lemonbytes by Stan Lemon

husband, dad, steelers fan and software engineer

Lately I’ve been writing a lot about personal finance, especially topics related to budgeting. Lots of people think we’re on the verge of a recession, but my eyes have been set solely on the NFL, where my favorite team, the Pittsburgh Steelers, are gearing up for a run at another Lombardi. I love football, and the idea of a players’ strike is entirely disconcerting to me. So while the finance world is worrying about a recession, I’m worried about whether or not the 2021 season will get played.

CBS Sports posted an article this week citing communication from the NFL Players Association (via ESPN) and in it were ten recommendations for the players as they budget for a strike. At first I laughed, but then I thought hey these are actually pretty good (even the outlandish ones). Here are the ten items from that post on CBS Sports:

1. Save at least half of each paycheck, if not more. If your current expenses are too high to save this much, you should look at ways to change your spending habits and reduce financial commitments.
2. Try cooking at home instead of eating out as much.
3. Designate one day a week as “no spending day.”
4. Take care of major home repairs now.
5. If you’re in the market for a new home, consider renting instead of buying for now.
6. Find renters for your unoccupied homes or bedrooms.
7. Consider selling a car you have not driven in the past six months.
8. Avoid signing a long-term lease on any rental property that you rarely use.
9. Learn to say “no” – or at least, “not now” – to friends and family asking for money.
10. Consider selling clothes you have not worn in a year on Poshmark, Thredup or Tradesy.

Some of these seem ridiculous to the average Joe, like “Consider selling a car you have not driven in the past six months.”. Do normal people just have extra cars lying around? I think we might be surprised how many do!

Here’s the gist of these talking points: Consider having less stuff, but whatever you do, don’t spend all of your money!

This seems like it would be really hard to do for an NFL player with a deal yielding several million dollars a year, but NFL players are no more immune to the urge to spend what we have than the blue collar factory worker or the software engineer with a blog.

There’s wisdom here amongst the absurdity. Eating out, buying more clothes than you can wear, over mortgaging yourself, these are all normal people problems. We need to plan for the good times as well as the bad. Not everyone can set aside half of their monthly paycheck, but they can set aside something. As the economy’s future becomes less and less certain I find this advice from the NFLPA very timely and much more widely applicable.

That said, I hope there’s a 2021 Steelers season!

Awhile back I wrote an article about visualizing my mortgage after my buddy Jon and I discussed buying a house on our podcast. Since then my wife and I have aggressively gone after our mortgage and I was happy to report (on Facebook) that at the end of June we made the final payment. I hesitated posting about this on Facebook (I don’t post often), but I was pretty proud and happy and wanted to share that joy. Yes, it was a brag and it was anything but humble, but sometimes you earn a little bit of that. :)

Since my post many friends and frenemies alike have asked us two questions. First, how did we do it? Second, did we use Dave Ramsey’s methods? The answer to the second question is no, we did not explicitly use Dave Ramsey’s methods. Some of his principles and methods look very similar to our own though, so it’s possible we’ve been unintentionally using parts of them for the better part of a decade. The first question is harder to answer and does not have a quick and straight forward answer, so I figured I’d write a post about it.

Sara and I bought our first house a year into our marriage, back in 2007 right before the housing bubble burst. We bought a brand new town home in Pittsburgh and never expected it to be our forever home, though we loved it no less. The initial purchase was tough. We had saved some money up, but just barely enough to make it happen. Our downpayment was not dictated by our savings, but rather by our monthly payment. We had a budget and knew where we wanted that payment to be and thus cobbled together the money necessary to get that monthly payment. We managed to get about 11% down on that first house. This was back when PMI was just a flat fee, so it was not a big factor in our decision making. That was the last time we put less than 20% down on a home. If I were buying my first house today PMI would probably play a bigger factor in determining the amount I was borrowing.

We lived in that townhome for three years and refinanced in the middle of it. This probably seems insane, but the interest rates were dropping so fast then that it seemed crazy not to. Our refinance saved us a ton of money on interest, and despite not being there for very long the numbers made sense. When we refinanced we also did something a bit unusual, we put more money down, thus reducing the total size of the new loan. I had been doing contract work and, with a very good year, had some extra savings. We were spreading out a smaller loan over a fresh set of 30 years with a smaller interest rate, so our payment was definitely going to be smaller. Many people would spend the money freed up from a refinance like this, but we had already budgeted for what we were paying and decided to keep doing so. This meant that the buffer from the refinance was suddenly going at our principal. When you pay extra on your principal it quickly begins to chip away at that balance.

