I haven't posted our month's end update yet because our financial situation this past week has been so in flux. In a recent post I talked a bit about hoping our Xmas shortfall might "magically" fix itself. And believe it or not, we actually have had a fair bit of good fortune magic come our way recently in terms of income.
Hubby's writing/website management hobby is really taking off! He's just landed a new deal that should pay a minimum of $300/month starting next week, and possibly up to $500 or more. And that's in addition to the $220 he was already making through another deal, plus some smaller bits on the side. All together that is more than enough to make up for the back pay child support that is now ending (last check tomorrow!) and also enough to bridge the income gap we were expecting for Dec/Jan.
Additionally, I've had a little bit of work come my way as well! My worse case budget scenario was assuming I would continue to have only about $140/month of income (that used to be more like $600). For at least Dec/Jan though, I think I can count on that being around $400 instead, so that's another extra $260 that also kind of feels like it just magically appeared in time for Christmas.
Were in not for the car repair that suddenly fell into our laps as well then, we would probably feel we were raking in the dough. But alas, this was no ordinary car repair. This was a $992 doosey. I'm not even sure we've paid that much for a car repair before. Usually when the repairs start getting that expensive and close together, the car is old enough that we decide its probably not worth it and time for a newer one instead. But this is hubby's car and we are still making car payments on it as it is. It's also the newer of our two vehicles and therefore not allowed to reach the end of its life first!
Anyways, that completely cleaned out the emergency fund. All but $10.17. So that's a little scary. Cause it's a good two and a half months until tax rebate season. Additionally, our discretionary account has only $4.81 in it, while even our fixed checking, which we use for things like the mortgage, has only $728.42. Not cool. Luckily, hubby gets paid tomorrow, though there are still lots more gifts to get. I should point out here that the order these fluctuations came in as was: my income increase (Oh, good, that will help a little), then the car (Oh, fuck. We're screwed again.), then hubby's income increase (Woo hoooo!!! We're saved!). It's been a long week.
We ended last month with about $260 surplus, which we would have liked to use to pay down our credit card debts given that that is the point of this whole thing. Unfortunately, as the month ended, we were projecting a $750 shortfall for Dec./Jan., so I felt I needed to hold on to that extra to help somehow bridge the gap. When my extra income came in, we had high hopes that end of Dec or at least Jan. might afford us some surplus after all. But then the car crapped out, and Dave Ramsey says our first priority now should be going back to baby step 1 to replenish the emergency fund. I'm not quite sure yet where that puts us in terms of catching up again, but it may well be Feb still. In the meantime, we will continue making our roughly $500/month in minimum payments.
More good news; some very preliminary numbers I ran in the newly released 2012 Turbotax seem to predict that we will be getting back around $8000 this year! Holy shit! I think that's even bigger than when we got our first time home buyer's credit, though I might be wrong about that. We only claimed 4 deductions rather than 5 on hubby's W-4, so as to cancel out my estimated business taxes, but I didn't make very much so it ending up being a lot more withholdings than we really needed. Plus, we get some kind of a $2000 education credit for my daughter starting college, since she is still a dependent on our taxes for this year. Yay!! Until the car died, we were considering buying a new fridge with some of that. But at this point, we may just muddle through and try to just get done with this ASAP. Hopefully by next Xmas we'll be on baby step 3!
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Thursday, December 6, 2012
Thursday, November 29, 2012
The December Budget
I haven't posted an actual numbers budget here yet, but I figure given how careful we will need to be these next few months, December is a good time to start. Explanations to follow. Here goes:
Okay, so before my non-existent audience jumps down my neck about a few items on there, allow me to explain myself. First of all, our gym membership. A bit costly, I agree, and that is certainly one of those things they always recommend canceling at the beginning of any big get out of debt plan. But the assumption is usually that you're not using it enough for it to be worth it. And nothing could be farther from the truth in our case. You see, our gym provides 2 free hours of child care per day for stay at home mommies like me to take advantage of and not go crazy. Either my husband or I, and not uncommonly both, take a trip to the gym pretty much Every Single Day. No, I am not exaggerating, and we have both been doing this for over a year now so I'm pretty sure its not a phase. Additionally, since we started going to the gym, we have lost a combined total of over 100 pounds. This has brought both our BMIs into the healthy range and allows us to get a $1200/yr reduction in our health insurance premium costs. And guess what? That pays for the gym. So I think that's a valid expense.
The leaf removal service. Well, all I can say in defense is that my husband spent just about every moment of his weekend free time for a month last year trying to take care of this on his own, and we still did a completely half ass job. With two small boys who cannot be kept contained for any length of time without a fence, (nor kept in the cold that long), we just don't have the time for this right now. An extravagance, yes, but so, so worth it.
To be honest though, this is really an extension of the lawn mowing service we had this past summer. Also something we felt we did not have time for, though not as time consuming as the leaves I'll admit. And we had not yet started our Total Money Makeover then. Not sure what we're going to do about that next lawn season yet. If the boys are at the point where they can be outside with me while I do it, it might be possible again. I am hoping my business will pick up again by then though so that we won't need to feel bad about making that splurge again. Because we loved it and our yard looks so much better now.
One final note, while he does a great job, our lawn guy is horrible with his billing. We haven't yet actually received this leaf removal bill, and I have a feeling I am going to have to remind him he added us to his leaf list. He is a decent guy and I would not want to take advantage of him - but - if he did forget again, I may wait to remind him until late February or so. ;)
Entertainment - that's the allowance hubby and I give ourselves so that we have at least a little fun money. I've actually cut this budget category down quite a bit from what it used to be because we've both been pretty good at cutting it back and we have agreed to let go of date nights out for a year. But if I give hubby any less than what it currently is, he will not be willing to do this anymore. He's struggling as it is. So that's that.
Yes, we have expensive iPhone data plans. All I can say is that we live on them. There was a time not long ago that I felt they were completely unnecessary (hubby likes to remind me of that from time to time). But now, everything from our recipes, to workout routines, to social networking, to downtime gaming is on them and I'm not even sure what I would do without mine anymore. For better or worse, my phone is like an extension of myself at this point. So extravagant or not, we're not getting rid of that. We did cancel our home phone a while back though.
Garbage - just a note that that is for two months worth of service.
Gasoline - This one might be considerably lower. Will depend on whether I need to get my daughter from college at the end of the semester or not. Its amazing how much less we spend on gas than we used to though now that we don't go anywhere! Still figuring out what a good number for it is now.
Groceries - as I've mentioned, we're working on it. We've started shopping at a discount ware house store every couple weeks for many things, but we're still using our more expensive grocery delivery service for most perishable things, though we have almost halved our bill most weeks with the cost reducing measures we're taking. I think there's more we can do here, but Xmas and having 5 grocery days in Dec. instead of 4 is going to make this month hard. Someday the boys will be big enough to make store shopping feel more doable again too I'm sure, but by then hopefully we'll be out of this mess.
We do have some leftover buffer from this month that will help us out a little with that $773 difference, as well as some other possibilities I've discussed, but its going to be a tough month. Without Xmas in there, Jan should be a little better.
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The leaf removal service. Well, all I can say in defense is that my husband spent just about every moment of his weekend free time for a month last year trying to take care of this on his own, and we still did a completely half ass job. With two small boys who cannot be kept contained for any length of time without a fence, (nor kept in the cold that long), we just don't have the time for this right now. An extravagance, yes, but so, so worth it.
To be honest though, this is really an extension of the lawn mowing service we had this past summer. Also something we felt we did not have time for, though not as time consuming as the leaves I'll admit. And we had not yet started our Total Money Makeover then. Not sure what we're going to do about that next lawn season yet. If the boys are at the point where they can be outside with me while I do it, it might be possible again. I am hoping my business will pick up again by then though so that we won't need to feel bad about making that splurge again. Because we loved it and our yard looks so much better now.
One final note, while he does a great job, our lawn guy is horrible with his billing. We haven't yet actually received this leaf removal bill, and I have a feeling I am going to have to remind him he added us to his leaf list. He is a decent guy and I would not want to take advantage of him - but - if he did forget again, I may wait to remind him until late February or so. ;)
Entertainment - that's the allowance hubby and I give ourselves so that we have at least a little fun money. I've actually cut this budget category down quite a bit from what it used to be because we've both been pretty good at cutting it back and we have agreed to let go of date nights out for a year. But if I give hubby any less than what it currently is, he will not be willing to do this anymore. He's struggling as it is. So that's that.
Yes, we have expensive iPhone data plans. All I can say is that we live on them. There was a time not long ago that I felt they were completely unnecessary (hubby likes to remind me of that from time to time). But now, everything from our recipes, to workout routines, to social networking, to downtime gaming is on them and I'm not even sure what I would do without mine anymore. For better or worse, my phone is like an extension of myself at this point. So extravagant or not, we're not getting rid of that. We did cancel our home phone a while back though.
