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Archive for March, 2014

Rethinking My Payoff Plan

March 26th, 2014 at 08:19 am

I have lots and lots of debt, but I'm on track to have it all paid off within 10-11 years, assuming minimal commissions on S's job and 1-2% annual pay increases only for the next 3 years. (S's income fluctuates; he does have a base and generally gets 3% COLA, but commissions vary by tens of thousands of dollars each year.)

Basically, I have the following types of debt:

Credit Cards and Lending Club Loan
401(k) Loans
Personal (Family) Loans
Real Estate Backed Loans

My plan has been to pay them off in that order, in essentially a snowball (or avalanche, I guess they're called now, since I'm paying the highest interest rates off first), and then I'll have nearly $5,000 a month freed up for savings, investing, etc.

After reading a bit here, and thinking about it, I may change that a bit. I'll still tackle the credit cards/LC loan aggressively (on schedule to be paid off 5/16, unless I'm able do a consolidation at a lower interest rate), and then the 401(k) loans (on schedule to be paid off 8/17, unless of course the credit cards get paid off sooner and then they'll be paid off sooner, too). Then I think I'll step back a bit, and build the emergency fund up to $15,000 and set up a $5,000 slush fund. That should take less than a year. Next I'll look at setting up Roth IRAs for S and me and get on a plan to fully fund those every year. Once that's done, I'll increase our 401(k) contributions back to the maximum (we're currently both only contributing what the company matches).

Ideally I'll still have some extra money at the end of the month once this all shakes out, and I'll start tackling the family loans. Unless the family gets impatient, which is conceivable, or the interest rates get too high. Interest is renegotiated annually, kind of a compromise between what the lender could get in a high-yield CD and what I would pay on a bank loan at the average interest rate. Right now it varies from 2-3% on a few different loans. Some of those will be paid off in the next couple of years, just from the regular payments, and that money goes to the next loan. It's basically a separate snowball/avalanche plan; the income from the rental is paid directly to the family so I never even see it, and it gets disbursed among the loans as we agree each year at the "Family Financial Summit" (FFS).

Once the family is taken care of, I can then tackle the real estate loans. (I should add, at this point S has a company car and we don't really see that changing, unless he takes a promotion -- knock wood, of course!! My car will be paid off by 2/17 (part of the family loan) and I expect to have it for several more years; if not, we have the option to buy S's company car when he gets a new one (that's how we got the car I'm driving now), which is about every two years, at a decent price.) First in line would be the rental, which may be sold by then. (They're on a 'lease to own' agreement, which actually was supposed to happen last year, but they've had some setbacks and aren't in a position to buy, and quite honestly I'm not in a hurry. The value is still below what I paid for it, though I think I'm just starting to tread water on the mortgage amount, and it's about half what it was when they started renting at the peak of the bubble.) If any money comes out of that sale, it would go toward the family loan.

By that point all of the unsecured debt will be off of my shoulders, we'll have a solid emergency fund, we'll be aggressively saving for retirement, and our only debt will be the mortgages. Which, frankly, sounds like both heaven and the impossible dream! I'll look at interest rates then, see about refinancing if it would be helpful (though my current rates aren't too horrible, 4.25-5.375%), and decide at that time which balance to pay off first or if I should pay extra on both. Excel is my best friend so I'll run the numbers and see what makes the most sense. I've got a little time to get there yet!

I've tried to not be too aggressive in planning these payoffs, and to not count on variable things like commissions and raises. Right now I still feel like I'm teetering on the edge -- a significant expense would be tough but probably manageable (>$5,000), but a major expense would be difficult, and of course a job loss would be catastrophic. Once I get these credit cards paid off, I'll breathe a lot easier. I'll actually have five paid off within a year, which will shave about $14,000 off my total cc debt and $450 off the minimum payment amounts. (Not that I plan on only paying the minimums, but it's nice to know that in the event of a catastrophe my obligations will be that much lower. It's still a lot to pay every month, don't get me wrong!)

It's kind of hard to believe, after all these years of debt hanging over me, that I might actually be free of it!