At the end of our time at the townhome we bought what we thought would be our forever home, just North of Pittsburgh in a lovely town called Saxonburg. It turned out that we had some equity stored up in the townhome and sold it for more than we had bought it. All of that equity went into our next loan. Interest rates were still falling at this point and so once again a year after we bought that house we refinanced. Again, it would have been crazy not to. The monthly savings more than paid for itself a mere nine months later. I never thought this would make sense to do twice in my lifetime, but here we were. As I write this now I doubt I’ll see interest rates drop like that again. My first mortgage’s interest rate was twice what my last’s was!

Once again we had a buffer in our budget and used it to pay more principal. While we were living in Saxonburg life threw us a curve ball we didn’t expect and we ended up leaving Pittsburgh. We moved to a farm town my wife grew up in called Seymour in the state of Indiana. We had a hard time finding a home in Seymour and ended up staying with my in-laws for almost four months. During that time we kept the same budget, storing up four months of mortgage payments for the next house.

When we found a home we took all of the proceeds from the previous home, four additional months of mortgage payments, as well as some extra savings we had amassed and threw it all at our new house. On top of that the home in Seymour cost a lot less than the last home in Pittsburgh. We wound up with a mortgage payment far smaller than any we had in Pittsburgh, and so we did what we had always done and paid more on the principal.

At this point in my career I received my first ever bonus. This was not income I had budgeted for and so initially we debated what we would do with that money. Ultimately we threw it at our principal, creating a new habit that would follow us over the next five years we lived in Seymour. Any time I had a bonus, or Sara made money from playing the organ at church or teaching music, we threw that money at our mortgage. Over time we chipped away at that mortgage, the principal getting ever smaller.

When we sold our home in Seymour to move to Indianapolis we had been home owners for 11 years. We had paid a lot towards our principal over that time and were well situation for what we would do next. We decided with the new mortgage for our house in Indianapolis we were going to take out a 15 year loan, instead of the 30 year loan we had up until this point. This brings me to another point we’ve used to our favor over the years.

For 11 years we took out 30 year loans. This goes against most debt reduction strategies you’ll find out there. This probably seems odd considering where things ended up, but keep in mind we never expected to stay at the townhome or the house in Seymour forever. We knew we were never going to see the end of that loan, and so we opted for a smaller payment over a longer period of time. But why? If you ever spend time looking at a mortgage amortization schedule you’ll see that you pay very little on the principal at the front of the mortgage. By doing a smaller payment, we used that buffer toward our principal and in turn paid principal amounts that would have normally been done 10-15 years later in the amortization schedule. This allowed us to chip away at the principal faster. It probably sounds crazy and as I mentioned, it’s not a traditional debt reduction strategy, but knowing that we weren’t going to stay in that home forever enabled us to look at things a bit differently.

I’d be remiss if I didn’t mention an important detail. When Sara and I got married we had no debt whatsoever. We started with a completely blank slate in large part due to both of our parents, who graciously made sure we entered adulthood with both a college degree and no student loans. There’s probably a whole other blog article waiting to be written about student loan debt, but that’s for another time. We were very blessed by the generosity of our parents; they gave us a huge leg up as we worked towards buying a home. Thanks mom, dad, mom-in-law and dad-in-law!

Over our years of home ownership we kept focussed, throwing extra at the principal at every turn. First by budgeting for it and second through bonuses and income from odd jobs. The critical point here is to borrow lower than the budget and commit the excess to the principal. There was no magic, no secret formula and no books behind our strategy. Four houses and six mortgages later we’re finally done.

It can be difficult to know where to start budgeting. There are entire companies built around the art of budgeting, everything from Intuit’s once ubiquitous Quicken software to classic envelope budgeting, where you use actual physical envelopes loaded with cash. In some respects a whole industry of financial self help experts like Dave Ramsey have popped up with the sales pitch of helping you budget. The truth is budgeting doesn’t have to be hard and there’s a really easy way to start.

I am not going to sell you an ideology, method or software. I am a big believer in budgeting, or maybe more accurately knowing what you have and then only spending what you have. To get there you don’t have to attend a conference, buy a book or sign up for a software subscription. It’s actually pretty straight forward.