Garbage - just a note that that is for two months worth of service.
Gasoline - This one might be considerably lower. Will depend on whether I need to get my daughter from college at the end of the semester or not. Its amazing how much less we spend on gas than we used to though now that we don't go anywhere! Still figuring out what a good number for it is now.
Groceries - as I've mentioned, we're working on it. We've started shopping at a discount ware house store every couple weeks for many things, but we're still using our more expensive grocery delivery service for most perishable things, though we have almost halved our bill most weeks with the cost reducing measures we're taking. I think there's more we can do here, but Xmas and having 5 grocery days in Dec. instead of 4 is going to make this month hard. Someday the boys will be big enough to make store shopping feel more doable again too I'm sure, but by then hopefully we'll be out of this mess.
We do have some leftover buffer from this month that will help us out a little with that $773 difference, as well as some other possibilities I've discussed, but its going to be a tough month. Without Xmas in there, Jan should be a little better.
Cancelling Christmas (Except Not)
So bad news this week. That big job I usually get this time of year that has paid for the last couple Christmases will not be happening this year. Or anymore at all actually; it appears they have gone out of business. And given how much we were counting on it, that is quite a bummer.
The net effect of this is that Dec and Jan are not going to be just tight as I've mentioned, they are going to be negative in terms of cash flow. Even putting off getting the new tires we need, and even adding in the savings we scraped out of this month, I estimate we are still going to be about $500 short by the end of Jan. And given that bonuses and tax returns won't come in until the later half of Feb, the first half of that month is not going to be pretty either. Things have already felt so tight on this Total Money Makeover that it's hard for me to even picture how much more this is going to suck now.
Given all this, and in the spirit of maintaining gazelle intensity for our debts (I mentioned I hated that phrase, right?), it seems we probably should cancel Xmas this year. Or presents at least, that is. In fact, that would simple act alone would about take care of that $500 shortfall we have (so would winning that $500 million Powerball right now, but I digress). But we are not going to do that. Does this mean we are not really serious about our Total Money Makeover? I don't know, perhaps. But I just can't. It would be too sad for me and I think my husband would just lose it. We would lose our drive to do this because it just wouldn't feel worth it anymore. We're going to be smart about it and stick to our budget, but we're going to have Xmas, so tough.
So where is this $500 going to magically appear from then you ask? That's a good question. Cause we do have $1000 sitting in our emergency fund still, but we all know how Dave Ramsey feels about acting as if Xmas is an emergency. Well, one solution is that it might magically appear. Okay, okay, not magically. But so far hubby's side writing hobby has been bringing in a little more money than expected each month. I think its quite possible we could end up with up to $250 more from that then I currently have budgeted. Also, I could get another job through my business (hah!). I mean, probably not this month, but it could happen. At one time, I made over $20K/yr with this little side gig. (Will probably be lucky to hit even $6K this year.)
Other, less magical avenues include the possibility of me getting a very part-time job in the evenings. I'm looking into this and will in fact be putting in an application by the end of the week I hope. Not sure I will do it for any longer than necessary, but I feel I must do something. It just sucks because I will probably make only a quarter as much per hour for my efforts doing that then for my business. But a quarter as much still meets the gap my business is just not producing right now. I really hope that changes again eventually. :(
If worse comes to worse though and none of those things pan out, I guess we will be tapping into the emergency fund. All I can say in our defense is that I promise we will pay it back in February. Needless to say, there will be no extra credit card/car payments for the next 3 months. Our minimum payments total to almost $500/month though, and our credit cards are all no interest promotions, so as long as we don't use those, we'll still be chipping away at it.
The net effect of this is that Dec and Jan are not going to be just tight as I've mentioned, they are going to be negative in terms of cash flow. Even putting off getting the new tires we need, and even adding in the savings we scraped out of this month, I estimate we are still going to be about $500 short by the end of Jan. And given that bonuses and tax returns won't come in until the later half of Feb, the first half of that month is not going to be pretty either. Things have already felt so tight on this Total Money Makeover that it's hard for me to even picture how much more this is going to suck now.
Given all this, and in the spirit of maintaining gazelle intensity for our debts (I mentioned I hated that phrase, right?), it seems we probably should cancel Xmas this year. Or presents at least, that is. In fact, that would simple act alone would about take care of that $500 shortfall we have (so would winning that $500 million Powerball right now, but I digress). But we are not going to do that. Does this mean we are not really serious about our Total Money Makeover? I don't know, perhaps. But I just can't. It would be too sad for me and I think my husband would just lose it. We would lose our drive to do this because it just wouldn't feel worth it anymore. We're going to be smart about it and stick to our budget, but we're going to have Xmas, so tough.
So where is this $500 going to magically appear from then you ask? That's a good question. Cause we do have $1000 sitting in our emergency fund still, but we all know how Dave Ramsey feels about acting as if Xmas is an emergency. Well, one solution is that it might magically appear. Okay, okay, not magically. But so far hubby's side writing hobby has been bringing in a little more money than expected each month. I think its quite possible we could end up with up to $250 more from that then I currently have budgeted. Also, I could get another job through my business (hah!). I mean, probably not this month, but it could happen. At one time, I made over $20K/yr with this little side gig. (Will probably be lucky to hit even $6K this year.)
Other, less magical avenues include the possibility of me getting a very part-time job in the evenings. I'm looking into this and will in fact be putting in an application by the end of the week I hope. Not sure I will do it for any longer than necessary, but I feel I must do something. It just sucks because I will probably make only a quarter as much per hour for my efforts doing that then for my business. But a quarter as much still meets the gap my business is just not producing right now. I really hope that changes again eventually. :(
If worse comes to worse though and none of those things pan out, I guess we will be tapping into the emergency fund. All I can say in our defense is that I promise we will pay it back in February. Needless to say, there will be no extra credit card/car payments for the next 3 months. Our minimum payments total to almost $500/month though, and our credit cards are all no interest promotions, so as long as we don't use those, we'll still be chipping away at it.
Monday, November 19, 2012
Apparently We're Good at This
I keep trying to find more things we can do, something we must be missing, to make this debt thing go faster. So far, no luck. If anything, the book I checked out from the library recently (did you hear that, the library not the book store) called "Your Money: The Missing Manual" made me feel like we're taking this more seriously than I sometimes feel we are. Consider all these recommended measures we have implemented:
Cancelling cable: As of last week, Check! My husband's company pays for the internet portion of our bill already. And our recent purchase of an Apple tv will pay for itself in less than two months of not paying for cable.
Get rid of home phone: We got rid of our home phone line a couple months ago since we were really only using our cell phones anyways. This has been causing us to use more of our cell phone roll over minutes though, so I'm hoping we won't have to up that eventually.
Cancel monthly subscriptions: To my surprise when we began this, hubby volunteered to cancel his Audible subscription until our debt was paid off and just re listen to old favorites instead. We also cancelled our Netflix a few months ago since we hardly ever used it and I've already decided not to renew Newsweek this coming year. Half the issues never get read anyways.
Make a Unit Price Grocery Spreadsheet: Still working on that but I have started to collect that info and I'm already getting the hang of when something is a good price. I have also learned to...
Use Coupons Wisely: I do not fall for buying things with coupons that a) I wouldn't usually get anyways b) are still more expensive than the store brand or another location. This also meets his suggestion to...
Discard Brand Loyalties: Even for toilet paper, I got over it.
Buy In Bulk - When it Makes Sense: Hello new big box warehouse store membership. Can't believe how much money we've saved there (per unit price at least!) so far.
Waste Not: Finally plugged in the big freezer downstairs again and started labeling and storing all left over canned and other items. I've even started buying things like yogurt in bulk, freezing it before it goes bad and then thawing it as needed. Its a little more liquidy than it would have been but still tastes fine (the boys don't know the difference!).
Shop Less: Not a problem. There's no money anyways and neither hubby or I were ever big shoppers. Probably the biggest success in this area though was when we separated our checking account into discretionary and non-discretionary expenses and then limited ourselves to a budgeted discretionary amount. In theory we were doing that before, but since I didn't track where each individual purchase went, it was hard to know how well we were sticking to it. I still don't always track it that closely. But now, when the discretionary money's gone, its gone. And so that takes care of that.
Replace Light Bulbs w/ Florescent: Done! We even got a Groupon for a home energy checkup a month or so ago in which we also got some weather stripping applied to a couple doors and well as thermometers to check refrigerator/freezer and water heater temps. We would have gotten more but they said we were already doing great on most everything else! Especially considering our gas energy company gave us a rebate to get our attic re-insulated this past summer which has already significantly impacted our energy bills.