52 Week Saving Challenge Update

March 23rd, 2014 at 12:08 pm

My big client payment still hasn't come in, I sent a reminder about that on Thursday so hopefully I'll see it soon. That will catch me up a few weeks!

I got paid $50 for a side gig and they over-reimbursed me (for a product I had to buy for the gig) by a penny, but I'm counting it! Wink Plus the $25 CVS savings, so not a bad week even though I was so busy I didn't get a chance to do much of anything savings-wise.

Last week I didn't notice that ING had added a little bit of interest before they merged my accounts, so I started with a reserve of $1.51 instead of 41.37. And then I didn't use the $0.20 from last week, I deposited the full $70, so my reserve hasn't gone down at all.

52-Week Mega Savings Challenge
Week 12 [started late, my week 3]

Side Gig: $50.01
CVS Savings: $25
Total Snowflakes: $75.01
Rounding (to reserve): -$0.01

Beginning Balance: $190
Deposit: $75
Ending Balance: $265

Reserve: $1.51 + $0.01 = $1.52

52 WSC Update

March 19th, 2014 at 07:23 am

When I went to transfer my Week 11(2) savings to my ING account, I found that my bank account wasn't linked anymore. (I'd had two ING accounts, each linked to a different bank account; I combined the two ING accounts, which apparently dropped one of the linked accounts (the 'right' one, of course!).)

Anyway, I had to re-add the account so they sent two small transfers - snowflakes!

I also remembered that I'm using 1/2 of what I save by not going to CVS as a snowflake, and I'd forgotten about that. So the new numbers are:

52-Week Mega Savings Challenge
Week 11 [started late, my week 2]

Subway GC: $3.53
Pinecone: $6.00
Free pizzas (3 @ $6.95 + tax): $22.10
Pizza sale (2 @ $3.81 + tax): $8.08
CVS Savings: $25
ING Deposit 1: $0.07
ING Deposit 2: $0.02
Total Snowflakes: $64.80
Rounding (from reserve): $0.20

Beginning Balance: $120
Deposit: $70
Ending Balance: $190

Reserve: $1.37 - $0.20 = $1.17

52 Week Saving Challenge

March 16th, 2014 at 07:47 pm

My client payment hasn't come in yet, so I'm not knocking off any of the big amounts this week. I did decide to use the pizza coupons as a snowflake, plus they had another deal going this week for "Pi day", $3.14 per pie instead of $6.95. Great for the budget, but I'm a little pizzaed out!

52-Week Mega Savings Challenge
Week 11 [started late, my week 2]

Subway GC: $3.53
Pinecone: $6.00
Free pizzas (3 @ $6.95 + tax): $22.10
Pizza sale (2 @ $3.81 + tax): $8.08
Total Snowflakes: $39.71
Rounding (from reserve): $0.29

Beginning Balance: $120
Deposit: $40
Ending Balance: $160

Reserve: $1.37 - $0.29 = $1.08

Chase Freedom Rewards

March 15th, 2014 at 06:33 am

One of the things I'm actually doing right is not using credit cards. For a long time everything went on our debit (Visa check) cards, so the money was pulled right out of our account, and we were getting rewards for the spending. Then Chase discontinued the debit card rewards program. Boo.

After a few months of no rewards, though, on a whim I decided to apply for a Chase Freedom card, which gives 1% on everything, and 5% on quarterly categories. Since I'm in a hardship repayment plan on three Chase credit cards, I really didn't think I had a chance of getting the Freedom card, but I figured I might as well give it a shot. Lo and behold, they gave me a card!

This was also a test of our dedication to not incur more credit card debt. We made a deal that we would pay that card off as needed to ensure we never pay interest on it. (Since we use it constantly, it's never really 'paid off'. I keep the balance low and ensure I pay at least the last statement balance before the next due date.) I'm happy to say we've had it for over a year now and no interest paid yet!