First let’s take a step back and think about what the goal of budgeting is: it’s to give yourself permission to spend money. That may sound weird at first, but without a budget you’re running wild and free never quite knowing whether or not you should or should not spend money on something. Budgeting is a tool that basically says, “Yeah Stan, it’s OK to buy this right now.” Or, “Sorry Stan, not right now, you need to save up for this one.”

How do you start a budget? I’m going to show you the most the bare bones budget and everything you need to get started. You don’t necessarily need a computer for this, a pen and piece of paper will work; but if you have Excel, Google Spreadsheets or AirTable I recommend using that.

To get started building a budget there are really just two steps:

1. Identify your income.
2. Identify your recurring expenses.

This may seem overly simplistic, but as with so many things one of the biggest risks in starting down the path of budgeting is to attempt to boil the ocean. One of the ways you can boil the ocean is with super fine grained categories that you try to shove all of your expenses into. That won’t serve you well in the short run and over time it’ll just get frustrating. Remember, the goal is to give yourself permission to spend money, not to frustrate yourself. The best way to give yourself permission is through simple knowledge, not overbearing process.

If you’re gainfully employed identifying your income should be pretty straight forward. If you’re paid twice a month just take your after taxes pay check and multiply it by 2. If you’re paid every two weeks I recommend building your budget around just 2 paychecks, as that’s all you’ll have most months. That extra pay check you get a few times a year is a great way to tackle debt or to build up savings. If you’re a contractor or have some sort of variable income the best thing to do is spend some time figuring out what a reliable month looks like and basing your month off that.

For the sake of illustrating my point let’s say my after taxes pay check is $2,000. This means that for any given month my total budget is $4,000, and thus I’m going to write this at the very top of my budget. 

Next I need to think about all the things that I spend money on every month, like my cell phone bill, my mortgage and my car insurance. Your list might look something like this:

 These expenses never change, or at least not until something radical happens like I get rid of my car or cancel Netflix. There’s another category of recurring transactions that can be harder to pin down and those are your utilities, such as gas, water, electric and sewer. If your utility company offers a budget plan you should use it. The budget plan is designed to standardize your monthly payment and cover the spikes that can occur seasonally when, say, it’s cold outside and you need more gas for your furnace. If your utility company does not offer a budget plan then my best recommendation is to use one of three things: (1) Your highest bill, (2) Your average bill, or my personal favorite (3) Your average bill plus its standard deviation. 

You’re probably thinking, standard deviation, are you kidding me?!? Nope. Here’s the thing, if you use the highest bill then most months you’re over budgeting. If you use the average then most months you’re under budgeting. You need to give yourself some sort of buffer, and the standard deviation can help do that in a rationale way. If you don’t want to mess with the math though, simply average your bill out over 12 months and call it a day.

If like Mrs. Lemon you were left wondering what standard deviation is, never fear! Standard deviation is a measurement of how far apart your numbers are. For the purpose of budgeting it can help you come up with a buffer to use when determining your number. Any spreadsheet software can figure this number out for you, but if you want to learn more check out this link.

Once you’ve dealt with your utilities you’re down to the truly variable stuff, such as groceries, eating out and auto fuel. Most people have no clue how much they spend in these categories each month. If you start budgeting you will eventually, but for now don’t sweat it because again, you’re just getting started.

Let’s take a look at the whole budget together now:

 Based upon our back of the napkin math here, we appear to have $2,873.01 leftover after our recurring expenses. Now the trick is to make sure you don’t spend more than that!

The easiest way to track your spending is with fewer accounts. Many items, like the mortgage (or rent) and utilities often require you to write a check, use bill pay from your checking account or do an electronic funds transfer. If you are a debit account user than using one account is easier than if you’re using a credit card, because all of your payments can come from the same place. If you’re a credit card user you can try to put those fixed costs onto your checking account and then make sure your credit card balance never exceeds the amount you’ve budgeted for as ‘leftovers’ (the part circled in yellow above).

Here’s the next thing to keep an eye on: how much money are you spending each day beyond your fixed costs? If your leftovers are $2,873.01 you have roughly $92 per day that you can spend. Some days you won’t spend any, others you’ll spend more. The point is not to get ahead of yourself. If at the end of a week you’ve spent more than $644 ($92 x 7) you need to slow down and make adjustments.