Increase/decrease the setting on your programmable thermostat: We haven't made any huge sacrifices here compared to people I hear setting their winter thermostat to 65F or waiting until Halloween to even turn on heat but we have lowered our winter setting from 75F to 72F and raised our summer setting from 72F to 74F. It not much I know, but we do have two year old boys and I don't want them to be too cold or not sleep well. Bedroom space heaters make me nervous with such little ones (and I don't think they could be trusted with them once we switch to "big kid" beds), and we haven't had the money yet to invest in summer ceiling fans.
Play Board Games for Fun: We don't always play board games, but hubby and I have completely let go of our monthly night outs for the next year and turned all our date nights into at home affairs instead. We always make a nice dinner together after the boys are in bed and then talk or watch a movie or something.
So those are all the things we're doing right. Perhaps I will devote my next entry to all the things we could still improve though I worry it will just turn into a big excuse fest! ;)
Sunday, November 11, 2012
The Big Picture
This may be simply an exercise in idealistic dreaming, but I want to paint for you (or maybe mostly just me) a picture of how I see this new financial plan unfolding for us in the coming years. Cause I have big, unrealized but hopefully not unrealistic, dreams. In Dave Ramsey's book, he tells you that it takes most people about seven years to reach Baby Step 7: Build Wealth. Longer still to get to the Pinnacle Point where your money finally starts working harder than you have to. Certainly, that is the long term goal. And the short term goal is the credit card/car payment debt payoff I've already outlined. But it'd be nice to have a picture of our mid-term plan as well. Especially given that I don't think we will be following the Baby Steps precisely.
So, one year out, give or take a few months, and hopefully our small debts (non-mortgage/student loan) will be paid off. At that point we will hopefully be more used to getting by with a lot less monthly discretionary income. Maybe we can at least add enough back in to be able to go on monthly date nights again though. But I don't want to get too slack because we still have a lot or work to do. Baby Step 3 is to Finish the Emergency Fund, which he defines as 3-6 mos. worth of expenses. For us, that would roughly be $15K-$30K.
Projecting out both raises and expenses, once we get our small debts paid off, I think we could save roughly $25K/yr. So, that should take us 7-14 mos. depending on how much cushion we want. My thought is that we should save as much as possible, setting aside the minimum $15K to touch only for emergencies, but then factor in the fact that our family SUV will be 15 years old (already has 223K miles) by then. I am fine with driving it until it dies, but its pretty much a given that that is going to be before too much longer (please, please, please not this year!). I am also fine with not getting a new car when it does die. But I would prefer to get something gently used with at least a few more bells and whistles than our current one has. I think we could probably get something 5-6 years old for between $15-$20K.
That's not the only big ticket item we need to save for though. In a few more years, the boys will be ready to start school and I will be more than ready to jump back on the career train. But that is probably going to require a bit of retraining on my part, and I am not willing to take out any more student loans. (Above and beyond the $105K I already put my foot down on of course). So, if I want to go back, which I very much do right now, we will need to save for that too. I am conservatively estimating about $20K for that right now, plus after school daycare (maybe $5K? Though that will be more of an on-going expense), but given the rising cost of education these days, who knows?
The point of all this speculating is to point out that with these extra purchases, the time it takes up to save about $30K for an emergency fund is going to be more like 2-3/4 to 3 years rather than 14 mos. That's a long time. And who knows how many set backs there might be in the meantime. At some point, hubby's car will need to be replaced as well, though it is 5 years newer than the SUV at least. But I guess I'm okay with it as long as we get to Baby Step 4: Retirement Investing, by the time I re-graduate, which I am predicting will be in 5-6 years. If we get to that step before I graduate, then I guess we will start putting at least the company matching amount into hubby's 401K. Actually, if we don't get to that step before 40, we probably should do a lot more than that, and I kind of doubt we will. Once I do graduate and start working again though, we are going to kick step 4's butt.
And then we get to Baby Step 5: College Funding for the kids. Except we're going to re-package that one as college payoff for the adults. By then my daughter will be done with college (or darn well better be at least). Until we get fabulously wealthy, I have done the best I can for her by insisting that she go to a school where she would graduate with a maximum of $40K in debt. Still a lot I know, but less than half as much than me, and within the amount considered reasonable by the income to debt calculators. She hated me for it at the time, but now seems mostly happy.
I am hoping that with a new masters degree I will be able to make at least $50K, although about half of that will probably have to go towards retirement, and the rest will get taxed. But lets just say that after stocking up our emergency fund, we have about $25K/yr extra from hubby's income and $25K/yr from mine. So $50K/yr extra after I start working to do with what we will. (OMG, is that really possible?) What to do with all that cash?? Pay off my damn student loans!! If we stick to the plan, that should take us only two more years. At that point, we can look into some minimal investing for the boys' college (and maybe some back pay for my daughter). But they are going to be expected to chip in as well because we are heading off to...
...Baby Step 6: Pay Off the Mortgage! Honestly, not quite sure what's going to happen when we get to this step because you see, before we focus on paying off the mortgage, we'd like to focus instead of getting the house we'd really like to have. The exciting thing is, once the student loan is paid off, we could afford about $600 more per month for a mortgage without changing anything else. Assuming the market continues to improve, we should also have a fair amount of equity at this point, having lived here for about 11 years. I am not sure yet whether we would rather buy or remodel. It will probably depend a lot on the location of our jobs at that point. There are some things I really like about both this home and this area, but our home was built in the 1960's and it really needs some updating. I think it would take between $175K-$200K to get it to where we want it, and only about 60% of that could be recouped in re-sale value. Whether or not that's worth it will depend largely on what we could get for the same value given the housing market at the time.
I also really like Dave Ramsey's idea of taking out only a 15 year mortgage and keeping your mortgage payment to less than 25% of your take home pay. Whether we decide to buy or remodel, I do very much want to keep those rules in mind. After all our hard work, I certainly do not want to end up house poor. It will be hard to feel like we can't afford just about whatever we want once we've taken care of all that other debt. And I do love big, pretty homes. Nonetheless, regardless of what we choose to do, at that point it should be a maximum of 15 years until we are entirely debt free, and if we continue with the $50K/yr rule, I think we could take that down to 6 years.
Which means this is more like a 14 year than a 7 years plan for us, but by the time we enter our 50's, it is very possible we will have no debt remaining (maybe we'll bump up the boys college fund at that point) and hopefully by the time we hit our 60's we will have reached that fabled Pinnacle Point which will leave us set for a long, happy retirement. Its certainly not a get rich quick scheme. which makes it seem somewhat more believable. Though it will certainly require a lot of dedication and sacrifice. But it seems like by the time the boys graduate from high school, we will finally have both the time AND money to do all sorts of things.
So that's the big picture. And now back to Baby Step 2.
So, one year out, give or take a few months, and hopefully our small debts (non-mortgage/student loan) will be paid off. At that point we will hopefully be more used to getting by with a lot less monthly discretionary income. Maybe we can at least add enough back in to be able to go on monthly date nights again though. But I don't want to get too slack because we still have a lot or work to do. Baby Step 3 is to Finish the Emergency Fund, which he defines as 3-6 mos. worth of expenses. For us, that would roughly be $15K-$30K.
Projecting out both raises and expenses, once we get our small debts paid off, I think we could save roughly $25K/yr. So, that should take us 7-14 mos. depending on how much cushion we want. My thought is that we should save as much as possible, setting aside the minimum $15K to touch only for emergencies, but then factor in the fact that our family SUV will be 15 years old (already has 223K miles) by then. I am fine with driving it until it dies, but its pretty much a given that that is going to be before too much longer (please, please, please not this year!). I am also fine with not getting a new car when it does die. But I would prefer to get something gently used with at least a few more bells and whistles than our current one has. I think we could probably get something 5-6 years old for between $15-$20K.
That's not the only big ticket item we need to save for though. In a few more years, the boys will be ready to start school and I will be more than ready to jump back on the career train. But that is probably going to require a bit of retraining on my part, and I am not willing to take out any more student loans. (Above and beyond the $105K I already put my foot down on of course). So, if I want to go back, which I very much do right now, we will need to save for that too. I am conservatively estimating about $20K for that right now, plus after school daycare (maybe $5K? Though that will be more of an on-going expense), but given the rising cost of education these days, who knows?
The point of all this speculating is to point out that with these extra purchases, the time it takes up to save about $30K for an emergency fund is going to be more like 2-3/4 to 3 years rather than 14 mos. That's a long time. And who knows how many set backs there might be in the meantime. At some point, hubby's car will need to be replaced as well, though it is 5 years newer than the SUV at least. But I guess I'm okay with it as long as we get to Baby Step 4: Retirement Investing, by the time I re-graduate, which I am predicting will be in 5-6 years. If we get to that step before I graduate, then I guess we will start putting at least the company matching amount into hubby's 401K. Actually, if we don't get to that step before 40, we probably should do a lot more than that, and I kind of doubt we will. Once I do graduate and start working again though, we are going to kick step 4's butt.
