they just spend 1/2 or 2/3 of their income on housing? Thus making it harder for other businesses to get customers?

So how about you guys? Those of you who are home owners, have you thought about the amount to insure your house for and, if so, how do you make your decision?