At any rate, we're getting rewards again and have taken advantage of them from time to time (movie gift cards, restaurant gift cards, a TV and a new vacuum). I've gotten a little bit wiser now, though, and have decided it's in my better interest to take the cash as needed and purchase the item or gift cards with the Freedom card -- that way I get another 1% on the purchase that I'm paying for with the rewards. (I will check to be sure the price is comparable; it used to be that a $25 gift card cost the equivalent of $20 in points, but now it's been a dollar-to-dollar purchase.)

Somewhere I read that someone was using their rewards points to pay for Christmas, and I thought that was a great idea, so I'm setting that as my goal for the rewards money this year. (Christmas and birthdays.) We have a small family, so although I've never really added it all up, I'm guessing that $500 will more than cover our spending on these items for the year. So my first goal is $500 in the gift fund. Then I may set aside $100 for a movie gift card. (I honestly don't think I can actually pay for a movie again; I've been using rewards gift cards for close to a decade! I know it's the same thing in the long run, but psychologically it would just bug me.) We don't go to the movies very often, so $100 will last a while. (I just got a $100 gift card in November, and there's still $83 left on it.)

It looks like we average about 5,000 rewards a month, or $50, so that's $600 a year. However, I started out with $80 and apparently they give a 10% annual bonus, plus we had some large expenses in January/February, so I'm ahead of the game right now. I'll figure out what to do with the additional rewards once I get to that point!

Rewards Gift Fund
Goal - $500
Balance - $288.44
Remaining - $211.56

Movie Card Fund
Goal - $100
Balance - $0
Remaining - $100

Snowflakes Cost Me $300

March 12th, 2014 at 04:30 pm

The real kind, that is. We got dumped on with snow overnight, which means I couldn't get out of the driveway, which means I couldn't go to work. Since this is overtime season, that means I missed 10 hours of time and a half. I was able to work a couple of hours from home, I had an extra hour yesterday, and I can probably add a couple of extra hours the rest of the week, so I'll probably only end up missing five hours of overtime, but still, it's a pretty significant hit.

I am so over this winter.

In the good snowflake category (which I'm using toward my 52 week mega challenge), I had $3.53 left on a Subway gift card that I used for lunch Monday, and $6 from Pinecone surveys that I'd forgotten about. (I haven't gotten a survey from them for almost a year, but they haven't kicked me out yet, either. I'm going to send an email to see what's going on with that.) So, $9.53 goes to the reserve, added to the $1.37 that's already in there, for $10.90 available to use at the end of the week.

I'm still debating with myself about what kind of "saving" I'm going to use as snowflakes. The Subway gift card I'm comfortable using, because I would have spent that money anyway. However, we had some coupons for free pizzas at a new place that just opened, and I'm reluctant to include the $6.95 (plus tax) as a snowflake, since if we hadn't had the coupon we wouldn't have gone there. On the other hand, we would have spent some money somewhere for the meal, either at a different restaurant or at the grocery store.

How do you decide between a snowflake and money you just didn't spend?


March 9th, 2014 at 01:06 pm

I meant to put this in the February/March post, but I forgot!

We don't really do Lent in my church -- we recognize the 'season', but we've never done the "give up something for Lent" thing. Still, I know a lot of people do practice abstention for Lent, and so sometimes I'll play along and give up something, too.

This year, as strange as it may seem, I'm giving up CVS for Lent. (Yes, the drugstore.) There's one right next to where I work, and it's too easy to just pop over there for this or that -- "this" usually being Pepsi, and "that" being some kind of chocolate. I have a weird hangup, however, in that I can't only buy pop and chocolate at CVS, so I have to think up something else that's more "drugstore-y", so that it looks like I came into the CVS for the other thing and grabbed a snack while I was there. (I'm actually a very logical person in a lot of ways, but clearly this is not one of them!) So I grab batteries, or makeup, or some kind of first aid thing that I might eventually use one day but don't really need.

Cutting down on the Pepsi and chocolate is definitely something I need to do, but moreso, I'm wasting a lot of money at CVS. So far in 2014 (not including some lottery tickets I bought for a friend's birthday present) I've spent over $400 at CVS. In two months. On nothing. So, yeah, giving that up for Lent.