And then we get to Baby Step 5: College Funding for the kids. Except we're going to re-package that one as college payoff for the adults. By then my daughter will be done with college (or darn well better be at least). Until we get fabulously wealthy, I have done the best I can for her by insisting that she go to a school where she would graduate with a maximum of $40K in debt. Still a lot I know, but less than half as much than me, and within the amount considered reasonable by the income to debt calculators. She hated me for it at the time, but now seems mostly happy.
I am hoping that with a new masters degree I will be able to make at least $50K, although about half of that will probably have to go towards retirement, and the rest will get taxed. But lets just say that after stocking up our emergency fund, we have about $25K/yr extra from hubby's income and $25K/yr from mine. So $50K/yr extra after I start working to do with what we will. (OMG, is that really possible?) What to do with all that cash?? Pay off my damn student loans!! If we stick to the plan, that should take us only two more years. At that point, we can look into some minimal investing for the boys' college (and maybe some back pay for my daughter). But they are going to be expected to chip in as well because we are heading off to...
...Baby Step 6: Pay Off the Mortgage! Honestly, not quite sure what's going to happen when we get to this step because you see, before we focus on paying off the mortgage, we'd like to focus instead of getting the house we'd really like to have. The exciting thing is, once the student loan is paid off, we could afford about $600 more per month for a mortgage without changing anything else. Assuming the market continues to improve, we should also have a fair amount of equity at this point, having lived here for about 11 years. I am not sure yet whether we would rather buy or remodel. It will probably depend a lot on the location of our jobs at that point. There are some things I really like about both this home and this area, but our home was built in the 1960's and it really needs some updating. I think it would take between $175K-$200K to get it to where we want it, and only about 60% of that could be recouped in re-sale value. Whether or not that's worth it will depend largely on what we could get for the same value given the housing market at the time.
I also really like Dave Ramsey's idea of taking out only a 15 year mortgage and keeping your mortgage payment to less than 25% of your take home pay. Whether we decide to buy or remodel, I do very much want to keep those rules in mind. After all our hard work, I certainly do not want to end up house poor. It will be hard to feel like we can't afford just about whatever we want once we've taken care of all that other debt. And I do love big, pretty homes. Nonetheless, regardless of what we choose to do, at that point it should be a maximum of 15 years until we are entirely debt free, and if we continue with the $50K/yr rule, I think we could take that down to 6 years.
Which means this is more like a 14 year than a 7 years plan for us, but by the time we enter our 50's, it is very possible we will have no debt remaining (maybe we'll bump up the boys college fund at that point) and hopefully by the time we hit our 60's we will have reached that fabled Pinnacle Point which will leave us set for a long, happy retirement. Its certainly not a get rich quick scheme. which makes it seem somewhat more believable. Though it will certainly require a lot of dedication and sacrifice. But it seems like by the time the boys graduate from high school, we will finally have both the time AND money to do all sorts of things.
So that's the big picture. And now back to Baby Step 2.
Friday, November 9, 2012
Grocery Day
It is sad, but I was actually having trouble sleeping last night due to worrying about grocery day today.I feel doomed to over spending failure. I did finally manage to go one week last week without visiting our discount warehouse store for supplies. (You know, that big box store that's supposed to be saving us money, but so far seems to be costing us more instead due to the bulk amounts.) But it seems like that just means there will be twice as much this week instead, so I'm not that impressed with myself anymore.
Other than our mortgage, groceries is our single biggest monthly expense, and I really feel that getting control of our finances is going to require some soul seraching in this area. Looking over the list (20 items!), I would say that close to half the items are things that are going to last us for quite a long time, so perhaps it is once again that we are just still in the bulk up phase. We've been in this phase for a month and a half now then though. And we really need to be out of it by next month because I am projecting Dec and Jan to both be particularly tight. And then I look at the news and see things about food cost increases due to the drought this past summer, and fiscal cliff payroll tax increases, and I just want to scream a throw things. A little help please??
My husband is not much emotional support this week either as he seem to be struggling with it worse than me. I think it is mostly brought on by his job kind of sucking right now. But he got really annoyed the other day when I said he'd need to wait until pay day to get another new charger cord for his new iPhone (because of course the old ones are no longer compatible) because we used up all of last paycheck's discretionary budget getting the phone itself. He got annoyed and said that it sucks to work hard all day at a job he doesn't like to make all this money, and yet still not have $20 for a phone cord at the end of the day if he wants one. To which I was like, well we do have enough if you want to prioritize that over credit card debt, but we can't do both. He grumbled and went downstairs and was moody for the rest of the night even though he said he did think we were doing the right thing.
My thoughts upstairs were along the lines of, "Come on. You got an iPhone 5 this month. I got an iPhone 4. That's certainly not nothing. And you only need to wait 1 extra day!" He's not normally that whiny (though money issues does seem to be one of his buttons) so I think its mostly work. And I think its more generally the idea of not having enough money period that bothers him a lot more than the phone cord specifically. None the less, its hard to feel like a motivated, goal in site, on the ball team when faced with tirades like that. Also had to explain to him this week that planning a meal with beef instead of chicken because that's what we still have in the freezer doesn't actually save us money if we still have either chicken or beef every time in roughly the same ratios (assuming we never let it spoil, which we don't). To actually save money, we have to use less meat. He is a smart man. I'm not sure why that was hard for him to hear.
I've still been feeling quite motivated and very happy that we are working on this. I just wish it were not so mind numbingly slow! I've seen a number of blogs that mention the idea of "snow flaking" your way through your debt snowball. That is, finding lots of small ways to contribute regularly to the total sum. I think I need to look more into ways to do that, because I really need to find more chances to celebrate in what will undoubtedly be a long and somewhat frustrating year. I also need to get more comfortable with throwing this extra money immediately towards debt instead of holding on to it "in case", because it always gets spent that way. For instance, I realized out of the blue the other day that our bank check cards have been racking up points in one of those rewards programs for months (if not years) now. Turned out we had a little over $100 in cash back savings. Half of that went directly towards a credit card, but half of it got used for things like diapers and wipes this week due to funds being low after the phones.
As long as we truly stick to our budget, that extra should still be there at the end of the month to pay then. But we all know what often happens with things like that. Case and point: it was mailing in the buffer at the end of last month that caused us to be too short for the phone cord this week, and look how my husband reacted. Its hard to not want to keep some on hand to avoid situations like that. I think perhaps we need to have a discussion about keeping our state of mind in the right place for each other during this "small account buffer" period of our finances. I know it makes him uneasy, which in turn makes me uneasy, but this is how its going to be for the next few month if we are to make any real progress. We need to be each other's cheerleaders more often. We are doing something awesome and very worthwhile!
I wish my next money goal could be getting our grocery bill under a certain amount, but to be honest, until we get done with these initial bulk purchases (maybe this week?) I just don't think I can budget as well as I would like for that yet. One thing I am finally going to bite the bullet on though: a "best" price spreadsheet for groceries. We have up to 5 different stores we get things from at this point (though only 3 main ones) and trying to keep track of which place is best for which thing is driving me crazy, especially when sales come up. Granted, the idea of being the kind of crazy, price checking, coupon clipping, store hopping lady who has a list like that also makes me cringe. But as mentioned before, groceries is really the number one things we need to get a handle on in this house. Something must be done.
I already have two items I'm going to price check at two places before I purchase this week. As well as two coupons I printed and then discarded when I discovered the store brand is cheaper anyway. I did totally fall for a $5 store card with diaper purchase, only to realize as I was getting in my car that they had just marked up their regular diaper price by $5 (Bastards!). Actually, I think that was the very moment I finally accepted that I needed to make this spreadsheet. To redeem myself, I made sure to cut up and freeze the two extra bananas I didn't use after all this week, so that I can use them next week instead. To me, these are the true Baby Steps of Dave Ramsey's process right now. Because the distance between this Baby Step and the next one in the Total Money Makeover book feels more like an Olympic hurdle to me right now. But I am slowly finding my balance in this stage, and there are many milestones yet to come.
Other than our mortgage, groceries is our single biggest monthly expense, and I really feel that getting control of our finances is going to require some soul seraching in this area. Looking over the list (20 items!), I would say that close to half the items are things that are going to last us for quite a long time, so perhaps it is once again that we are just still in the bulk up phase. We've been in this phase for a month and a half now then though. And we really need to be out of it by next month because I am projecting Dec and Jan to both be particularly tight. And then I look at the news and see things about food cost increases due to the drought this past summer, and fiscal cliff payroll tax increases, and I just want to scream a throw things. A little help please??
