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Yesterday on the train I noticed a piece of candy on the floor. I noticed it because I kept hearing something rolling around and I was curious what it was. When we started moving, it would roll backwards, behind me somewhere. When we stopped, it would roll back toward me, and I’d catch a glimpse of it, a little orange sphere, maybe a Gobstopper or something. As we rocketed down the tracks it would go side to side a little bit, sometimes here, sometimes there. It was so small and inconsequential that it was completely at the mercy of the movement of the train. While I sat in my seat and barely noticed much motion, it was propelled all over the place by the slightest shift.

gobstoppers

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Poor little gobstopper. What if it was trying to get to the front of the car, or to the seat where a cute boy was sitting? What if it really wanted to be near the heater below the right-hand window, or in the seat nearest to the door in order to exit the train quickly? It had no control over where it was going.

Look, I know it sounds silly. I’m aware that a gobstopper doesn’t have a brain and it couldn’t really have been thinking any of these things. But it kind of made me think about how I’m like that little piece of candy sometimes: going about my days, shifting gears as circumstances dictate, not sure what the big picture is.

I’m really good at reacting, at diving in to put out fires, to handle things after something has already happened. Some days I feel like that gobstopper, rolling around, not in charge of my own destiny.

That’s a little dramatic, but it’s true. I want to have a 5-year plan. I want to have a vision. I want to be able to make sure that decisions I make today, actions I take this morning, are part of a larger whole.

To that end, I’ve been meeting with a friend of mine who is conveniently also a life coach for young adults trying to discern their career paths. I’ve always had a really hard time dreaming big, because I tend to get caught in the logisitical weeds. That’s a valuable skill to have a lot of times, and it makes me a great contributor to teams I’ve worked on, but I need to be able to step outside of that and see the forest. Without that, then I can’t be sure that the weeds I’m pulling are the right weeds, the weeds that will lead to fulfillment for me, the weeds that will help me end up in the place I want to be, as the person I want to be.

So I’m zooming out. It’s not easy. It sort of stinks sometimes to see yourself in light of your quirks and flaws. It’s weighty stuff, and it’s not like I’m ever going to completely replace my personality and my preferences with new ones. But I think I can learn how to dream, and I think I can stop being a gobstopper.

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When I left off we were talking about mortgages. Doing math is good. Being intentional about how much you spend on housing is good. I love my home, and I love that my husband is meticulous with our spending. But today I want to talk about a more fun category in our fixed expenses list: his and hers money.

Everyone always talks about how the biggest fights couples have are over money. I don’t doubt that. Thankfully Andy and I have managed to avoid that pitfall. I can’t pinpoint exactly how, and I don’t have a cure-all to prescribe. I will suggest, though, that you earmark a little bit of your money every month for each of you to spend however you please. Even when money is tight, it’s super important for your quality of life to have a little bit of fun money. This can be $5 that allows you to buy a soda once a week, or it can be a couple of hundred that allows you to buy an iPad. I don’t think there’s a magical amount that makes this principle work—it’s the concept that counts.

I’ve read on some other personal finance blogs about couples who share their fun money. I can see how that might be necessary if you’re really pinching pennies to make ends meet. I still think having a little bit of wiggle room is better than having none at all—but to me the real beauty of fun money is not talking to your spouse about it and truly being able to spend it on whatever you want with no judgment.

I find I spend a majority of my hers money on food and coffee. I really like lattes, and even though I have a milk frother at home, it’s just not the same. Also, eating lunch out is one of my little pleasures (I know, I know, says the girl who has blogged about bringing her lunch.) Also, I like to shop. I passed a Marshall’s on my way home from work every day for 2 ½ years, and I stopped there with somewhat embarrassing frequency “just to browse.” I also buy a lot of Kindle books, especially when they hit $1.99.

My husband’s spending tends much more toward the electronics spectrum. We let balances carry over in the his and hers categories, one of the few places we do that, so if we spend under our budgeted amount in a given month the amount we were under gets added to the next month’s amount. It’s possible to end up with a pretty hefty chunk in there, and he’s more likely than I am to spend very little for a few months and then buy a bigger-ticket item.