Save your receipts as you’re getting started. They can be handy to look back at the end of the month and see what you spent money on. This is especially handy if you eat out a lot, or find yourself making surprise visits to Target frequently. Those receipts can help you determine that maybe you don’t need appetizers every time you go out, or perhaps you really didn’t need those new towels from Target.

As time goes on if you track the expenses in your leftovers you’ll start to see a few more categories emerge, such as Groceries, Eating Out, Household Items and Entertainment. Remember what I said earlier about fine grain categories. Whatever you do, resist the temptation! Come up with good round numbers for these things like, $500/month for Groceries and record your transactions and see where things shake out. The most critical piece is not to spend more than the $2,873.01 you have leftover.

Don’t make budgeting a burden; remember what we said earlier, the goal here is to give yourself permission to spend money - specifically that money you have. When budgeting works out well you can react to surprises, like a new alternator for your car, or you can celebrate for things like a birthday. Budgeting also steers you clear of debt, especially credit card debt, which can cripple your financial abilities in ways too numerous to count. At the end of the day, budgeting should empower you, and if it’s not then take a step back and start over.

For close to a year now my friend Jon and I have been recording our podcast, Life with a Twist of Lemon. Jon and I have been friends for a long time, and he had been advocating for us to do a podcast for a while when I finally caved, contingent on one condition: I would do nothing. I knew if Jon was serious this wouldn’t be a problem, and we could simply replace one of our usual phone calls with a high-quality microphone and it wouldn’t be more time out of my day. To sweeten the deal, Jon suggested we use my name in the title. As if I could resist!

We really had no idea what the podcast would be about. There was no plan. We were just going to talk. It’d be like when the NSA ease drops in our phone conversations. Lo and behold themes would emerge.

This week Jon and I released an episode reflecting back on the year’s highlights. I thought in the spirit of our anniversary celebration I would list out my top 5 episodes, the ones you really shouldn’t miss.

Honorable Mention: In December we began running a crawl before the show where I made a pitch to raise donations for our friend, Pastor Joel Fritsche, who serves as a missionary in the Dominican Republic. The pitch was simple: Donate $50 and I’ll match it and send you a sticker. We raised money and sent out stickers; it was pretty awesome.

#5 January 3, 2019 - The Budget Episode

In this episode we talked about budgeting, the things we do and how we structure our finances each month. This is just good listening in my opinion and is arguably one of our more timeless episodes.

#4 September 6, 2018 - If you don’t buy milkshakes with your money, save for a house!

Our most listened to episodes started with a twist: There were no milkshakes! Jon was in pursuit of a house and peppered me with questions about what to expect. After recording I ended up resurrecting my blogging career and posted about how my wife and I visualized our mortgage (https://stanlemon.com/2018/09/15/visualizing-a-mortgage/).

#3 March 14, 2019 - A Philosophical Debate regarding Grilled Cheese

Much to my surprise this turned out to be the most controversial episode we’ve recorded. Shortly after this one was released my cell phone blew up with messages appalled by my grilled cheese criteria. I’m still defending my position on this one, and I’m still right.

#2 May 2, 2019 - Patrick Sturdivant: The First Listener (and our review of Endgame)

This episode was literally months in the making! We recorded it with our friend Patrick after watching Endgame twice. It made for a long night, but pretty good podcast listening. (This is also where we lost Jon’s mom as a listener.)

#1 October 18, 2018 - Milkshakes power our productivity

This is good clean Milkshake fun, with our very first guest – my very own daughter, Lucy Lemon. It’s in this episode where Lucy established the rubrics for milkshake straws, which has become part of our Milkshake method evaluation system ever since.

I’m a big fan of the Marvel Cinematic Universe. I don’t hesitate to get a baby sitter and see new releases in the theater and I’ve pretty much preordered every release (sans Guardians 2). I love the genre, but even more so I think the MCU represents some of the best movie writing of my lifetime. Consistently the MCU rolls out great content, so that even the worst MCU movie is still a great movie. Not even Star Wars can rival the consistent greatness of the MCU’s story telling.

Because I’m such an MCU nerd I often get asked to rank the movies from my favorite to least. That’s no easy task! I’ve tried this before with Star Trek and Star Wars where the disparity between a great movie and the bottom of the barrel is stark. In the MCU that disparity is narrow and sometimes hard to navigate. The middle of the list of also especially difficult to decide because they’re on such even ground with each other. Nonetheless for you, dear reader, I shall endeavor to order these movies. Please note, this list is fluid and I have no reservations about updating this list over time.