My husband is not much emotional support this week either as he seem to be struggling with it worse than me. I think it is mostly brought on by his job kind of sucking right now. But he got really annoyed the other day when I said he'd need to wait until pay day to get another new charger cord for his new iPhone (because of course the old ones are no longer compatible) because we used up all of last paycheck's discretionary budget getting the phone itself. He got annoyed and said that it sucks to work hard all day at a job he doesn't like to make all this money, and yet still not have $20 for a phone cord at the end of the day if he wants one. To which I was like, well we do have enough if you want to prioritize that over credit card debt, but we can't do both. He grumbled and went downstairs and was moody for the rest of the night even though he said he did think we were doing the right thing.
My thoughts upstairs were along the lines of, "Come on. You got an iPhone 5 this month. I got an iPhone 4. That's certainly not nothing. And you only need to wait 1 extra day!" He's not normally that whiny (though money issues does seem to be one of his buttons) so I think its mostly work. And I think its more generally the idea of not having enough money period that bothers him a lot more than the phone cord specifically. None the less, its hard to feel like a motivated, goal in site, on the ball team when faced with tirades like that. Also had to explain to him this week that planning a meal with beef instead of chicken because that's what we still have in the freezer doesn't actually save us money if we still have either chicken or beef every time in roughly the same ratios (assuming we never let it spoil, which we don't). To actually save money, we have to use less meat. He is a smart man. I'm not sure why that was hard for him to hear.
I've still been feeling quite motivated and very happy that we are working on this. I just wish it were not so mind numbingly slow! I've seen a number of blogs that mention the idea of "snow flaking" your way through your debt snowball. That is, finding lots of small ways to contribute regularly to the total sum. I think I need to look more into ways to do that, because I really need to find more chances to celebrate in what will undoubtedly be a long and somewhat frustrating year. I also need to get more comfortable with throwing this extra money immediately towards debt instead of holding on to it "in case", because it always gets spent that way. For instance, I realized out of the blue the other day that our bank check cards have been racking up points in one of those rewards programs for months (if not years) now. Turned out we had a little over $100 in cash back savings. Half of that went directly towards a credit card, but half of it got used for things like diapers and wipes this week due to funds being low after the phones.
As long as we truly stick to our budget, that extra should still be there at the end of the month to pay then. But we all know what often happens with things like that. Case and point: it was mailing in the buffer at the end of last month that caused us to be too short for the phone cord this week, and look how my husband reacted. Its hard to not want to keep some on hand to avoid situations like that. I think perhaps we need to have a discussion about keeping our state of mind in the right place for each other during this "small account buffer" period of our finances. I know it makes him uneasy, which in turn makes me uneasy, but this is how its going to be for the next few month if we are to make any real progress. We need to be each other's cheerleaders more often. We are doing something awesome and very worthwhile!
I wish my next money goal could be getting our grocery bill under a certain amount, but to be honest, until we get done with these initial bulk purchases (maybe this week?) I just don't think I can budget as well as I would like for that yet. One thing I am finally going to bite the bullet on though: a "best" price spreadsheet for groceries. We have up to 5 different stores we get things from at this point (though only 3 main ones) and trying to keep track of which place is best for which thing is driving me crazy, especially when sales come up. Granted, the idea of being the kind of crazy, price checking, coupon clipping, store hopping lady who has a list like that also makes me cringe. But as mentioned before, groceries is really the number one things we need to get a handle on in this house. Something must be done.
I already have two items I'm going to price check at two places before I purchase this week. As well as two coupons I printed and then discarded when I discovered the store brand is cheaper anyway. I did totally fall for a $5 store card with diaper purchase, only to realize as I was getting in my car that they had just marked up their regular diaper price by $5 (Bastards!). Actually, I think that was the very moment I finally accepted that I needed to make this spreadsheet. To redeem myself, I made sure to cut up and freeze the two extra bananas I didn't use after all this week, so that I can use them next week instead. To me, these are the true Baby Steps of Dave Ramsey's process right now. Because the distance between this Baby Step and the next one in the Total Money Makeover book feels more like an Olympic hurdle to me right now. But I am slowly finding my balance in this stage, and there are many milestones yet to come.
Thursday, November 1, 2012
(Number) Crunch Time!
Its the first on the new month! Time to tally up last month and see how far we got. It didn't all go as stellar as I had hoped. But the most important number of everything I can tell you is this: $434.55. We paid $434.55 more this month towards our debt than we would have before we started this money makeover. That is not to say that is all we paid. We actually sent in a total of $935.79. Which means we now stand at a total credit card/car debt of $23,725.13.
I'm not gonna pretend that's awesome. But its certainly better. Especially when you consider that, just as I feared, we were hit with a double whammy this month in terms of car issues. Every time something acts up we seem to leave the repair shop down another $350. This month that happened twice, though the second time was a doosey - about $520. This last year we put away some extra money into our emergency fund to use when things like this came up. But being three quarters through the year at this point, we had already burned through most of it. Plus, I wanted to follow Dave Ramsey's advice of not keeping more than $1000 on hand so as to help light a fire under your debt motivation butt. Thus, $159.91 of the extra we paid off this month came from throwing in our "excess" savings.
Additionally, Ramsey makes the point that regular car maintenance and repairs are not really emergencies usually, but rather something you should be budgeting for. Given that out newest car is 8 years old, I'd have to agree with that to some extent. Twice in one month is a bit ridiculous (though it was only once for each car) but Quicken tells me that we spent $2453.88 last year on car repairs/maintenance and we're never really all that surprised when we need to bring in a car for some reason. I think it was a little higher last year given that my daughter's car was at the end of its life and we no longer have that vehicle. Still, I decided that its something we should probably start budgeting for instead of always dipping in to the emergency fund. So I added a line item for it in our budget, which is unfortunately going to push off our end date by at least a month. Better to know about it now that be dejected by it later I suppose. And motivation for being able to get newer cars at the other end of all this!
Another thing that makes me feel not too bad about all this is that my Excel spreadsheet shows we actually brought in negative money this month. That's right, we actually had about $1300 less than we needed to cover all our expenses this month, and yet we still managed to reduce our credit card/car debt by 3.8%. Quicken also tells me that on average, we have spent about $1500/month on misc expenses and another $325/month on entertainment expenses this past year. This month we cut our misc expenses down to $471 and our entertainment down to $267. That's a 60% reduction, and I feel like it means we are serious about this.
It makes me realize as well that though the $1300 short fall probably would have happened no matter what, in previous times we would have just wondered what happened. Not being aware, we certainly would have dug ourselves in even further and made no additional debt progress what so ever. We may have even had to break out a credit card for that second car repair, thus again wiping out a considerable portion of what we paid off in the year leading up to this. Instead, I feel very aware now of just where our money is going and how it tends to get away from us.
Additionally, our other biggest expense this month was groceries: a whopping $1700 got spent this way which was even more than the absurdly high $1250 I had initially budgeted for it. I think this will absolutely be lower next month. For one thing, there are only 4 grocery days instead of 5 next month. For another, I am getting better at finding less expensive substitutions and planning some things around what we already have. But mostly, I think we have already stocked up on just about everything possible from the discount wholesale store we have started doing half our grocery shopping at. We started shopping there at the beginning of Oct and it has taken longer than I thought it would to make the switch over. Each time you buy something in bulk, you save on the cost per unit, but you spend even more initially on the cost over all since you're buying 4 times more. That added up a lot more than I realized it would.
If my home business continues to be sluggish, these next few months until Feb. are going to be hard. Especially come Dec. when my back child support finally ends (though Dec tends to be a good month for my business). That's about $500/month we are going to have to learn to do without. But come Feb, we should get a nice tax return. Then in March my husband's bonus will come, and if all goes as expected, in Apr. he should be getting a nice promotion, which will permanently make up the child support difference. Our goal at this point is still to be done with this piece by the end of 2013. And then on to baby step 3!
I'm not gonna pretend that's awesome. But its certainly better. Especially when you consider that, just as I feared, we were hit with a double whammy this month in terms of car issues. Every time something acts up we seem to leave the repair shop down another $350. This month that happened twice, though the second time was a doosey - about $520. This last year we put away some extra money into our emergency fund to use when things like this came up. But being three quarters through the year at this point, we had already burned through most of it. Plus, I wanted to follow Dave Ramsey's advice of not keeping more than $1000 on hand so as to help light a fire under your debt motivation butt. Thus, $159.91 of the extra we paid off this month came from throwing in our "excess" savings.
