Opportunity cost

This is a post about money.  Over the years I’ve discovered that generally the “haves,” the people who have money, do not like to talk about it, not in any meaningful or personal way.  They find discussions of one’s own money to be distasteful, perhaps even vulgar.  The “have nots,” on the other hand, are not subject to this problem.  Perhaps there is some distinction we (the people who don’t have enough money) can’t yet see between talking about our own money and talking about other people’s money – because the “haves” have no problem talking about other people’s money and what they think should be done with it.  If you are among those who will experience a bad taste in your mouth reading me writing about my own money, either go away or become a benefactor/patron-of-the-arts so I can get out of this “have not” situation and stop bothering you by mentioning money.

Note: this post is over 2600 words long.

As you may or may not be aware, in March of 2008 I left my “day job” (they would probably say I was fired for violent behaviour, but believe me when I tell you my outburst was literally in the vein of “if that’s the way you insist on doing business, I can’t work here any more”) and have been a full-time, self-employed creator of books (Modern Evil Press) and art (wretched creature) since then.  My wife, a high school english teacher, has been the primary income earner for our household since that time.  You probably know teachers don’t earn a lot, and she’s only been teaching for a few years, so far, if that tells you anything.  So: not a lot of money.  But there’s good news: God loves us.  Evidenced by the fact that it’s been almost 11 months and we’re still okay.

We didn’t start off in a great position.  No savings, two car loans, Mandy’s student loans, and my mess of cc debt put us somewhere over $90k in debt as of last March.  About half of that’s the student loan, but it’s still a lot of money.  A lot of debt.  At the time I worked out a budget, we cut back in a few places, and we found that every month Mandy’s income covered all the bills and none of the stuff that isn’t bills.  ie: food, gas, entertainment, medical, et cetera were not covered.  We had just got back a sizeable tax refund (for the poor, marriage seems to make your tax situation better) about a week before I left my day job, so we had that $2700 in the bank to live off.  I needed to spend a chunk of it getting set up to run my business (pro audio equipment to record my podcast audio books, a video camera to make promotional YouTube videos, packaging materials & equipment for doing the physical audiobooks including a new printer, oh, and a sizeable inventory of books to sell directly through modernevil.com) – something between 1/3 and 1/2 of the money we needed to live on, right off the top.

But we did okay.  I made art, I made audiobooks, I worked on writing new books, and most importantly, I worked on building an audience and getting sales.  In May I started showing at the Phoenix First Fridays Art Walk among the Roosevelt Row vendors.  A little later, I also started showing at the not-quite-monthly Art Fair at Intatto Coffee / Angel’s Serenity.  (Note: Intatto has since gone out of business, but if you’re in North Phoenix/Scottsdale on 2/14/09, there’s another Angel’s Serenity Art Fair coming up!)  I started using social media more actively (Twitter, Plurk when I found out about it, Facebook, et cetera) and I actually made several art sales through contacts I made in social media.  Sales haven’t yet been knock-your-socks-off great, but I’ve had sales every month since April, 2008 and most months a bit more in income than in expenses (according to my accounting software).

Right before the money left over from the tax refund ran out, our $1200 stimulus check arrived.  Not too long after, Mandy got a pay increase (at the start of the new school year) and was working extra hours.  Just before the stimulus check ran out (it went further after her raise & w/ Student Council overtime), she received a bonus of a similar amount.  Every step along the way, either with new sales / new customers, Mandy offered overtime, gov’t intervention, bonus checks, whatever, before we hit bottom, right when we need it, God has come through for us with more support.  Within the next two weeks, we’re going to get close to that bottom again.  Which brings us to taxes, and the original subject of this post:

It’s tax season again.  Yesterday I spent a few hours entering all our information into hrblock.com which we filed with last year, and both Mandy and I have filed with in various years in the past.  I knew they were capable of handling my business taxes (since I reported some business income last year, and got a look at what their site was capable of), and probably I’ll go ahead and file through them later this week.  I’m still waiting on a document or two in the mail, but I’m 99% sure I know what they say (and the $0.95 interest we earned on our savings account won’t change anything at all), so I don’t want to actually file quite yet, but I’m pretty sure I’ve got all the info entered in correctly.  And it looks like, for a variety of reasons (my income at my day job was so low I basically get all my withholding back, bonuses have a higher withholding than normal income, & our income was cut almost in half this year over last), we’ll be getting a sizeable refund this year.  Something in the neighborhood of $4500.