Lastly… don’t ever watch these movies in this order! The MCU should always be watched chronologically, period. Unlike Star Wars the release order matters, with but a few exceptions that, quite honestly, are not worth taking out of release order (looking at you Captain America: First Avenger and Captain Marvel).

1. Avengers: Infinity Wars
2. Avengers: Endgame
3. Captain America: Civil War
4. Iron Man 1
5. Thor: Ragnarok
6. Spider-Man: Far From Home
7. Guardians of the Galaxy
8. Captain America: Winter Soldier
9. Avengers
10. Black Panther
11. Captain America: The First Avenger
12. Captain Marvel
13. Ant-man
14. Dr. Strange
15. Spider-Man: Homecoming
16. Iron Man 2
17. Thor
18. Age of Ultron
19. Iron Man 3
20. Thor: Dark World
21. Guardians of the Galaxy 2
22. Ant-man & the Wasp

A few words (possible spoilers below)…

• Notice the italics? These are movies that I struggled to sort amongst themselves and I would not object to someone’s personal reorganization of 12-18.
• Yes, Infinity wars tops Endgame. Why? Infinity Wars is arguably the best most complete story in the MCU. They weren’t afraid to leave you entirely hopeless and that made this an emotionally gripping movie. Endgame is great, especially the final scenes, but as a whole the film isn’t greater than the fantastic writing of Infinity Wars.
• Why is Age of Ultron so low? Yes, we get Vision, Scarlett Witch and the fist mention of Wakanda, but while there’s some great stuff going on here it is all in all a weak movie with lots of holes. Bottom line is it could have been better. It’s critical to the development of the MCU’s story line but I never find myself going back and rewatching it because I want to.
• Dark World: Elves, enough said.
• Guardians 2 has one of the best opening 30 minutes in the MCU. It’s hilarious and just great entertainment. After that 30 minutes we slip into the “I’ve got daddy issues” phase of the movie and the writing just goes down the drain. I can also make an argument that this is the least valuable movie to the franchise. What does it add to the ultimate culmination of Infinity Wars? Nothing.
• I wanted so badly to love Ant-man & the Wasp, especially since Ant-man has long been a favorite of mine. I was ecstatic that we got the Wasp and that she was so key to this film, but the problem here is the villain. Which one, you ask? Exactly! This movie struggled to identify a clear bad guy and suffered because of it. Yes, it was hilarious and yes the post credits scene is absolutely critical to Endgame, making it one of the most necessary movies to watch going into it, but all in all it was just bad writing. My biggest fear from this one is that they don’t make a third, because that would be a travesty.
• There are a ton of Captain Marvel haters out there, but I am not one. The biggest criticism I’ve heard is about Brie Larson’s almost stoic performance. Those with this criticism simply don’t understand the character and clearly don’t understand the Kree. So if Brie Larson’s sometimes emotionless acting bugged you, go do yourself a favor and read up on the Kree. If there’s anything to fault this movie for it’s probably the lack of depth around Kree culture, but then again hey we didn’t need (or want) an Endgame-length movie here.
• Why is Far From Home so high? Well, I just watched it! But more so than that it ended up being more of a comic book styled movie than other MCU flicks. It has great character development for Spider-Man too. I loved that it was intrinsically tied into Endgame without being fully dependent upon it. There are so many great nerd-nods in this movie that MCU lovers will gush over it. Lastly, it finally capitalized on BARF, this odd left field reference in the beginning of Civil War that had until now never been capitalized on. MCU fans have been patiently waiting for something to be made of BARF and now we’ve got it in Mysterio!
• Many of my friends will recall that for a long time I strongly disliked the first Avengers movie. So it might seem odd that it now stands in the top 10. What changed? I have long loved the story telling and character development of the MCU far more than I did the special effects and elaborate battle scenes. This is why Captain America: The First Avenger sits so high on my list, when for many it is near the bottom. The first Avengers is an action movie that has an amazing amount of ground to cover and thus it spends a lot less time on character development than say Ultron. What changed my mind was actually Endgame. As I re-watched the entire MCU in preparation for Endgame I found myself coming back to that first Avengers movie and really appreciating how much is setup for the rest of the MCU in that movie. It’s this appreciation that drove it up so high on my list.
• What about The Incredible Hulk? Well, what about it?