February Look Back / March Look Ahead

March 5th, 2014 at 11:15 am

I'm going to try to do monthly reviews/projections to see if it helps me stay on track (I'm good about the debt paydown, but tend to let the savings side of things slide.)

I though I'd end up having paid off about $2300 in debt principal, but I forgot about some Bill Me Later purchases I made. They're 0% interest for six months, at which time I'll pay them off, but they're still technically debt. So I only ended up paying off $1990 in debt principal. Then, based on comments on one of my other posts, I set up my Excel spreadsheet to calculate the interest I've paid each month. Not including mortgage interest, this month's total is about $871. Ouch!

That said, I did pay $74 extra on the highest-interest card (that was a little low, actually, but I had a 0% BML amount due so that payment was higher than usual).

I've decided to attempt the 52-Week Mega Savings Challenge. I'm quite a bit behind, though, and there are some big amounts to catch up! I'm going to give it my best shot, and if I miss I should still hit the "double" challenge (which is probably called something else). I'm only going to fund this with snowflakes, which does not include hubby's (we'll call him S, just to save typing!) commissions, or checking account sweeps. Those will go toward upcoming planned expenses like summer property taxes, new a/c at the rental, etc. It will include money I make from my side gigs.

I'm also debating joining the DietBet 6-month "Transformer" challenge. It's $125 (if I pay up front, $150 if I pay month-to-month -- hm, can I count that $25 as a snowflake?) and if you meet the goals (monthly and overall, which ends up at 10% weight lost) you are guaranteed to at least get your money back. (They of course take a fee from the winning, but have pledged that they will reduce or eliminate their cut to be sure everyone that meets the goals gets their money back, which I really liked.) This may be a 'doing it wrong' thing again, since there's no guaranteed return on the investment (they say on average people get 1.5-2x their money back), and I could theoretically invest the money somewhere and make a small return (around $3 at 5%?) -- but I would consider it an investment in my health, since I really do need to lose (far more than) 10% of my weight. If anyone has done a DietBet before, I'd love to know what you thought of it.

I finally finished up and set out an invoice that should have gone two months ago. That will really jump-start my 52-week challenge, since it's for $625.

I "found" money in a couple of savings accounts I'd set up at ING (now Capital One 360) -- I'd forgotten about them until I was working on our taxes, and they came up under the Interest schedule. So I logged in to see that there really wasn't that much interest to report Wink but the two accounts had $67.31 and $54.06 in them. Coincidentally, that same day we got letters from Capital One stating that the accounts were at risk of being transferred to the state as abandoned property. So that's the $120 square checked off. Smile I think I'll use one of those accounts as my 52-Week savings account, too -- that gets it out of my easy reach and will keep those accounts from going dormant again. (I should probably combine them, really; I have one in my name and one joint, but there's no real reason to have two.) (I'm going to call them ING accounts, because Capital One 360 is too much to type!)

I also need to track down the EOBs from some physical therapy I had last year. I paid the $20/visit co-pay, but if I'm reading things right it looks like my insurance company paid for the full cost of the visit (we have Health Reimbursement Account, and it looks like the co-pays were paid from that account). So I need to verify that, and then call the PT place and ask for my $200 back.

52-Week Mega Savings Challenge
Starting late, on week 10!

Beginning Balance: $0
ING Joint Account: $67.31
ING Solo Account: $54.06
Ending Balance: $120
Reserve: $1.37 (In case I need it to round out a future week!)

Attitudes About Debt

March 3rd, 2014 at 07:49 am

[Gotta love the Lazarus add-on for Firefox -- this entry was lost in the 'catastrophic failure' of the server, but with one (right) click Lazarus was able to restore the whole thing! It's free, too, though the do occasionally ask for donations.]

I posted before that I have an indifferent attitude about debt. I just figure it's always going to be there, and now that I comfortably pay the minimums every month, I'm not too fussed about it. I'd like to get out of debt, sure, and I am working toward that -- but it's not a driving force for me, I'm not especially motivated to cut my spending down to nothing and throw every cent I have at the debt. I want to enjoy my life while I'm living it, within reason. (I'm not going to take a trip around the world or buy expensive cars, jewels, etc., but I might buy a $12 ring (marked down from $60, of course) just because I like it.)