And now we have to embark on an examination of this post’s titular ‘opportunity cost’ – the cost of taking one opportunity is in being unable to take others.  Let’s begin with what we ought to do: use that money to keep things like food on the table and gas in the cars (esp. since Mandy drives ~21 miles each way to/from work) and some basic level of we’re-not-going-mad entertainment coming in.  At our current spending rates, with Mandy’s current income, and without counting on any significant sales from me (they’re already coming in – have you ordered my new books Forget What You Can’t Remember and More Lost Memories, yet? Have you seen my latest painting?), and barring any unexpected emergencies that money could last perhaps 9 months – until almost November.  Except that, since I left my day job last year, we haven’t been paying my father any rent to live here (he’d only started charging us a couple of months before that), and he’s been having trouble getting renters to pay on time, when he can find renters at all, for the property he manages / lives on in Pine, AZ – not to mention that just about every piece of equipment up there has broken this year and has needed (or still needs some) expensive repairs.  So, he has the property taxes coming due soon and I told him we’ll -at the very least- help him with that.  From the looks of the size of this refund, we may just pay the full amount, ~$1500, which would leave us with about 6 months’ worth of money for food/etc..

Then there’s the matter of my iMac died this Fall.  I’ve been doing everything on my 4-year-old iBook.  Everything meaning: writing books, editing/layout of books, cover design, audio recording, audio editing/mixing/compressing, video recording/editing, web site design, and more.  My whole business is wrapped up in that little, weary laptop computer.  If we bought the entry-level iMac currently available (& maxed out the ram for another $60), processor and memory intensive tasks (like mixing & compressing audio and video, and working with book-length documents and print-quality cover designs) would go four to eight times faster.  Not to mention I’m currently doing everything on a 15″ 1024×768 screen; I could really use more screen real estate – it would probably speed me up another several percent to be able to see everything I’m doing at once.  We looked into it late last year and decided that the iMac line appears due for an update, and we thought it would come at MacWorldSF, and we should probably wait to see if we’re getting a tax refund or somehow owed taxes before we bought a new computer.  That I could use the larger screen (and lower price point) of the iMac over the Macbook Pro -I absolutely need firewire; all that equipment I bought in 2008 for audio & video connects via firewire- and now … well, now we’re sortof waiting for the update.  If they leave FW out of the updated iMac line, I just need to get the current model (which will then be discounted), but either way it’s a better value to wait.  SO that’s somewhere in the $1500-$2000 range.  The opportunity cost being another 3-4 months of living comfortably.

Then there’s the TV.  This one, despite being largely irrational, has really been bugging me more and more the last few months=>weeks=>days.  The TV we currently use is not small, it’s a 37″ (I think 37″… I’m not going to go measure it) CRT TV I bought back in 1998 or 1999.  At the time, HDTVs were already on the market, but were very expensive.  I shopped around, decided I didn’t want an HDTV  with a diagonal measurement less than my height, and calculated how much I wanted to spend on a TV knowing that analog broadcasts were going to be shut off in 2006.  (They bumped it back a couple of times since then…)  At that time, stores had HDTVs up to about 83″, so saying I wanted one 76″ or larger was only mostly silly – since then, in trying to find a mass-marketable HDTV size and in compliance with plasma-TV constraints, HDTV sizes have settled pretty comfortably in the 40″-55″ range, and there is rarely a TV over 72″, so I compromised my ridiculous requirement a few years back to consider HDTVs 72″ and larger.  Long story short, I’ve been noticing that Fry’s Electronics keeps listing a 73″ Mitsubishi DLP HDTV for $1899.  (Note: DLP is my preferred technology for HDTV, until SED comes out.)  Yesterday I noticed that it’s even “3D Ready” – which I had to look up, since … umm…  3D ready?  I mean, I’d heard that there was a company working with developers to come out with some 3D games for the PS3 in 2009, but it didn’t make a lot of sense because -as far as I knew- there weren’t any 3D TV’s on the market, yet.  Apparently, there are.  Mitsubishi and Samsung both manufacture 3D-capable DLP HDTVs – they work with shutter glasses, available for ~$60-$75/pair.  Huh.  Anyway, so partially since I’ve been expecting/planning on replacing my TV with an HDTV in 2006 for the last decade, partially because the analog broadcasts are finally shutting down, partially because there’s actually a 72″+ DLP HDTV available under $2k, partially because we have a PS3/Blu-Ray player and actually just bought our first Blu-Ray (Repo! The Genetic Opera, FYI), I’ve sortof got a bug about getting an HDTV.  Like, I’m pretty sure it’s why I woke up at 2AM after less than 4 hours of sleep this morning – I can’t stop thinking about this money situation and about this TV.  So I’ve been sitting here for the last 3.5hrs writing this post, somewhat to try to talk/write myself out of the idea of it.