But the beauty of budgeting fun money is that, as long as you stay within your budgeted amount, everything is fine! You don’t have to feel guilty. I only know what Andy buys because we record our purchases in YNAB, not because we’ve necessarily talked about it. Budgeting for his and hers money allows us each to indulge our own natural spending habits without breaking the bank AND buy ourselves things we enjoy, whatever those things may be.

Willpower is a muscle, and you can also use up your daily reserves of self-control by presenting yourself with too many decisions to make. Having some money in your budget, even a joint budget, that is just for you, to spend however you want, with no conequences, is a relief.

Like I said, I won’t say this is a magic bullet to never fighting about money, but I’d like to suggest that it sure can’t hurt!

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This is a guest post by Andy Lindeman.

Laura and I recently bought a condo together, and one of the many decisions we needed to make was the type of mortgage to get. We knew we wanted a fixed rate mortgage, but we needed to choose a term: the most popular options are 15 years and 30 years.

Well, I’m an engineer so I make decisions with numbers! For an example in this post, I’m going to consider a $250,000 home with a 20% downpayment (avoiding the need to calculate PMI) and with current interest rates from bankrate.com as of 2 October 2014. I used Zillow’s mortgage calculator to compute monthly payments.

15 year 3.44% $1,424/month $256,320 paid over loan lifetime
30 year 4.27% $986/month $354,960 paid over loan lifetime

The differences seem pretty stark: the 15 year mortgage has a higher monthly rate, but is offered at a lower rate that saves nearly $100,000 over the lifetime of the loan.

Except it’s not valid to compare those numbers.

Consider a case where you spot me $10 for lunch because I forgot my wallet. If I pay you back tomorrow, the $10 will have the same purchasing power as it did yesterday. If $10 bought a lunch yesterday, it will buy the same lunch today. But if I wait 10 years or longer to pay you back, it’s very likely that lunch at the same diner will cost closer to $15 or more because of inflation.

Applied to the example above, the monthly payments a homeowner makes today have more purchasing power than the monthly payments the homeowner will make 10, 20, or 30 years down the line. A monthly payment of $986 or $1,424 will likely hit their pocketbook harder today than it will decades from now.

It’s relatively easy to adjust the “loan lifetime” numbers for inflation by calculating them in terms of present value. I used a spreadsheet to apply the formula here to each monthly payment over the lifetime of the loan.

Unfortunately we need to guess at what inflation will look like over the next 30 years, and that’s a subjective decision. I’ve given a range of possibilies in the table below:

Loan Term 0% Inflation 2% Inflation 4% Inflation 6% Inflation
15 year $256,320 $221,940 $194,082 $171,309
30 year $354,960 $267,857 $209,006 $168,111

Now it’s more clear how much inflation affects homeowners with mortgages. At 2% inflation, the 30 year mortgage costs about $46,000 more in today’s dollars than the 15 year mortgage. It’s valid to compare these numbers directly. $46,000 in 2014 dollars is a chunk of change! If inflation stays as low as 2%, homeowners who choose the 15 year loan and are able to make the higher monthly payments come out ahead of homeowners who chose the 30 year option.

But things get interesting toward the other end of the spectrum. At 6%, homeowners who choose the 30 year loan come out marginally ahead of those who choose the 15 year mortgage. How can that be? Well, if inflation creeps up and stays at 6%, having a loan where the rate is lower than inflation is a big win: in some senses, homeowners who have a loan whose interest rate is lower than the inflation rate pocket the difference as time goes on.

What will be the reality? It’s obviously unclear. For the past few years, inflation has been very low. But historically there have been periods where it’s been much higher, even higher than 6%. It’s also worth noting that inflation rates will vary over the course of the loan too rather than staying constant as I assumed for the example above.

Whatever the reality ends up being, if inflation stays positive, the gap between a 15 year mortgage and 30 year mortgage over their lifetimes shrinks from the difference between simply adding their monthly payments up. In general, I think it’s good to consider this because you might want to use the difference in monthly payments to do other things that enrich your life: invest in a crazy idea, take another vacation, create an emergency fund, etc. If you know that the actual difference (after inflation) is much lower than the pre-inflation numbers, it might be easier to justify in your mind.

Laura and I eventually chose a 30 year mortgage, though the reasons go beyond present value. I plan to write another post in this series explaining our rationale that I’ll link here after it’s posted.