Additionally, Ramsey makes the point that regular car maintenance and repairs are not really emergencies usually, but rather something you should be budgeting for. Given that out newest car is 8 years old, I'd have to agree with that to some extent. Twice in one month is a bit ridiculous (though it was only once for each car) but Quicken tells me that we spent $2453.88 last year on car repairs/maintenance and we're never really all that surprised when we need to bring in a car for some reason. I think it was a little higher last year given that my daughter's car was at the end of its life and we no longer have that vehicle. Still, I decided that its something we should probably start budgeting for instead of always dipping in to the emergency fund. So I added a line item for it in our budget, which is unfortunately going to push off our end date by at least a month. Better to know about it now that be dejected by it later I suppose. And motivation for being able to get newer cars at the other end of all this!
Another thing that makes me feel not too bad about all this is that my Excel spreadsheet shows we actually brought in negative money this month. That's right, we actually had about $1300 less than we needed to cover all our expenses this month, and yet we still managed to reduce our credit card/car debt by 3.8%. Quicken also tells me that on average, we have spent about $1500/month on misc expenses and another $325/month on entertainment expenses this past year. This month we cut our misc expenses down to $471 and our entertainment down to $267. That's a 60% reduction, and I feel like it means we are serious about this.
It makes me realize as well that though the $1300 short fall probably would have happened no matter what, in previous times we would have just wondered what happened. Not being aware, we certainly would have dug ourselves in even further and made no additional debt progress what so ever. We may have even had to break out a credit card for that second car repair, thus again wiping out a considerable portion of what we paid off in the year leading up to this. Instead, I feel very aware now of just where our money is going and how it tends to get away from us.
Additionally, our other biggest expense this month was groceries: a whopping $1700 got spent this way which was even more than the absurdly high $1250 I had initially budgeted for it. I think this will absolutely be lower next month. For one thing, there are only 4 grocery days instead of 5 next month. For another, I am getting better at finding less expensive substitutions and planning some things around what we already have. But mostly, I think we have already stocked up on just about everything possible from the discount wholesale store we have started doing half our grocery shopping at. We started shopping there at the beginning of Oct and it has taken longer than I thought it would to make the switch over. Each time you buy something in bulk, you save on the cost per unit, but you spend even more initially on the cost over all since you're buying 4 times more. That added up a lot more than I realized it would.
If my home business continues to be sluggish, these next few months until Feb. are going to be hard. Especially come Dec. when my back child support finally ends (though Dec tends to be a good month for my business). That's about $500/month we are going to have to learn to do without. But come Feb, we should get a nice tax return. Then in March my husband's bonus will come, and if all goes as expected, in Apr. he should be getting a nice promotion, which will permanently make up the child support difference. Our goal at this point is still to be done with this piece by the end of 2013. And then on to baby step 3!
Tuesday, October 23, 2012
Realism or Another Cop-out?
I've been having a hard time finding the motivation to write again given the major Fail I feel like our money makeover ran into this week. It started out with good intentions. I wanted to feel more certain about Pulling the Trigger on our debt and making a big initial payment from my preliminary budget excess estimate. So I finally put it all down in a spreadsheet for the next year. All our fixed expenses, all our non-discretionary non-fixed expenses, and all the little extras we're still learning to trim. And I compared that with both our fixed and estimated sources of income. I've been doing this with Quicken for years actually, but somehow it looks different in Excel. Or at least, in this case, it looks much smaller. The excess that is. All I know is that somehow the $2000 I found before dissipated into only about $250. WTF?
Am I just that bad at this? I thought I was pretty good with math and estimating/projecting? I thought I was ready to make some sacrifices. Did I go too easy on us? And why do Quicken and Excel say such different things? The best I can come up with, (other than user error which I have repeatedly checked for) is that it has something to do with me doing specific month by month totals in Excel, whereas in Quicken its kind of a running average. For instance, the 30 day low balance projection in Quicken isn't much affected by the fact that grocery day will just happen to occur 5 time in Oct rather than 4 as usual. And the fact that some months get 2 paychecks, but a few months get 3 paychecks is sort of averaged out. In my spreadsheet though, each column gets only exactly what that month has (or doesn't) and so some months look much better than average, and others look much worse.
There's also a few things I hadn't really included in Quicken. The new car tires we need before this winter. Xmas. The fact that, for whatever reason, my home business is totally sucking compared to normal right now. Not to mention all the things I don't even know about yet. I tend to use more average amounts in Quicken, but I wanted my spreadsheet to reflect the worst case scenario so that I would know we could afford that much "no matter what". Be careful what you ask for.
Unfortunately, in terms of debt reducing motivation, these first few months seem kind of stacked against us. This month and Jan. look to be especially dismal, and Nov. and Dec. won't be much better. Feb and the spring should kick butt though, if we don't lose steam by then. Ugh. How to get this debt snow ball rolling? And not lose more traction in the meantime? The Total Money Makeover book answer is to start selling stuff. I repeat, Ugh. What if we're just...not that type? Lame, I know. Do I really want this or not? And if so, what am I willing to do for it? I'm still trying to answer that.
Hubby and I actually have talked a little about some things we could sell. Unfortunately, most of it would sell much better in the spring than now, but there are a few possibilities. I should stop sulking and start pricing. Sigh. Did I mention how little free time I have as it is, with two year old twin boys? This is seriously not how I want to be spending my time. There's a lot of things I don't like about the early part of this process though. Obviously, this isn't the fun part. The fun part is coming. Its just a few years out yet.
I need to keep the faith. I need to trust that this CAN happen for us. I need to believe that a stable, healthy and exciting financial future is a true possibility - no, Reality, for us. Its starting small. Very small. But it will get Big. And it is going to start with this goal: No matter what else comes up this month, or how the numbers seem to change, I am going to pay at least $250 extra (above the $500 minimum we are required to pay already) towards our credit card debt by the end of this month. Hold me to it!
Am I just that bad at this? I thought I was pretty good with math and estimating/projecting? I thought I was ready to make some sacrifices. Did I go too easy on us? And why do Quicken and Excel say such different things? The best I can come up with, (other than user error which I have repeatedly checked for) is that it has something to do with me doing specific month by month totals in Excel, whereas in Quicken its kind of a running average. For instance, the 30 day low balance projection in Quicken isn't much affected by the fact that grocery day will just happen to occur 5 time in Oct rather than 4 as usual. And the fact that some months get 2 paychecks, but a few months get 3 paychecks is sort of averaged out. In my spreadsheet though, each column gets only exactly what that month has (or doesn't) and so some months look much better than average, and others look much worse.
There's also a few things I hadn't really included in Quicken. The new car tires we need before this winter. Xmas. The fact that, for whatever reason, my home business is totally sucking compared to normal right now. Not to mention all the things I don't even know about yet. I tend to use more average amounts in Quicken, but I wanted my spreadsheet to reflect the worst case scenario so that I would know we could afford that much "no matter what". Be careful what you ask for.
Unfortunately, in terms of debt reducing motivation, these first few months seem kind of stacked against us. This month and Jan. look to be especially dismal, and Nov. and Dec. won't be much better. Feb and the spring should kick butt though, if we don't lose steam by then. Ugh. How to get this debt snow ball rolling? And not lose more traction in the meantime? The Total Money Makeover book answer is to start selling stuff. I repeat, Ugh. What if we're just...not that type? Lame, I know. Do I really want this or not? And if so, what am I willing to do for it? I'm still trying to answer that.
Hubby and I actually have talked a little about some things we could sell. Unfortunately, most of it would sell much better in the spring than now, but there are a few possibilities. I should stop sulking and start pricing. Sigh. Did I mention how little free time I have as it is, with two year old twin boys? This is seriously not how I want to be spending my time. There's a lot of things I don't like about the early part of this process though. Obviously, this isn't the fun part. The fun part is coming. Its just a few years out yet.
I need to keep the faith. I need to trust that this CAN happen for us. I need to believe that a stable, healthy and exciting financial future is a true possibility - no, Reality, for us. Its starting small. Very small. But it will get Big. And it is going to start with this goal: No matter what else comes up this month, or how the numbers seem to change, I am going to pay at least $250 extra (above the $500 minimum we are required to pay already) towards our credit card debt by the end of this month. Hold me to it!
Wednesday, October 17, 2012
Pulling the Trigger on Debt
I've been scouring the internet lately for blogs on normal families like mine trying to get out of debt (wow, did I just say I have a "normal" family? Now that's news.) And I can't quite find what I'm looking for (though perhaps someone can make a friendly comment suggestion?) which I guess is part of why I've decided to write about our debt experience. Now obviously, there are a ton of get-out-of-debt blogs out there, many of which seem quite good for the audience they're aiming for. One of which that comes close to what I'm looking for is PaidTwice. Another mom with an unused PhD (and lots of student loans to prove it), discussing both the practical and emotional issues of dealing with debt. My main problem with this blog is simply that its not current. As of 12/20/10 they succeeded in their goal of becoming debt free. And that is Awesome. I want to be them someday! But for now, I am at a very different place in this journey. And I'm looking for blogs about people in the same boat.