The opportunity cost of buying a $2k TV is… well, frankly, it would mean getting a new iMac is out of the question – because really we do need to eat.  Even if I didn’t feel paying my father’s property tax (or at least some large portion of it) was the right thing to do, HDTV+iMac = no money left for food.  Property tax + iMac = about 3-4 months of expenses left covered.  (And the iMac would actually be a business expense – so that’ll help with next year’s taxes.)  Property tax + HDTV = about 2 months of expenses left covered.  And then we can starve to death in front of a really, really beautiful home theater.  There’s always debt…  This is America, after all.  But since March, we haven’t missed or been late on a single payment on any of our accounts and our total debt is down by around $5k.  And while we could put one of these things on credit and pay it down over time (plus interest, of course – even when the Fed’s rate is at 0%, the rest of us have to pay interest), we’d really prefer to keep heading in the direction of less debt rather than more debt.  At this rate, I know, it’s about 12 years before we could dig ourselves down to debt-free, and the cost of an iMac only adds a couple of months to that, but it’s the principle, right?  Heck, the smartest thing to do would be to pay down as much of our highest-interest debt with the tax refund as possible, since we’re paying interest on it and our checking account earns no interest…

And, yes, there’s the idea of sales and income from my businesses to consider, too.  Before hrblock.com advised me of Sec. 179 Depreciation, whereby all the assets/equipment I bought this year were counted as expenses, I’d actually had a Net Income for 2008 of around $60.  (With the extra expenses it’s more like negative $300.)  Which is to say, after less than a year I’m nearly profitable.  I had some expenses this month that’ll take a while to earn back (travel to NYC for Tools of Change, books setup and inventory for my two new books, and I pre-paid for a full year for a space at Roosevelt Row / First Fridays), but I’ve also got at least one person considering commissioning some art already, too, and have had pretty good interest in the new books.  The closer the income from sales of my art & books is to our actual needs, the better, and if/when the one passes the other, concerns like this become less dire.  Hopefully we can get there within a year or two.  Hopefully the economy recovers enough that people can afford to pay more reasonable prices for my art.  Hopefully enough people hear about my books that sales go up from dozens to hundreds (or thousands) of copies.  Hopefully.  Hopefully.

Ugh, I’ve written almost 2500 words and I still don’t feel resolved on the matter.  The mature, appropriate, best thing to do is some combination of paying dad’s property tax, paying down debt, and using the money to buy food and gasoline.  The iBook works, even if it’s slow & has a cramped workspace.  The CRT TV works, especially since we get all our TV from the internet.  We can get by without either big purchase, and we can get by a lot longer without either one.  Maybe, maybe, I’d be more productive with a faster, better computer with a bigger screen.  And maybe I’d be more productive with a huge TV, too.  (No, really – I sketch, paint, and do most of my web development in front of the TV and -and this is important- do most of my relaxing there, too.  Being happy with my home theatre (as opposed to staying up nights fretting about HDTVs, like I’m doing now, or spending hours and days researching HDTVs, like I’ve done off and on these last few weeks/months) and able to actually relax in my off hours will certainly contribute to the quality of work I do.)  Sigh.  Alright, I’m going to see if maybe I can get a bit of a nap in.  Sleep on this a bit more.  I doubt it.  I feel almost as conflicted as I did last night.  Stupid money.

Note: the opportunity cost of fretting about this & writing this post is the last five hours. I could have been sleeping.