I've been thinking about that lately, and wondering why my attitude is what it is. Part of it is my overall personality -- I'm not especially motivated to do anything, and would rather curl up on the couch with a good book than do most other things. (Translation -- I'm lazy!) I do think there are a few factors that have contributed, or at least if they were different maybe my attitude toward debt would be different, too.

My Mom Is Frugal
That's putting it mildly. Smile She returns food she doesn't like, she will drive to four different stores to save 25 cents on a certain item at each, etc. Granted, she was divorced and raising two kids alone in her late 20s/early 30s, back when being divorced was unusual. (Her parents were nearby, and a great help to her, but still, I know it wasn't easy for her.) She had to pinch pennies to keep food on the table, especially since child support was unreliable. So my sister and I didn't always have the trendy toys or the Jordache jeans (I'm dating myself now!), because we just couldn't afford them. (Don't get me wrong -- we weren't living in poverty by any means. We had a nice home in a good neighborhood, I never really knew it was a struggle to put food on the table until I was much older, etc. Plenty of people had and have it far worse than we ever did; overall we were still very fortunate, I know.) As a result, I think as an adult I subconsciously rebel against any restrictions on my spending, because we were so restricted when I was young.

No One Taught Me About Budgeting
By the time I got to high school, they'd stopped offering personal finance classes at all, much less making them compulsory. This is probably one of the worst ideas ever. (I know my mom could have taught me -- she probably tried, but I was a typical teenager and no doubt thought she was just 'getting on my case'.) So off I went to college, with no real idea of how to manage money and lots and lots of companies wanting to give me credit cards. Is it any surprise I was in over my head in debt well before I graduated? (And I didn't have any student loans, so I don't even have that excuse!) We inherited/bought my grandparents' house after they died, along with all of their 'stuff', and as we were cleaning things out I found several of my grandmother's "household budgeting" notebooks. Just a steno pad, and her records of where their money went, but it was fascinating. Every transaction was written down (well, almost -- my grandpa got a weekly lunch allowance, and that was the only tracking of that amount), a running balance of all outstanding debts, weekly savings account updates, etc. It was a fascinating glimpse into their life back in the 40s, 50s, and 60s, and also illustrated a clear schism between what she was taught and what I was taught about personal finance.

I Don't Have A Clear Self-Image
I think one of the biggest issues is that in my head, I'm still in my mid-20s. I have lots of time to pay off my debts, save up for retirement, etc. The reality is that I'm quickly approaching my mid-40s, and that 'far off' retirement age is a whole heck of a lot closer! This is probably my punishment for not having children -- at the very least, they insist on aging, so I'd have that constant reminder that I was aging, too. (I do have a niece now, whom I see fairly often, so maybe she'll help!) This is one of the reasons I'm overweight, too, of course -- I was skinny in my mid-20s!

A shrink would probably come up with some other, deep-rooted reasons for my nonchalance about debt, no doubt stemming from my parents' divorce when I was 3 years old. (My grandmother used to think I had abandonment issues because I use to put 'leashes' on all my stuffed animals. I assume that was actually just because I wasn't allowed to have a real dog.) To me, though, there's a certain amount of sense in the reasons I've listed, even if they're not especially deep.

*Update* There was a comment to the original post about retirement planning as a potential motivation to get out of debt. It's a good observation -- I have done some retirement planners, including the detailed one we use at work (I work in the financial services industry, ironically). There's such a wide variety there, of course -- about a $1.5 million difference in what they estimate I'd need to retire, depending on the calculator. So in some cases I'm doing well, in others I'd have to work until I'm 77 or so! I do stand to inherit a decent amount at some point; I don't want to depend on that, of course, but at work we do always include inheritances in our retirement projections. I'm estimating it low, without accounting for long-term growth, and subtracting the money I owe against it (which ideally will be paid back well before then). With that, I'm in good shape, but again, I don't like to depend on it. So perhaps I'll work on a 'motivation board' for our retirement, and link it up to my debt-repayment plan. Thanks for the thought!