This is the very first month of our Total Money Makeover. The very first time I have created a zero dollar budget, and I have to admit I was pleasantly surprised to find out how much wiggle room we have right now, even on the tighter months for my home business. There have certainly been times in my earlier life when there just wasn't enough, period, regardless of how well you spent it. And for that I am very grateful. It also makes me a little disgusted with myself. Laying it all out on paper makes it pretty hard to deny that this is something we could have been making headway on for a while now. We've been pretty good for two years or so about not digging ourselves in any deeper. But we haven't made any real progress on filling the hole. That gaping $327,000 hole I mentioned previously.
When I calculate it all out, even allowing for about $400 of discretionary "fun money", this month we have about $680 extra we could throw towards debt. And actually, given that we used to try to keep a buffer in our main checking account, we probably have another $700 I could throw towards it if we can handle living more dangerously. This year we even managed to scrape together an emergency fund from our tax return that has lasted us for most of the year. It originally had about $4000 in it, though we are now down to about $1160, with quite a few months to go before refilling. Dave Ramsey says that for gazelle intensity we only "need" $1000 though, so that's another $160 I could throw in. And this is in addition to the minimum payment total of about $486/month we make to our credit cards and car loan debts anyways.
I should be elated here. Despite feeling like there is never enough, Dave Ramsey and our zero dollar budget have revealed to us that we actually have about $2025 available this month to throw at our $26,000 credit card/car loan debt problem. We could be down to less than $24,000 in our first month! And I do know just where I will mail it (figuratively speaking with online banking that is) when it comes time. But I feel something much closer to trepidation than elation.What happens when I mail in this check, and a week later our refrigerator dies (not unlikely) or our car breaks down? Okay yes, we would still have a $1000 emergency fund and that would probably cover it. But what if something happens the next month again before we have a chance to replenish it?
I'll tell you exactly what happens, because its happened before. Last Oct./Nov to be exact. And what happened was that all the hard work of the previous month's extra payments towards credit cards were erased when we had to dig them out again to cover the insurance deductible and appliance replacements. It was incredibly disheartening and it really brought our efforts to a halt for a few months while our bruised egos recovered. I was elated though, when we actually managed to put away quite a bit more than usual the following spring for the next years "emergencies". And although our emergency fund has now depleted down to barely more than $1000, it has come in handy many a time. Both for car/house issues, as well as the times our budget got away from us a bit due to unplanned circumstances, or yes, an occasional bout of frivolity.
My point is not that we always spent is completely wisely. My point is that it was always there when we needed it, and buffered us from a lot of the financial ups and downs previous years have brought, especially with part of our income being from my self-employment. My point is that is was a major source of financial peace to me this past year. I understand that part of the point of keeping only $1000 on hand is to light a fire under your ass so that you take care of your debt as soon as possible. But I have seen plenty of other years in my life when having only $1000 (or far less) in savings only got us into more debt, not less. Life is not going to hold up a giant umbrella for us while we work through this. How do I trust that it is safe to write this check?
I will attempt to answer my own question, though I welcome any suggestions from anyone else who might happen upon this as well. I think what is most different about this time is that out zero dollar budget has revealed to us that, at least for now, even during tight months with my business, our income is still more than our non-discretionary expenses. It may seem like there is never enough money, but there is. We just overspend sometimes when things are good and then have to catch up, so it doesn't feel that way. To help curb this bad habit of ours we have opened a second checking account that we are using for discretionary expenses and transferring only as much money into it as we allotted to ourselves. Ultimately, we alone are in charge of whether or not we use our money only in the way we have assigned it. We will have to be honest with ourselves about whether or not the activation fees for our new iPhone contracts are going to make it hard to buy diapers when we need them. We are going to have to adjust to a lot less fun money. But the numbers don't lie. The money is there. We just need to spend it correctly.
This is the very first month of our Total Money Makeover. The very first time I have created a zero dollar budget, and I have to admit I was pleasantly surprised to find out how much wiggle room we have right now, even on the tighter months for my home business. There have certainly been times in my earlier life when there just wasn't enough, period, regardless of how well you spent it. And for that I am very grateful. It also makes me a little disgusted with myself. Laying it all out on paper makes it pretty hard to deny that this is something we could have been making headway on for a while now. We've been pretty good for two years or so about not digging ourselves in any deeper. But we haven't made any real progress on filling the hole. That gaping $327,000 hole I mentioned previously.
When I calculate it all out, even allowing for about $400 of discretionary "fun money", this month we have about $680 extra we could throw towards debt. And actually, given that we used to try to keep a buffer in our main checking account, we probably have another $700 I could throw towards it if we can handle living more dangerously. This year we even managed to scrape together an emergency fund from our tax return that has lasted us for most of the year. It originally had about $4000 in it, though we are now down to about $1160, with quite a few months to go before refilling. Dave Ramsey says that for gazelle intensity we only "need" $1000 though, so that's another $160 I could throw in. And this is in addition to the minimum payment total of about $486/month we make to our credit cards and car loan debts anyways.
I should be elated here. Despite feeling like there is never enough, Dave Ramsey and our zero dollar budget have revealed to us that we actually have about $2025 available this month to throw at our $26,000 credit card/car loan debt problem. We could be down to less than $24,000 in our first month! And I do know just where I will mail it (figuratively speaking with online banking that is) when it comes time. But I feel something much closer to trepidation than elation.What happens when I mail in this check, and a week later our refrigerator dies (not unlikely) or our car breaks down? Okay yes, we would still have a $1000 emergency fund and that would probably cover it. But what if something happens the next month again before we have a chance to replenish it?
I'll tell you exactly what happens, because its happened before. Last Oct./Nov to be exact. And what happened was that all the hard work of the previous month's extra payments towards credit cards were erased when we had to dig them out again to cover the insurance deductible and appliance replacements. It was incredibly disheartening and it really brought our efforts to a halt for a few months while our bruised egos recovered. I was elated though, when we actually managed to put away quite a bit more than usual the following spring for the next years "emergencies". And although our emergency fund has now depleted down to barely more than $1000, it has come in handy many a time. Both for car/house issues, as well as the times our budget got away from us a bit due to unplanned circumstances, or yes, an occasional bout of frivolity.
My point is not that we always spent is completely wisely. My point is that it was always there when we needed it, and buffered us from a lot of the financial ups and downs previous years have brought, especially with part of our income being from my self-employment. My point is that is was a major source of financial peace to me this past year. I understand that part of the point of keeping only $1000 on hand is to light a fire under your ass so that you take care of your debt as soon as possible. But I have seen plenty of other years in my life when having only $1000 (or far less) in savings only got us into more debt, not less. Life is not going to hold up a giant umbrella for us while we work through this. How do I trust that it is safe to write this check?
I will attempt to answer my own question, though I welcome any suggestions from anyone else who might happen upon this as well. I think what is most different about this time is that out zero dollar budget has revealed to us that, at least for now, even during tight months with my business, our income is still more than our non-discretionary expenses. It may seem like there is never enough money, but there is. We just overspend sometimes when things are good and then have to catch up, so it doesn't feel that way. To help curb this bad habit of ours we have opened a second checking account that we are using for discretionary expenses and transferring only as much money into it as we allotted to ourselves. Ultimately, we alone are in charge of whether or not we use our money only in the way we have assigned it. We will have to be honest with ourselves about whether or not the activation fees for our new iPhone contracts are going to make it hard to buy diapers when we need them. We are going to have to adjust to a lot less fun money. But the numbers don't lie. The money is there. We just need to spend it correctly.
Tuesday, October 16, 2012
Another Family Debt Blog
I’m not a big 12 step follower or anything. But I do believe
that two very important steps for beginning a major life change of most any sort, are acceptance and admission. You need to truly accept that there is a problem
with something in your life. No more excuses, no more minimizing. And then to fully define what the problem is, you need an open admission of your mistakes and current status. To that end..."Hi. My name is Anne, and I have a problem with debt."
The description I just gave creates the same moderately dismal view of debt that I think a lot of Americans have. Kind of a necessary evil in which you "do the best you can", trying to make some responsible headway while still allowing yourself some enjoyment of "the good things in life". And I think it is this minimizing, moderate view that has kept my husband and I in this situation for much longer than we have really needed to be here. And since, like so many debt slashers before me, I have have just finished Dave Ramsey's "Total Money Makeover" book, I am now in the mood to take a much more extreme (i.e. honest) stance about our current situation.
Let's just start with a number. $327,758. As of Oct. 1, 2012, that is where our total debt stands. About 60% of this belongs to our mortgage. Another 32% to my student loans. (Boo!) The remaining 8% is a combination of credit cards and car loan. Keep in mind that 8% of $327,758 is over $26,000. Keep in mind also that although we may not be suffering, this total number is still more than three times our combined yearly income. Ugh. To top it all off, we have not a dime saved for retirement or college for our boys, and we will probably end up co-signing on $30,000 in student loans by the time my daughter graduates from college (though hopefully that will be her problem, not mine). We are in deep shit folks. I mentioned we're 30 something, right? And let's just say that we're closer to the later end of that then the beginning.
Despite our seeming record to the contrary, I am actually a big believer in Ramsey's assertion that debt of just about any sort is just no good. That we have all bought into a lie that serves the lenders rather than ourselves. And that mostly, the only excuse for using credit cards is poor planning and difficulty with impulse control. Ouch. We suck. I have lots of good excuses for our credit card debt that I have pulled out in the past to soothe these sharp criticisms. And I will say at least that my husband and I are generally not people who use credit cards for shiny new toys or entertainment much less basics like groceries and clothes. Mostly, these were one time or unplanned emergency expenses (that being said, I can think of at least one exception to pretty much each one of those things I just mentioned.) None the less, even the unplanned things were mostly due to not saving for an emergency fund the way we should have to begin with. There was some impulsiveness in there as well for sure. (And a very shiny toy indeed in the form of a ring that now sits upon my wedding finger.)
I want to be completely honest about this because I am tired of being in credit card debt. I am tired of wondering what on earth we would do if one of our cars died. I am tired of feeling trapped in my home by having no home equity. I am tired of feeling too daunted by my student loans to even begin handling my retirement. And I am sick to death of feeling like this will be the year we're finally going to start getting ahead a little, only to somehow have all the extra trickle away with no lasting effect on the bottom line. I am ready to get serious about this. I am ready to start making some sacrifices. I am not sure about "gazelle intensity" (maybe just cause I really hate that phrase?) but I am willing to begin exploring options I haven't been willing to consider before.
But I need something to keep me motivated. And I need a way to work out the serious anxiety I am feeling about all this. And a place to put down some of the things I learn and maybe even help someone else in the process. Thus, I started a blog! :)
The description I just gave creates the same moderately dismal view of debt that I think a lot of Americans have. Kind of a necessary evil in which you "do the best you can", trying to make some responsible headway while still allowing yourself some enjoyment of "the good things in life". And I think it is this minimizing, moderate view that has kept my husband and I in this situation for much longer than we have really needed to be here. And since, like so many debt slashers before me, I have have just finished Dave Ramsey's "Total Money Makeover" book, I am now in the mood to take a much more extreme (i.e. honest) stance about our current situation.
Let's just start with a number. $327,758. As of Oct. 1, 2012, that is where our total debt stands. About 60% of this belongs to our mortgage. Another 32% to my student loans. (Boo!) The remaining 8% is a combination of credit cards and car loan. Keep in mind that 8% of $327,758 is over $26,000. Keep in mind also that although we may not be suffering, this total number is still more than three times our combined yearly income. Ugh. To top it all off, we have not a dime saved for retirement or college for our boys, and we will probably end up co-signing on $30,000 in student loans by the time my daughter graduates from college (though hopefully that will be her problem, not mine). We are in deep shit folks. I mentioned we're 30 something, right? And let's just say that we're closer to the later end of that then the beginning.
Despite our seeming record to the contrary, I am actually a big believer in Ramsey's assertion that debt of just about any sort is just no good. That we have all bought into a lie that serves the lenders rather than ourselves. And that mostly, the only excuse for using credit cards is poor planning and difficulty with impulse control. Ouch. We suck. I have lots of good excuses for our credit card debt that I have pulled out in the past to soothe these sharp criticisms. And I will say at least that my husband and I are generally not people who use credit cards for shiny new toys or entertainment much less basics like groceries and clothes. Mostly, these were one time or unplanned emergency expenses (that being said, I can think of at least one exception to pretty much each one of those things I just mentioned.) None the less, even the unplanned things were mostly due to not saving for an emergency fund the way we should have to begin with. There was some impulsiveness in there as well for sure. (And a very shiny toy indeed in the form of a ring that now sits upon my wedding finger.)
I want to be completely honest about this because I am tired of being in credit card debt. I am tired of wondering what on earth we would do if one of our cars died. I am tired of feeling trapped in my home by having no home equity. I am tired of feeling too daunted by my student loans to even begin handling my retirement. And I am sick to death of feeling like this will be the year we're finally going to start getting ahead a little, only to somehow have all the extra trickle away with no lasting effect on the bottom line. I am ready to get serious about this. I am ready to start making some sacrifices. I am not sure about "gazelle intensity" (maybe just cause I really hate that phrase?) but I am willing to begin exploring options I haven't been willing to consider before.
But I need something to keep me motivated. And I need a way to work out the serious anxiety I am feeling about all this. And a place to put down some of the things I learn and maybe even help someone else in the process. Thus, I started a blog! :)
What Am I Doing Here Anyways?
I have been toying with the idea of starting an anonymous blog for a very long time. Journaling has always been a catharsis for me. But I know that it is often even more powerful when honest thought and emotion can be seen and/or heard instead. And I know that this catharsis is most pronounced with done with as much openness and honesty as possible. Thus, it is absolutely necessary that this blog be completely anonymous. In fact, I am not even going to tell my husband...
I feel a little bad about that. I do not generally keep things from him. And I have, at least, told him in the past that I have always thought about doing something like this. I don't think he would be shocked if he found out I was. But I certainly don't think he would want anyone to know personal things about him, or us, anymore than I would. And I want to be able to write about us when I need to, and to say what I really think and feel. Certainly you will know all sorts of personal things about me if you chose to read this blog (though how anyone will ever find it, I have no idea) but you won't actually know its me. Even if we met in person. And that's what I feel like I need here.
So who am I anyway? What can I tell you that reveals me internally but not externally? Well, to start with, I am a thirty something stay at home mom of three. I was a young mom for my oldest daughter, married fresh out of high school. And now I am a somewhat older and remarried mom for my twin toddler boys. I have a PhD in a physical science that now sits on the shelf, and only wispy dreams about what I will do next career-wise. I have a husband I have been with over 7 years now, and a marriage that feels solid, if not always exciting. I love reading, cooking, gardening, music and above all, learning. I spend a lot of my energy raising kids, exercising, cooking and lately, trying to figure out how to conquer debt (more on that later). I dislike cleaning, superficial chatter and cola beverages. I tend to get pissy about perceived chore unfairness and I waste far too much time on my iPhone. I am spiritual but not religious. I am a self described social liberal but fiscal moderate (not sure others would agree). I am concerned about the environment, the obesity epidemic, Iran getting nukes, retirement, whether my daughter and I will ever get along again, and the number of mint M&M's I have consumed this week. I may talk from time to time about any or all of those things.
I have no idea yet how often I will post, whether this will really become something, or whether it will putter out in a few weeks. I'm not sure I will ever have any followers, nor how many I would want, nor who would be interested in my ramblings. But I feel the need to be here none the less. To throw my truths out into the wider world and see what happens. And this is where I begin.
I feel a little bad about that. I do not generally keep things from him. And I have, at least, told him in the past that I have always thought about doing something like this. I don't think he would be shocked if he found out I was. But I certainly don't think he would want anyone to know personal things about him, or us, anymore than I would. And I want to be able to write about us when I need to, and to say what I really think and feel. Certainly you will know all sorts of personal things about me if you chose to read this blog (though how anyone will ever find it, I have no idea) but you won't actually know its me. Even if we met in person. And that's what I feel like I need here.
So who am I anyway? What can I tell you that reveals me internally but not externally? Well, to start with, I am a thirty something stay at home mom of three. I was a young mom for my oldest daughter, married fresh out of high school. And now I am a somewhat older and remarried mom for my twin toddler boys. I have a PhD in a physical science that now sits on the shelf, and only wispy dreams about what I will do next career-wise. I have a husband I have been with over 7 years now, and a marriage that feels solid, if not always exciting. I love reading, cooking, gardening, music and above all, learning. I spend a lot of my energy raising kids, exercising, cooking and lately, trying to figure out how to conquer debt (more on that later). I dislike cleaning, superficial chatter and cola beverages. I tend to get pissy about perceived chore unfairness and I waste far too much time on my iPhone. I am spiritual but not religious. I am a self described social liberal but fiscal moderate (not sure others would agree). I am concerned about the environment, the obesity epidemic, Iran getting nukes, retirement, whether my daughter and I will ever get along again, and the number of mint M&M's I have consumed this week. I may talk from time to time about any or all of those things.
I have no idea yet how often I will post, whether this will really become something, or whether it will putter out in a few weeks. I'm not sure I will ever have any followers, nor how many I would want, nor who would be interested in my ramblings. But I feel the need to be here none the less. To throw my truths out into the wider world and see what happens. And this is where I begin.
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